Lieff Cabraser Heimann & Bernstein, LLP

Plaintiffs Get Creative With Consumer Class Actions

The number of nationwide consumer class actions is on the wane, as courts increasingly frown on certifying classes of U.S. consumers in suits brought under state consumer protection statutes. But the ever-inventive plaintiffs bar has not been cowed, experts say, with multiple single-state class actions just one of the new tools of the old trade.

Reasons for the demise of the nationwide class action are manifold. Partly it's a result of the Class Action Fairness Act of 2005, which helped to clamp down on forum shopping in certification-friendly state courts. Partly it stems from the success of the defense argument that a Texas judge should hear a Texan's claims, and a New York judge a New Yorker's claims.

But largely the demise can be blamed on a consensus among courts that the certification of a nationwide class requires the unwieldy application of the laws of 50 jurisdictions; and in the case of state consumer protection statutes, they're simply too varied for certification to be practical.

But plaintiffs attorneys have modified their approach to adapt — choosing venues carefully, expanding or contracting their claims, and trying out novel applications of class action law.

One new approach is the filing of multiple single-state actions. These actions — which aim to represent consumers who reside within the state where the action is filed, even though the underlying claims may apply to consumers across the U.S. — are becoming one of the most common alternatives to the nationwide class, attorneys said.

Just one example is the MDL involving allegations that Whirlpool Corp. sold washing machines that give off a moldy odor.  Jonathan D. Selbin, head of the economic injury product defect group at Lieff Cabraser Heimann & Bernstein LLP, brought roughly a dozen single-state actions against Whirlpool, which were eventually consolidated in an MDL in the Northern District of Ohio.

The plaintiffs first won certification for a class of Ohio consumers — which Whirlpool has appealed — and now the parties are awaiting rulings from a single judge on class certification for plaintiffs in an additional 12 states, all under state-specific laws.

Selbin acknowledges that the process is complicated, requiring plaintiffs counsel to "brush up on the law of a whole bunch of states and make sure we have clients in all those states." The 13 actions cover states where consumers purchased the greatest number of washing machines, but the MDL will still leave out 30 percent to 40 percent of Whirlpool's customers, he said.

Another emerging strategy is to establish that the consumer statute of the defendant manufacturer's home state applies to potential class members across the U.S., based on the idea that the manufacturer's unlawful decisions originated within the state, attorneys said.

Although most jurisdictions would toss these claims, the Supreme Court of Oklahoma has allowed nationwide class actions that apply the law of the manufacturer's state of residence, Jackson said.  So has the Supreme Court of California, according to Selbin.

Additionally, a federal judge in New Jersey certified a nationwide class of consumers in the MDL against Montvale, N.J.-based Mercedes-Benz USA LLC over its analog-only Tele-Aid emergency assistance systems. Likewise, a federal judge in California applied a similar reasoning in 2008 to certify a nationwide class action against American Honda Motor Co. Inc.

The U.S. Court of Appeals for the Third Circuit declined to hear an appeal of the Mercedes class certification as well as an appeal of an order denying decertification. An appeal of the class certification ruling in the Honda case is pending.

Not surprisingly, most cases targeting a manufacturer's headquarters have cropped up in state and federal courts in California and New Jersey, said Selbin, who is representing plaintiffs in the Mercedes Tele-Aid action. These alternative actions constitute the plaintiffs bar's new consumer suit playbook, but suggestions that the nationwide consumer class action is altogether dead may be exaggerated.

Consider the decision in Pella Corp. v. Saltzman, a suit alleging the window manufacturer failed to tell consumers about defects with its products. In May, the Seventh Circuit allowed a nationwide class of people whose windows have yet to manifest the apparent defect and six statewide subclasses of consumers who already had to replace their windows.

"While consumer fraud class actions present challenges that a district court must carefully consider," the appeals court said, "there are circumstances where certification is appropriate."

The decision was all the more remarkable considering that the Seventh Circuit led the charge against nationwide consumer classes at the beginning of the decade, attorneys said.

For some lawyers, Pella represents the farthest an appeals court will go toward nationwide class certification, especially considering that the laws of the six states at issue have "nearly identical elements," in the words of the Seventh Circuit.

The way Selbin sees it, however, Pella and the Mercedes Tele-Aid rulings represent the pendulum swinging ever so slightly back toward nationwide classes.

"It's always easier for a judge to say, 'This is too big and too messy, I can't do it,' and rarely will an appellate court reverse a judge for saying it," Selbin said. Despite the upfront work involved, however, "litigating those claims of a million consumer class members one time, in one trial, in one court is the most just, speedy and inexpensive way of doing it."