The early consensus about Whirlpool’s favorable jury verdict in a class action on behalf of Ohio purchasers of front loading washing machines with an alleged propensity to develop mold/mildew problems this past week is that it is a great thing . . . for the plaintiffs’ class action bar!
In a nutshell they both focus (in part) on a slice of Judge Richard Posner’s opinion in Butler v Sears, Roebuck, 727 F.3d 796 (7th Cir 2013) (also involving front loading washers and the same problem). The Seventh Circuit reversed a district court’s decision not to certify a moldy washing machine class and pointed out that Sears should welcome a class trial on the question of defect (liability)–if the jury found in defendant’s favor, class members would be barred by res judicata from bringing individual claims against Sears. This scenario is precisely what played out in the Whirlpool case in Ohio.
And it is not as if Judge Posner can be accused of being insensitive to the pressure class certification places on companies to settle. His opinion in In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995), is practically the poster-child of this point, and has been cited hundreds (maybe thousands) of times in class opposition briefs. But in Butler Judge Posner distinguished the mass tort context of Rhone Poulenc (involving the claims of hemophiliacs who were infected with the HIV virus in the early 1980s through transfusion of blood solids supplied by defendants) from consumer product defect cases.
My take: It’s a bit too early to declare the Whirlpool verdict to be an de facto “win” for the plaintiffs’ class action bar. Here are four reasons why it might well cut the other way:
- more defendant corporations may be encouraged to take close class cases to trial. If they do so (and start winning a fair percentage of the cases), this will make it less attractive–not more attractive–for class counsel to file class actions. They will be less assured of obtaining a settlement prior to trial, and less likely to obtain any recovery (or fee) after trial;
- the projected costs of bringing a class action (for plaintiffs’ counsel, who have to fund these costs in virtually all instances), will surely rise. Add to the costs of (i) notice, (ii) discovery costs (including deposition transcripts, travel expenses, document review and coding, etc.) and often substantial ESI costs; and (iii) often experts to support certification (e.g., in antitrust and many consumer cases)–the (iv) additional costs associated with trial (which are substantial);
- It is not entirely clear how the Whirlpool trial victory will influence trial and appellate judges evaluating whether to certify a class. Yes, Judge Posner’s logic has been vindicated in this case. But it is commonly perceived by class action lawyers on both sides of the aisle that the stronger the facts on liability the more “pull” a motion to certify has. (Indeed there were some damaging documents internal to Whirlpool regarding the moldy washer issue that might explain how these cases came to be certified in the first place.) The point is, while logically under Rule 23 class certification should not be resisted in a weak (though viable) liability case because it could “help” defendant avoid repeated individual suits, some judges may be disinclined to certify these cases if they think that defendants are more likely to take them to trial and thereby tie up their trial dockets for weeks on end. The hard fact of the case management regime that is reality in our federal courts today (where the vast majority of class actions land after passage of the Class Action Fairness Act of 2005, which made most state class actions removable to federal court) is that well over 90% of cases are either dismissed or settled; very few go to trial. So long as certification of a class virtually always equated with settlement, class certification did not threaten this regime. But if certification becomes increasingly associated with complex long-running class trials, well, that threatens the district court’s case management big time. And one way (though not necessarily legitimately) to address this threat is for the trial court to decline to certify “in its broad discretion.” If this starts to happens it is hardly a “win” for the plaintiffs’ class action bar.
There is one more possible long-term downside in the Whirlpool verdict for the plaintiffs’ class action bar. As reflected in comments attributed to lead class counsel Jonathan Selbin in the Reuters blog linked above, class counsel plans to try other moldy washing machine cases on a state-by-state basis. He also mentions the possibility of “offensive” use of collateral estoppel (whereby, under certain state laws, a prior issue resolved against a defendant in a separate trial involving another adverse party can nonetheless bind the defendant in the subsequent trial).
Offensive collateral estoppel is a controversial proposition. Some lawyers and judges find it, well, offensive. If, after losing the Ohio case, plaintiffs win a class trial against Whirlpool on the issue of design defect in another state and then on that basis seek to bind Whirlpool to the finding of defect in future statewide trials (notwithstanding the contrary verdict in Ohio), there is a real possibility that the perceived unfairness of this risk (or result) will be urged in other cases based on state law as a reason to deny certification .
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Trials used to be the bedrock of the civil justice system. They have become less and less so as courts have gotten bogged down and have moved to a regime that encourages early dismissal of perceived non-meritoriousness claims and settlement of the rest.
*If* courts can adjust to accommodate more class trials, it is likely to be a good thing all the way around–especially for class members and corporate defendants. And also for the class action bar. Class action lawyers will get back to preparing their cases for trial, which helps sharpen their theories, defenses, factual development, and requests for relief. Weak cases that class counsel do not believe would be worthwhile trying will be brought less often (on the mere hope of certification and a quick settlement)–which is good for everybody. Stronger cases will go to trial more often. Sometimes defendants will win and class members will take nothing–which is not that much of a loss to them as compared with the alternative of a settlement in which each member would have obtained only de minimis compensation. These losses will cost class counsel a lot–providing further discipline to bring only meritorious claims. On the other hand, when the plaintiff class wins class members are much more likely to achieve complete (or near complete) relief. Moreover, occasional large class verdicts will have the deterrent effect that verdicts are supposed to have, encouraging companies and organizations with many customers or members to adhere to the governing legal standards.
As a final example I cite the experience of a former partner of mine, James Feeney of the Dykema law firm (Michigan), who tried a class action on behalf of Ford Motor Company brought by police officers who claimed that the Crown Victoria police vehicle was defective and dangerous. Ford won that trial. I tried (unsuccessfully) to recruit Jim to participate on a panel on class trials I moderated at the ABA Annual Institute on Class Actions a few years ago in New York City. (Judge Jack Weinstein joined us, which was great.) Jim told me then: “Companies need to take more of these cases to trial.”
Wise words spoken by one of the preeminent products defense trial lawyers in the country. Maybe Whirlpool was listening.