Amicus Curiae Brief — FCA US LLC, et al., Petitioners v. Brian Flynn, et al.

Nos. 18-398

In the Supreme Court of the United States

_______________

FCA US LLC AND HARMAN INTERNATIONAL

INDUSTRIES, INC.,

Petitioners

v.

BRIAN FLYNN, GEORGE & KELLY BROWN, AND

MICHAEL KEITH, INDIVIDUALLY AND ON BEHALF OF

OTHERS SIMILARLY SITUATED,

Respondents

______________________

On Petition for Writ of Certiorari

To the United States Court of Appeals for

the Seventh Circuit

_______________

BRIEF OF AMICI

NATIONAL ASSOCIATION OF MANUFACTURERS

AND AMERICAN TORT REFORM ASSOCIATION

IN SUPPORT OF PETITIONERS

_______________

Philip S. Goldberg

Counsel of Record

SHOOK, HARDY & BACON L.L.P.

1155 F Street, N.W., Suite 200

Washington, D.C. 20004

(202) 783-8400

October 29, 2018

Of Counsel

Peter C. Tolsdorf

Leland P. Frost

MANUFACTURERS’ CENTER

FOR LEGAL ACTION

733 10th Street, N.W., Suite 700

Washington, D.C. 20001

(202) 637-3000

Counsel for National Association of

Manufacturers

H. Sherman Joyce

Lauren Sheets Jarrell

AMERICAN TORT REFORM ASSOCIATION

1101 Connecticut Avenue, N.W., #400

Washington, D.C. 20036

(202) 682-1163

Counsel for American Tort Reform

Association

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ..................................

ii

INTEREST OF AMICI CURIAE ...........................

1

INTRODUCTION AND

SUMMARY OF THE ARGUMENT .................

2

ARGUMENT ..........................................................

4

I.

The Court Should Grant Review Because

the Seventh Circuit’s Criteria for Rule

23(f) Review Is Too Narrow and Does

Not Give Proper Effect to the Rule ...........

4

A. The Court Was Purposeful in Not

Limiting Access to Rule 23(f) ...............

5

B. A District Court’s Manifest Error

Warrants Rule 23(f) Review .................

7

C. The Circuit Split on Manifest Error

Facilitates Forum Shopping for

Baseless Class Actions .........................

9

II. Certifying a Class in Circumvention of

this Court’s Precedent Is Manifest Error..

11

A. Mere Risk of a “Hack” Is Not a

Violation of a Manufacturer’s

Standard of Care ..................................

12

B. Risk of a Future Hack Is Not a

Compensable Harm Under

Traditional Tort Law ............................

13

C. Abstract Consumer Class Actions

Should Not Overtake Products

Liability .................................................

16

CONCLUSION .......................................................

17

ii

TABLE OF AUTHORITIES

Cases

Page

Blair v. Equifax Check Servs., Inc.,

181 F.3d 832 (7th Cir. 1999) ......................... 2, 6, 7

Cahen v. Toyota Motor Corp.,

717 Fed. App’x 720 (2017) ......................... 3, 13, 14

Chamberlan v. Ford Motor Co.,

402 F.3d 952 (9th Cir. 2005) ......................... 3, 7, 8

Clapper v. Amnesty Int’l USA,

568 U.S. 398 (2013).......................................... 3, 14

In re Delta Air Lines, 310 F.3d 953

(6th Cir. 2002) ........................................................ 7

In re Lorazapam & Clorazepate Antritrust Litig.,

289 F.3d 98 (D.C. Cir. 2002) ........................... 7, 8-9

In re Toyota Motor Corp. Hybrid Brake Mktg.,

Sales Practices & Prods. Liab. Litig., 915 F.

Supp. 2d 1151 (C.D. Cal. 2013) ..................... 16, 17

Lienhart v. Dryvit Systems, Inc.,

255 F.3d 138 (4th Cir. 2001) ................................. 7

Microsoft v. Baker, 137 S. Ct. 1702 (2017) .......... 2-3, 6

Newton v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 259 F.3d 154 (3d Cir. 2001) ........... 7, 8

