516 U.S. 367 (1996)
In 1990 Matsushita Electric Industrial Co. made a tender offer for the common stock of MCA, Inc., a Delaware corporation.1
The tender offer resulted in Matsushita's acquisition of MCA and precipitated two lawsuits on behalf of MCA shareholders.2 A class action was filed in the Delaware Court of Chancery against MCA and its directors for breach of fiduciary duty in failing to maximize shareholder value.3 The complaint was later amended to add claims against the directors for waste of corporate assets and against Matsushita for conspiring to violate Delaware law.4
While the Delaware action was pending, a separate suit was filed in the United States District Court for the Central District of California.5 It named Matsushita as defendant and alleged that the tender offer violated SEC Rules 10b-13 and 14d-10 promulgated under the Securities Exchange Act of 1934.6
The District Court declined to certify the class, entered summary judgment for Matsushita, and dismissed the federal action.7 The plaintiffs appealed to the Court of Appeals for the Ninth Circuit.8 After the federal plaintiffs filed their notice of appeal but before the Ninth Circuit decided the case, the parties to the Delaware suit negotiated a settlement.9 In exchange for a global release of all claims arising out of the Matsushita-MCA acquisition, including claims asserted in the California federal actions, the defendants agreed to deposit $2 million into a settlement fund to be distributed pro rata to class members.10
As required by Delaware Chancery Rule 23, the Chancery Court certified the class for settlement purposes and approved a notice of the proposed settlement.11 The notice informed class members of their right to request exclusion and to appear at a fairness hearing.12 It expressly stated that filing a valid request for exclusion would not preclude a member from individually pursuing the claims alleged in the California federal actions.13 Two notices were mailed to class members and the notice was also published in the national edition of the Wall Street Journal.14 After a hearing at which objectors appeared, the Chancery Court found the class representation adequate and the settlement fair.15
The Chancery Court's order and final judgment incorporated the settlement terms, releasing all state or federal claims, known or unknown, arising out of the merger agreement, tender offer, and related transactions, including the claims asserted in the California federal actions.16 The Delaware Supreme Court affirmed.17 Respondents were members of both the state and federal plaintiff classes.18 Following issuance of the notice they neither opted out of the settlement class nor appeared at the hearing.19 On appeal in the Ninth Circuit, Matsushita invoked the Delaware judgment as a bar under the Full Faith and Credit Act.20 The Ninth Circuit rejected the argument, and the Supreme Court granted certiorari.21
Whether a federal court may withhold full faith and credit from a state-court judgment approving a class-action settlement simply because the settlement releases claims within the exclusive jurisdiction of the federal courts?22
The Full Faith and Credit Act, 28 U.S.C. § 1738, requires that federal courts give state-court judgments the same preclusive effect they would receive in the rendering state's courts, absent a partial repeal by another federal statute.23 This mandate applies to class-action settlement judgments that release exclusively federal claims because such a judgment constitutes a judicial proceeding under the Act, and exclusive federal jurisdiction alone does not create an exemption from its operation.24
No. The Delaware Chancery Court's order and final judgment approving the settlement qualifies as the product of a judicial proceeding under 28 U.S.C. § 1738.25 The Chancery Court certified the class for settlement under Delaware Chancery Rule 23, mailed and published notice informing class members of opt-out rights and the fairness hearing, conducted a hearing at which objectors appeared, and expressly found the representation adequate and the settlement fair.26 The resulting judgment incorporated a global release of all state or federal claims arising out of the Matsushita-MCA acquisition, specifically including the claims asserted in the California federal actions.27 Respondents were members of both classes who neither opted out nor appeared to contest the settlement.28
Under Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373 (1985), the fact that the released claims fall within exclusive federal jurisdiction does not render § 1738 inapplicable or permit a federal court to withhold full faith and credit.29
A federal court therefore may not withhold full faith and credit from the Delaware judgment solely because it releases exclusively federal claims.30
Related opinions on this issue
Justice Stevens joined Parts I, II-A, and II-C of the Court's opinion.31 He agreed with the Court's reasons for concluding that § 27 of the Securities Exchange Act of 1934 does not create an implied partial repeal of the Full Faith and Credit Act.32 Justice Stevens would not join Part II-B or the Court's judgment.33
He agreed with Justice Ginsburg that the question of Delaware law should be addressed by the Court of Appeals in the first instance.34 The Ninth Circuit remains free to consider whether Delaware courts fully and fairly litigated the adequacy of class representation.35
Joined by Justice Stevens
Justice Ginsburg agreed that a remand is required because the Ninth Circuit failed to apply Kremer v. Chemical Construction Corp., 456 U.S. 461 (1982).36 She would not address Delaware preclusion law in the first instance.37 A state-court judgment generally is not entitled to full faith and credit unless it satisfies the requirements of the Fourteenth Amendment's Due Process Clause.38
In the class-action setting, adequate representation is among the due process ingredients that must be supplied if the judgment is to bind absent class members.39 The adequacy issue remains open for consideration on remand.40
Whether the Full Faith and Credit Act applies to a state-court class-action settlement judgment that releases exclusively federal claims?41
Section 1738 applies to any state-court judgment that is the product of a judicial proceeding, including class-action settlements.42 The Act is not rendered inapplicable merely because the judgment releases claims that could not have been litigated in the state court or that fall within exclusive federal jurisdiction, as confirmed by the analytical framework in Marrese.43
Yes. The Delaware action asserted only state-law claims over which the Chancery Court possessed subject-matter jurisdiction.44 After the parties negotiated a settlement releasing both state and federal claims, the Chancery Court applied Delaware Chancery Rule 23, provided notice and an opportunity to be heard, determined that the settlement was fair and the representation adequate, and entered a final judgment that expressly released the federal claims in the California action.45 The Delaware Supreme Court affirmed.
