Matsushita Electric Industrial Co., Ltd. v. Epstein (SCOTUS 1996)

Summary

The Supreme Court held that a federal court must give full faith and credit, under 28 U.S.C. Sec. 1738, to a Delaware Court of Chancery judgment approving a class-action settlement that globally released claims - including Exchange Act claims - lying within the exclusive jurisdiction of the federal courts: Sec. 1738 applies to class-action settlement judgments, Delaware law would render the judgment res judicata binding class members who never opted out, Sec. 27 of the Securities Exchange Act of 1934 creates no implied partial repeal of Sec. 1738, and the subject-matter-jurisdiction exception is inapposite because the Delaware court had jurisdiction over the underlying state-law suit. The Court therefore reversed the Ninth Circuit, which had withheld full faith and credit on the theory that the decree exceeded state jurisdiction, and remanded. Justice Stevens concurred in Parts I, II-A, and II-C but declined to join Part II-B or the judgment, and Justice Ginsburg, joined by Stevens (Souter joining as to Part II-B), concurred in the remand while dissenting from the Court's own forecast of Delaware preclusion law, stressing that the due-process adequacy-of-representation question remains open on remand.

Holding

Whether 28 U.S.C. Sec. 1738 applies to a state-court judgment entered in a class action that incorporates a settlement releasing claims within the exclusive jurisdiction of the federal courts. Yes. A judgment entered in a state-court class action is a 'judicial proceeding' presumptively entitled to full faith and credit, and neither its class-action origin nor its incorporation of a settlement releasing exclusively federal claims exempts it from the operation of Sec. 1738.

Whether, under Delaware law, the Court of Chancery's settlement judgment precludes the respondents' Exchange Act claims even though those claims could not have been litigated in Delaware. Yes. A Delaware court would afford the settlement judgment preclusive (res judicata) effect binding respondents - class members who never requested exclusion - notwithstanding that they could not have pressed their Exchange Act claims in the Court of Chancery.

Whether Section 27 of the Securities Exchange Act of 1934, which grants the federal courts exclusive jurisdiction over Exchange Act suits, impliedly partially repeals Sec. 1738. No. Section 27 contains no express or implied congressional intent to except Exchange Act claims from Sec. 1738; plaintiffs may release such claims in a judicially approved state-court settlement and may not thereafter relitigate them in federal court.

Whether the exception to full faith and credit for judgments rendered without jurisdiction applies where the rendering court possessed jurisdiction over the underlying suit but the approved settlement released exclusively federal claims. No. The subject-matter-jurisdiction exception is inapposite: the Delaware court possessed jurisdiction over the subject matter of the underlying suit and over the defendants, and the exception would attach only if the court had adjudicated the merits of Exchange Act claims beyond its jurisdiction; an exclusive-federal-jurisdiction statute bears on the possibility of partial repeal of Sec. 1738, not on the state court's possession of jurisdiction.

Matsushita Electric Industrial Co., Ltd. v. Epstein

Summary

Holding

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