Prado-Steiman v. Bush, 221 F.3d 1266

(11th Cir. 2000) .................................................. 7, 8

iii

Regents of Univ. of Cal. v. Credit Suisse

First Boston (USA) Inc., 482 F.3d 372

(5th Cir. 2007) ........................................................ 8

Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315

(5th Cir. 2002) ...................................................... 16

Sawyer v. Whitley, 505 U.S. 333 (1992) ..................... 8

Shady Grove Orthopedic Assocs., P.A. v. Allstate

Ins. Co., 559 U.S. 393 (2010) ................................. 4

Sinclair v. Merck & Co., 948 A.2d 587

(N.J. 2008) ............................................................ 14

Vallario v. Vandehey, 554 F.3d 1259

(10th Cir. 2009) ...................................................... 7

Statute

28 U.S.C. § 1292 .......................................................... 5

Other Authorities

American Bar Ass’n Sec. of Litig., Report and

Recommendations of the Special Committee

on Class Action Improvements, 110 F.R.D.

195 (1986) ............................................................... 5

John H. Beisner, et al., Study Reveals US Courts

of Appeal Are Less Receptive to Reviewing

Class Certification Rulings (2014) ...................... 10

Black’s Law Dictionary (10th ed. 2014) ..................... 8

iv

Comments of the Staff of the Federal Trade

Commission’s Bureau of Consumer Protection, In the Matter of The Internet of Things

and Consumer Product Hazards, No. CPSC2018-007, June 15, 2018 ................................ 12, 13

Complex Litigation: Statutory Recommendations

and Analysis, American Law Inst. (1994) ............ 5

Fed. R. Civ. P. 23(f) Advisory Committee's Note ....... 6

Charles R. Flores, Appealing Class Action

Certification Decisions Under Federal

Rule of Civil Procedure, 4 SETON HALL

CIR. REV. 27 (2007) ................................................ 9

Richard D. Freer, Interlocutory Review of Class

Action Certification Decisions: A Preliminary

Empirical Study of Federal and State Experience, 35 WESTERN STATE L. REV. 13 (2007) ........ 9

FTC Workshop Protecting Consumer Interests

in Class Actions, 18 GEO. J. LEGAL ETHICS

1197 (2005) ............................................................. 6

Theodore M. Grossman & Todd R. Geremia,

That’s Why They’re ‘Supreme,’” Nat’l L. J.

(May 14, 2007) ................................................ 10-11

Hearing on “Data Security and Breach Notification Reform,” House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Mar. 7, 2018 .......... 12

v

Judicial Conference of the United Sates,

Advisory Committee on Civil Rules,

Minutes of November 9-10, 1995 .......................... 6

Ben Kochman, A Deluge of Suits Over

Connected Devices Could be Coming,

Law360 (Aug. 24, 2018) ....................................... 13

Sheila B. Scheuerman, Against Liability for

Private Risk-Exposure, 35 HARV. J.L. &

PUB. POL’Y 681 (2012) .......................................... 16

Victor E. Schwartz & Cary Silverman,

The Rise of "Empty Suit" Litigation.

Where Should Tort Law Draw the

Line?, 80 BROOK. L. REV. 599 (2015) ................... 17

Michael E. Solimine & Christine Oliver Hines,

Deciding to Decide: Class Action Certification and Interlocutory Review by the United

States Courts of Appeals Under Rule 23(f),

41 WM. & MARY L. REV. 1531 (2000) ..................... 8

Start with Security: A Guide for Business –

Lessons Learned from FTC Cases, Federal

Trade Commission (June 2015) .......................... 12

Barry Sullivan & Amy Kobelski Trueblood, Rule

23(f): A Note on Law and Discretion in the

Courts of Appeals, 246 F.R.D. 277 (2008) ........... 10

The State of Class Actions Ten Years After the

Enactment of the Class Action Fairness Act,

Hearing Before the Subcomm. on the Constitution and Civil Justice of the H. Comm. on

the Judiciary, 114th Cong. (Feb. 27, 2015) ......... 15

vi

Working Papers of the Advisory Committee on

Civil Rules on Proposed Amendments to Civil

Rule 23: Vol. 1, Admin. Office of the U.S.

Courts, May 1, 1997..................................... 4, 5, 15

INTEREST OF AMICI CURIAE1

Amici have a substantial interest in ensuring that

businesses facing class actions are guaranteed their

procedural and constitutional protections. As explained herein, amici believe the Seventh Circuit’s

denial of interlocutory review of a clearly erroneous

District Court ruling to certify a class of claimants

that have sustained no injury violates these protections. If the Petition is denied and the underlying

rulings stand, amici’s members would be adversely

impacted by class actions based entirely on the everpresent risk that a product may fail, leading to unprincipled liability and needless litigation costs.