Because the judgment meets the requirements for claim preclusion under Delaware law as articulated in Nottingham Partners v. Dana, 564 A.2d 1089 (1989), and because the rendering court had jurisdiction over the underlying state-law suit, § 1738 directs federal courts to accord the judgment the same preclusive effect it would receive in Delaware courts.46
The Full Faith and Credit Act therefore applies to the Delaware class-action settlement judgment even though it releases exclusively federal claims.47
Whether Section 27 of the Securities Exchange Act of 1934 partially repeals the Full Faith and Credit Act with respect to the preclusive effect of state-court judgments on Exchange Act claims?48
An implied partial repeal of § 1738 by another federal statute exists only upon a showing of irreconcilable conflict. This conflict must demonstrate clear congressional intent to override the principles of comity and repose embodied in the Full Faith and Credit Act.49 Section 27's grant of exclusive jurisdiction does not evince such intent. It does not prohibit state courts from approving releases of Exchange Act claims in settlements of properly filed state-law actions.50
No. Section 27 confers exclusive federal jurisdiction over suits to enforce liabilities or duties created by the Exchange Act. It contains no express language addressing its relationship to § 1738 or the preclusive effect of related state-court proceedings.51 The Delaware action was not brought to enforce any right under the Exchange Act. It asserted only state-law fiduciary-duty claims.52 The Chancery Court approved the release of federal claims solely as part of evaluating the fairness of a settlement over which it had jurisdiction, without adjudicating the merits of those claims.53 The legislative history of the Exchange Act reveals no specific purpose to create an exception to full faith and credit.54 Other provisions such as 15 U.S.C. § 78bb(a) contemplate dual litigation while addressing only double recovery.55
Precedent confirms that exclusive-jurisdiction statutes do not preclude state-court resolution of related claims through settlement or arbitration.56
Section 27 therefore does not partially repeal § 1738, and the Delaware judgment retains its preclusive effect in federal court.57
Related opinions on this issue
Justice Stevens joined Parts I, II-A, and II-C of the Court's opinion. He agreed with the Court's reasons for concluding that § 27 of the Securities Exchange Act of 1934 does not create an implied partial repeal of the Full Faith and Credit Act. Nevertheless, Justice Stevens would not join Part II-B or the Court's judgment because he agreed with Justice Ginsburg that the question of Delaware law should be addressed by the Court of Appeals in the first instance.58
The Ninth Circuit remains free to consider whether Delaware courts fully and fairly litigated the adequacy of class representation.
Joined by Justice Stevens
Justice Ginsburg joined the Court's judgment to the extent that it remands the case to the Ninth Circuit.59 She agreed that a remand is in order because the Court of Appeals did not attend to this Court's reading of 28 U.S.C. § 1738 in the controlling decision Kremer v. Chemical Construction Corp., 456 U.S. 461 (1982).60 Justice Ginsburg would not endeavor to speak the first word on the content of Delaware preclusion law.
Instead, she would follow the standard practice of remitting that issue for decision in the first instance by the lower federal courts.61 She emphasized that a state-court judgment generally is not entitled to full faith and credit unless it satisfies the requirements of the Fourteenth Amendment's Due Process Clause. In the class-action setting adequate representation is among the due process ingredients that must be supplied if the judgment is to bind absent class members. The adequacy issue remains open for consideration on remand.