Unsettling the settled: is there a re-emerging debate regarding the role of choice-of-law in class certification proceedings?

• Author: Pigman, Heather A.

FOR YEARS, defendants opposing multi-jurisdiction product liability or alleged toxic exposure class actions in federal courts have benefited from a plethora of decisions denying certification of such classes based in whole or in part upon choice-of-law concerns. Most federal courts have found that where individual choice-of-law determinations are necessary, and different states' laws apply to different putative class members' claims, certification is improper under various subsections of Federal Rule of Civil Procedure 23(a) and 23(b). Because class actions potentially turn small value individual actions into "bet the company" litigation, the success and reliability of the choice-of-law defense has been a welcome development.

However, class actions continue to be litigated in federal court, and plaintiffs are searching for new ways to reverse the trend against certification of multi-jurisdiction product liability or toxic tort classes based on choice-of-law considerations. Several writers (some of whom also represent plaintiffs in class action lawsuits) have recently argued in the academic literature that the Class Action Fairness Act of 2005 ("CAFA") (1) alters the need for choice-of-law analysis. By increasing the likelihood that multi-jurisdiction class actions will be litigated in federal rather than state court, they argue that CAFA in essence requires that federal courts analyze the laws of multiple jurisdictions when necessary. Under this rationale, "[n]o longer is it appropriate to summarily deny certification on the grounds that multiple state laws are involved." (2) Other articles suggest that, in light of CAFA, prior interpretations of the Supreme Court's decision twenty-five years ago in Phillips Petroleum Co. v. Shutts (3) are now incorrect. Shutts rejected the application by a state court of that state's law to claims from other jurisdictions absent fulfillment of very strict conditions rarely (if ever) met in products liability or toxic tort cases. Many federal courts have incorporated Shutts in their choice-of-law determinations. Under this "new" interpretation, the authors seek to transform Shutts into support for application of a single state's law to a multi-jurisdiction class.

This article summarizes recent attacks on the choice-of-law doctrine and offers defense arguments detailing why CAFA does not alter the need for or manner of its application. Although plaintiffs have not pursued these challenges yet in active litigation on a widespread basis, defendants should be vigilant in monitoring for and defending against these arguments. If plaintiffs successfully argue that choice-of-law analyses are unnecessary or, at least, do not prevent certification where material differences in applicable law exist, defendants will lose a powerful component of their class certification defense.

1. The Central Nature of Choice-of-Law Analyses

   Although most class action defendants are familiar with the choice-of-law issues inherent in multi-jurisdiction products liability and toxic tort class actions, a brief review of Shutts and its impact on the current choice-of-law landscape provides helpful context for understanding the potential new challenges to this defense. In Shutts, a class of gas company investors located throughout the country filed suit in Kansas state court seeking application of Kansas law to their claims to recover interest on certain royalties from oil leases, most of which were not in Kansas. (4) The Kansas state court certified the class and applied Kansas law to all of the leasing agreements. (5) The defendants' appeal focused in large part on the impropriety of certification given the differences between Kansas law and the laws of the states in which the leases were located.

   Because state laws differed, for example, on key points such as the amount of interest (if any) that could be recovered, the Supreme Court found that the conflicts among the potentially applicable laws could have a major impact on the amount of the defendants' liability. (6) The Court also held that class action defendants are entitled to certain due process protections, including having the correct law applied to each claim against them. (7) That absent class members nationwide can be bound by the forum state's law in certain circumstances does not mean in every situation that a defendant's due process rights can be met by having liability assessed based on one state's law as well. In conducting the required choice-of-law analysis, the Supreme Court rejected the idea that presiding over a nationwide class action gave the state court "much greater latitude in applying its own law to the transactions in question than might otherwise be the case." (8) Courts:

   ... may not take a transaction with little or no relationship to the forum and apply the law of the forum in order to satisfy the procedural requirement that there be a "common question of law." The issue of personal jurisdiction over plaintiffs in a class action is entirely distinct from the question of the constitutional limitations on choice of law; the latter calculus is not altered by the fact that it may be more difficult or more burdensome to comply with the constitutional limitations because of the large number of transactions which the State proposes to adjudicate and which have little connection with the forum. (9) Instead, for a single state's law to apply to a nationwide class, that state's law "must have a 'significant contact or significant aggregation of contacts' to the claims asserted by each member of the plaintiff class, contacts...