The National Association of Manufacturers

(NAM), the largest manufacturing association in the

United States, represents small and large manufacturers in every industrial sector and in all 50 states.

Manufacturing employs more than 12 million men

and women, contributes $2.25 trillion to the U.S.

economy annually, has the largest economic impact

of any major sector, and accounts for more than

three-quarters of all private-sector research and development in the nation. The NAM is the voice of

the manufacturing community and leading advocate

for a policy agenda that helps manufacturers compete in the global economy and create jobs across the

United States.

Pursuant to Rule 37.6, counsel for amici certifies that this

brief was not authored in whole or in part by counsel for any

party and that no person or entity, other than amici, their

members, or their counsel made a monetary contribution to the

preparation or submission of the brief. The parties received

timely notice of amici’s intent to file the brief and have consented to the filing of this amici brief.

1

2

The American Tort Reform Association (ATRA) is

a broad-based coalition of businesses, corporations,

municipalities, associations, and professional firms

that have pooled their resources to promote reform of

the civil justice system with the goal of ensuring

fairness, balance, and predictability in civil litigation. For more than a decade, ATRA has filed amicus

briefs in cases involving important liability issues.

INTRODUCTION AND

SUMMARY OF THE ARGUMENT

The Seventh Circuit’s decision denying Petitioner’s interlocutory appeal of the District Court’s class

certification ruling demonstrates the need for the

Court to establish proper, consistent guidelines for

the implementation of Federal Rule of Civil Procedure 23(f). It has been twenty years since Rule 23(f)

was adopted, and broad discrepancies have developed among the Circuits as to the factors to be considered in determining when review is warranted,

the process for making these determinations, and

how likely a Circuit is to grant review. The Court

should clarify that a District Court’s manifest error

in certifying a class warrants interlocutory review.

Unlike other Circuits, the Seventh Circuit has not

recognized manifest error as a cause for review. It

has effectively limited Rule 23(f) to three circumstances, namely where: (1) “the denial of class status

sounds the death knell of the litigation”; (2) the grant

of class status “put[s] considerable pressure on the

defendant to settle”; and (3) immediate appeal “may

facilitate the development of the law.” Blair v.

Equifax Check Servs., Inc., 181 F.3d 832, 834-35 (7th

Cir. 1999). Rule 23(f), though, was never intended to

be so limited. See Microsoft v. Baker, 137 S. Ct.

3

1702, 1710 (2017) (stating that Rule 23(f) gives

courts the ability to grant review based on any consideration). Circuits granting review on manifest error alone have recognized their split from the Seventh Circuit. See, e.g., Chamberlan v. Ford Motor

Co., 402 F.3d 952, 958 (9th Cir. 2005).

The Petition provides the Court with the right

case for establishing this needed clarity and uniformity. The District Court was manifestly wrong to

certify this class. This case is a bald attempt to

plead around the Court’s well-considered precedent

that claimants, suing individually or as a class, have

no right to recover if they have no concrete injury

and no such injury is imminent. See, e.g., Clapper v.

Amnesty Int’l USA, 568 U.S. 398 (2013). Claimants

are alleging only a risk their products may fail. No

one’s product has failed, and no person has sustained

any injuries from a product failure. As the Ninth

Circuit found in a nearly identical case, the attempt

to plead economic loss for the diminution of value

based on the potential for product failure is neither

credible nor compensable. See Cahen v. Toyota Motor Corp., 717 Fed. App’x 720, 723 (2017). Under the

Court’s rulings, Plaintiffs clearly have no standing in

Federal Court and cannot state a claim for damages.

The Court adopted Rule 23(f) to provide interlocutory review in this exact type of situation, namely

where justice delayed will be justice denied. Noinjury class actions, including diminution of value

claims, are disproportionately driven by class counsel

seeking attorney fees. There are no aggrieved plaintiffs pushing for justice, and defendants are unlikely

to incur the expense, risks, and business interruptions of protracted litigation. Class certification is

4

merely leverage for settlement. See Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S.

393, 445 n.3 (2010) (Ginsburg, J., dissenting on other

grounds) (observing when “a class action poses the

risk of massive liability unmoored to actual injury,”

the “pressure to settle may be heightened”). The certification ruling is unlikely to be appealed.

