Using conflict of law analyses to oppose certification of consumer fraud class actions.

• Author: O'Neal, James A.

Defense counsel must be aware of and insist that courts recognize the many differences and divergences of the state statutes

IT WOULD be overly optimistic to think that the federal court system's well-reasoned and conservative approach to class certification in mass tort cases, as exemplified by the U.S. Supreme Court's decision in Amchem Products Inc. v. Windsor(1) and the Fifth Circuit's in Castano v. American Tobacco Co.,(2) free defense counsel from having to worry about class certification where individual issues seem clearly to predominate. True, federal courts are primarily, although not exclusively, following the example of the Supreme Court and refusing to certify mass tort classes. In the more populist state courts, however, plaintiffs' attorneys still find judges willing to certify amazingly ambitious classes, often where there are emotionally and politically charged allegations of consumer fraud.

One aspect of the certification of consumer fraud classes on which defense counsel should focus is the inappropriateness of certifying a multijurisdictional class in the face of the many conflicts in consumer protection laws among the different states. The stakes are high, given that treble and exemplary damages and attorneys' fees awards are possible under the state statutes. Since Castano, a careful and specific demonstration of conflicts of laws should be strong armor against the certification of an inappropriate, unmanageable but highly threatening national class action.

CLAIMS UNDER CONSUMER PROTECTION STATUTES

Plaintiffs who assert state consumer fraud claims on behalf of persons in many jurisdictions usually seek to impose liability based on the consumer protection statutes of the seller's home state. They argue that there is nothing arbitrary or unfair about requiring a seller to conform to the consumer laws of its own jurisdiction and that other states would have no interest in preventing their residents from recovering damages under a foreign state's law. This is a woeful oversimplification of conflict of laws principles, which themselves vary between jurisdictions. Even if the application of a particular state's law is not arbitrary or unfair, courts must still determine whether the choice of only one state's law would create a conflict in the context of a multijurisdictional class action.

In analyzing the choice of law issue, the first consideration is "whether the choice of one state's law over another's creates an actual conflict."(3) If there is a conflict between the law which plaintiffs seek to invoke and other state consumer protection statutes, then the court must apply an individualized choice of law analysis to each purported member's claims.(4) Plaintiffs may not avoid this conflict analysis merely by proposing the law of a single state. Courts have rejected that tactic.

For example, in In re Ford Motor Co. Ignition Switch Products Liability Litigation,(5) the U.S. District Court for the District of New Jersey rejected the very argument that the home state of the defendant corporation has the most significant interest in regulating the corporation's conduct, thus justifying the application of that state's law to each class member's claims. In that case, the plaintiffs argued that Michigan law should apply, including Michigan's consumer protection statute, because Ford was headquartered there, the vehicles were manufactured there, the decisions relating to the allegedly defective switches were made there, and the alleged misrepresentations, statements or advertisements regarding the vehicles originated there. While acknowledging that Michigan had an interest in regulating a corporation within its borders, the court nevertheless found that the laws of each putative class member's home state had interests that outweighed those of Michigan:

Each plaintiff's home state has an interest in protecting its consumers from in-state injuries caused by foreign corporations and in delineating the scope of recovery for its citizens under its own laws. These interests arise by virtue of each state being the place in which plaintiffs reside, or the place in which plaintiffs bought their allegedly defective vehicles or the place where plaintiffs' alleged damages occurred.(6) In so ruling, the court specifically rejected the invitation to simplify its task in order to justify class certification:

While it might be desirable, for the sake of efficiency, to settle upon one state--like Michigan or New Jersey--and apply its law in lieu of the other 49 jurisdictions, due process requires individual consideration of the choice of law issues raised by each class member's case before certification. Since the laws of each of the 50 states vary on important issues that are relevant to plaintiffs' causes of action and defendants' defenses, the court cannot conclude that there would be no conflict in applying the law of a single jurisdiction.... as plaintiffs suggest. Thus, the court will apply the law of each of the states from which plaintiffs hail.(7) The same conclusion was reached in Chin v. Chrysler Corp.,(8) in which another judge in the same district similarly rejected the plaintiffs' attempt to simplify that proposed class action by the application of New Jersey law to all claims.(9)

The same analysis was echoed by Judge Bechtle of the U.S. District Court for the Eastern District of Pennsylvania in In re Diet Drug Products Liability Litigation, in which he refused to adopt the plaintiffs' position that the law of Pennsylvania should be applied to the class as a whole because Pennsylvania has the greatest interest in applying its law:

The ingestion and prescription of these diet drugs occurred on a nationwide basis. Most of the proposed class members have no ties whatsoever with Pennsylvania. Although AHP's [American Home Products Corp.] subsidiary, Wyeth-Ayerst Laboratories Division, has its principal offices in [Pennsylvania] and many of AHP's activities regarding the drugs at issue occurred in Pennsylvania, AHP conducted its FDA [Food and Drug Administration] contacts and various marketing efforts in other jurisdictions as...