Nordic Naturals Vindicated Again with Third Circuit Affirming Class Action Dismissal and Granting Sanctions for Frivolous Appeal under FRAP 38
On September 14, 2016, in a precedential opinion, the Third Circuit upheld the dismissal of a serial, pro se attorney’s class action lawsuit against international dietary supplement manufacturer Nordic Naturals, Inc., which asserted label-related claims under the N.J. Consumer Fraud Act. Notably, the Third Circuit also entered a separate order, which granted Nordic’s motion for sanctions under Federal Rule Appellate Procedure 38 for Plaintiff’s frivolous appeal.
After Plaintiff filed a putative class action in state court, Nordic removed to federal court and the District Court rejected Plaintiff’s motion for remand, and then granted Nordic’s motion to dismiss for failure to state a claim (Hoffman I). Though the court expressly allowed Plaintiff leave to amend within the 30 days, he filed, instead, a second class action against Nordic in state court, alleging virtually identical claims and the same facts, but significantly narrowing the putative class definition to avoid the $5 million jurisdictional threshold for removal under the Class Action Fairness Act (CAFA). Nordic removed to federal court and filed another motion to dismiss on various grounds, including claim preclusion, entire controversy, and failure to state a claim. The motion was granted, and Plaintiff appealed.
The Third Circuit rejected Plaintiff’s argument that the District Court was first required to make jurisdictional findings of fact to ensure that the amount in controversy met the jurisdictional minimum under CAFA. The Court held that, inasmuch as the District Court dismissed on “claim preclusion” grounds, and “claim preclusion prohibits a court from reaching the merits of a claim[,] [t]he District Court was therefore permitted to ‘bypass’ the jurisdictional inquiry in favor of a non-merits dismissal on claim preclusion grounds.” Further, though the case presented an “interesting doctrinal question” as whether to apply federal claim preclusion or the New Jersey Entire Controversy Doctrine, there was no conflict because the same result would be obtained under either analysis since all three elements were present: (1) final judgment on the merits in a prior suit involving (2) the same parties, and (3) a subsequent suit based on the same cause of action. The Circuit rejected as implausible Plaintiff’s argument that the “without prejudice” dismissal of Hoffman I did not ripen into a “with prejudice” dismissal” because he filed a new complaint in state court: “Filing a new action in a different court does not prevent the District Court’s order from ripening into a final order.”