Amici respectfully urge the Court to grant the Petition. The Federal judiciary remains a single court

system. Class action litigants should be able to

achieve justice in all of the Federal Circuits when a

District Court certifies a class action based on its

manifest error in assessing the pleadings.

ARGUMENT

I. THE COURT SHOULD GRANT REVIEW

BECAUSE THE SEVENTH CIRCUIT’S

CRITERIA FOR RULE 23(F) REVIEW IS

TOO NARROW AND DOES NOT GIVE

PROPER EFFECT TO THE RULE

Rule 23(f) was developed specifically to provide

relief in cases like the one at bar. In the 1980s, creative class counsel “bombarded” the judiciary with inventive actions not anticipated in the 1960s when

the Court wrote Rule 23. Working Papers of the Advisory Committee on Civil Rules on Proposed

Amendments to Civil Rule 23: Vol. 1, Admin. Office of

the U.S. Courts, May 1, 1997, at ix (introductory

memorandum of Civil Rules Advisory Committee

Chairman Paul V. Niemeyer) [hereafter “Working

Papers”].2 Certification rulings, which were intended

to be procedural in nature, were instead driving liti2 http://www.uscourts.gov/sites/default/files/workingpapers-

vol1.pdf.

5

gations outcomes. In many cases, waiting for final

judgment in order to access appellate review proved

too late to correct injustices. See id.

Providing litigants an avenue for interlocutory

appeal of class certification rulings was studied extensively and generated broad support in the legal

community. See American Bar Ass’n Sec. of Litig.,

Report and Recommendations of the Special Committee on Class Action Improvements, 110 F.R.D.

195, 210-11 (1986) (recommending interlocutory appeal for class certification rulings); Complex Litigation: Statutory Recommendations and Analysis,

American Law Inst. (1994), at 134-35 (discussing

benefits of immediate review of class certification decisions). In 1992, Congress enacted the Federal

Courts Administration Act in bipartisan fashion, giving the Court authority to “prescribe rules . . . to provide for an appeal of an interlocutory decision to the

courts of appeals.” Pub. L. No. 102-572, § 101 (1992)

(codified at 28 U.S.C. § 1292(e)).

A. The Court Was Purposeful In Not Limiting Access to Rule 23(f)

The Court oversaw an eight-year process for

promulgating Rule 23(f). In 1990, the Advisory

Committee on Civil Rules began an in-depth study of

class action practice and procedures. See Working

Papers at ix. In 1996, it published for public comment the proposed amendments to Rule 23, including

for Rule 23(f). See id. The Advisory Committee held

conferences and hearings to solicit testimony from

practitioners, judges and academics. See id. The

Court adopted the final rule in 1998.

6

It was the considered judgment of the Federal

Rules Advisory Committee, and ultimately this

Court, that no reason for granting interlocutory appeals should be foreclosed. “[A]ny consideration that

the court of appeals finds persuasive” should lead to

review. Fed. R. Civ. P. 23(f) Advisory Committee's

Note. The Committee also recognized the creative,

evolving nature of class litigation. It cautioned that

courts should remain “flexible” so that their rulings

would adequately reflect the dynamic nature of class

litigation. Id. The Court recently observed “the

drafters of Rule 23(f) sought to provide ‘significantly

greater protection against improvident certification

decisions than’” under traditional rules for appeal.

Microsoft, 137 S. Ct. at 1709 (quoting Judicial Conference of the United Sates, Advisory Committee on

Civil Rules, Minutes of November 9-10, 1995).

After the Court adopted Rule 23(f), the Seventh

Circuit became the first federal appellate court to issue guidance for when it will grant interlocutory review. It effectively limited Rule 23(f) to three circumstances: where (1) “the denial of class status

sounds the death knell of the litigation”; (2) the grant

of class status “put[s] considerable pressure on the

defendant to settle”; and (3) immediate appeal “may

facilitate the development of the law.” Blair, 181

F.3d at 834-35. The well-respected Judge Wood, who

has served on the Seventh Circuit since the advent of

this Rule, explained in an open forum that the Circuit generally does not grant review to determine

whether a class action is meritless or unsupported by

the law, as in the case at bar. See FTC Workshop

Protecting Consumer Interests in Class Actions, 18

GEO. J. LEGAL ETHICS 1197, 1213 (2005). Rather, she

stated, the Seventh Circuit generally grants review

7

only when a case helps “clarify class action law,” i.e.,

whether a case should “qualify as a class action or

should it be handled in individual litigation.” Id.

It is not surprising then that the Seventh Circuit

denied review here. No-injury claims are meritless,

whether brought individually or as a class. The

Court should grant the Petition to clarify that the

Seventh Circuit has improperly limited Rule 23(f)’s

intended relief. It denies the rights of litigants the

full range of interlocutory appeals this Court and

Federal Rules Advisory Committee have provided.

B. A District Court’s Manifest Error Warrants Rule 23(f) Review

Other federal circuits have properly found that

manifest error in a class certification ruling is a central reason for interlocutory appeal. Soon after

Blair, the Eleventh Circuit split from the Seventh

Circuit, stating the Blair tests were not “conclusive.”

Prado-Steiman v. Bush, 221 F.3d 1266, 1274 (11th

Cir. 2000) (adopting a totality of the circumstances

test for review). In all, the Third, Fourth, Sixth,

Ninth, Tenth, and DC Circuits now explicitly recognize manifest error as a reason for Rule 23(f) review.3

They have concluded the Court did not intend interlocutory review to be cabined by the three Blair factors and should be allowed when a class certification

3 See Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259

F.3d 154 (3d Cir. 2001); Lienhart v. Dryvit Systems, Inc., 255

F.3d 138 (4th Cir. 2001); Chamberlan v. Ford Motor Co., 402

F.3d 952 (9th Cir. 2005); Vallario v. Vandehey, 554 F.3d 1259

(10th Cir. 2009); In re Lorazapam & Clorazepate Antritrust

Litig., 289 F.3d 98 (D.C. Cir. 2002); see also In re Delta Air

Lines, 310 F.3d 953 (6th Cir. 2002) (allowing review based on

the totality of the circumstances).

8

ruling is manifestly erroneous. See Newton v. Merrill

Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154,

164 (3d Cir. 2001).

Manifest error, also called “clear error,” is a criterion the Advisory Committee suggested “should undergird a grant of permission under Rule 23(f).” Michael E. Solimine & Christine Oliver Hines, Deciding

to Decide: Class Action Certification and Interlocutory Review by the United States Courts of Appeals

Under Rule 23(f), 41 WM. & MARY L. REV. 1531, 157576 (2000). It is a high bar not intended for routine

issues. It requires a District Court to have shown

“complete disregard of the controlling law or the

credible evidence in the record.” Black’s Law Dictionary 660 (10th ed. 2014). And, it is a standard

“familiar to federal courts.” Sawyer v. Whitley, 505

U.S. 333, 372 (1992) (Stevens, J., concurring).

Accordingly, the appellate courts have invoked

Rule 23(f) for manifest errors “sparingly.” Chamberlan, 402 F.3d at 959. They have found manifest error, as here, where a District Court overlooks controlling law. See Prado-Steinman, 221 F.3d at 1275. In

other cases, District Courts applied the wrong Rule

23 standard, see id., or incorrectly applied the substantive law of the claims. Cf. Regents of Univ. of

Cal. v. Credit Suisse First Boston (USA) Inc., 482

F.3d 372, 380 (5th Cir. 2007). In these situations, as

with the Blair criteria, there is “no reason for a party

to endure the costs of litigation when a certification

decision is erroneous and inevitably will be overturned.” Chamberlan, 402 F.3d at 958. Such litigants should equally be allowed “to avoid a lengthy

and costly trial that is for naught once the final

judgment is appealed.” In re Lorazepam & Cloraza-

9

pate Antitrust Litig., 289 F.3d 98, 105) (D.C. Cir.

2002).

When District Courts have clearly erred, appellate courts should provide them with needed guidance. In the first decade of Rule 23(f), there was a

four-fold increase in published appellate court decisions on the grant or denial of class certification. See

Richard D. Freer, Interlocutory Review of Class Action Certification Decisions: A Preliminary Empirical

Study of Federal and State Experience, 35 WESTERN

STATE L. REV. 13 (2007) (looking at data from 1998

through 2007). These rulings created a useful body

of case law for litigants and courts to follow. Granting the Petition, therefore, will facilitate a more consistent, competent judiciary without concern that

Rule 23(f) review will become commonplace.

C. The Circuit Split on Manifest Error

Facilitates Forum Shopping for Baseless

Class Actions

The discrepancies among the courts in applying

Rule 23(f), along with the Seventh Circuit’s reticence

to review cases for manifest error, have facilitated

forum shopping, particularly for abstract class actions such as the one at bar that can be filed in any

jurisdiction. See Charles R. Flores, Appealing Class

Action Certification Decisions Under Federal Rule of

Civil Procedure, 4 SETON HALL CIR. REV. 27 (2007)

(“[I]f the disparate Rule 23(f) standards among circuits remain, sophisticated litigants should expect to

evaluate Rule 23(f) appealability as part of strategic

forum shopping during class action litigation.”).

Studies have shown that some circuits are “more

willing to grant Rule 23(f) petitions” and, unlike the

Seventh Circuit, they will assess the “merits of the

10

appeal” when granting review. Barry Sullivan &

Amy Kobelski Trueblood, Rule 23(f): A Note on Law

and Discretion in the Courts of Appeals, 246 F.R.D.

277, 288 (2008).

The first major study of Rule 23(f) review was

conducted by Barry Sullivan and Amy Trueblood.

They looked at reported data on Rule 23(f) petitions

from December 1, 1998 through October 30, 2006.

This study found a wide range in the percentage of

petitions granted, from zero in the Tenth Circuit to

100 percent in the Fourth Circuit. The other Circuits

granted the following percentages of Rule 23(f) petitions: 16, 22, 25, 26, 28, 31, 36, 39, 54, 58, and 86.

Thus, there was no consistency among the Circuits

as for how often Rule 23(f) review was granted.

Several years ago, well-respected class action attorneys continued this study, looking at reported data from October 31, 2006 through December 31,

2013. See John H. Beisner, et al., Study Reveals US

Courts of Appeal Are Less Receptive to Reviewing

Class Certification Rulings (2014).

Their study

showed a decline in acceptances, which suggests lower courts followed the provided guidance. But, there

was still a wide range of acceptance rates, with

courts accepting review in the following percentages

of cases: 5, 10, 14, 19, 20, 25, 25, 25, 28, 33, 36, and

46. See id. In both studies, a District Court’s ruling

to certify a class was reversed about 70 percent of the

time. As here, federal appellate review has been

consistently needed to curb improper certifications.

These studies, along with the experiences of other

practitioners, have generated calls for the Court to

provide more clarity and uniformity among the circuits for Rule 23(f) review. See, e.g., Theodore M.

11

Grossman & Todd R. Geremia, That’s Why They’re

‘Supreme,’” Nat’l L. J. (May 14, 2007). The Petition

provides the Court with the opportunity to do so and

to facilitate access to justice in all Federal Circuits.

II. CERTIFYING A CLASS IN CIRCUMVENTION OF THIS COURT’S PRECEDENT IS

MANIFEST ERROR

This case represents an effort to broadly expand

class litigation, much like those that spurred the

creation of Rule 23(f) in the 1980s and 1990s. Here,

two researchers in a laboratory identified a flaw in

Petitioner’s cybersecurity protocols in its vehicle’s

Uconnect infotainment system. Petitioners recalled

the product and closed the port the researchers

found. See Dkt. #317-1, ¶¶ 117-18 (stating Petitioners “eliminated vulnerabilities that might allow a

remote actor to impact vehicle control systems”).

Nobody’s vehicle was actually hacked, and no consumer was injured. From a liability perspective, this

should have been a non-event.

The District Court recognized the Court’s precedent that where individuals have no injury, and no

injury is imminent, no right to sue exists. See Pet. at

12a. Yet, it allowed Plaintiffs to plead around this

case law; it approved an injury theory based entirely

on the perceived risk of future harm. In short, because a flaw was found in the product when sold,

there is a perception, rightly or wrongly, that there is

now an identifiable risk the product could fail, making it not worth the original sale price. Under this

theory, Plaintiffs suggest, it is irrelevant whether

they were exposed to or experienced any harm, or

whether they are satisfied with their purchase. Allowing a Rule 23(f) appeal for manifest error pro-

12

vides a safeguard against such creative attempts to

sidestep precedent.

A. Mere Risk of a “Hack” Is Not a Violation

of a Manufacturer’s Standard of Care

This litigation directly conflicts with the legal obligations on manufacturers to protect their consumers from cyber threats. Companies cannot make

cyber products “hack proof.” See Hearing on “Data

Security and Breach Notification Reform,” House Financial Services Subcommittee on Financial Institutions and Consumer Credit, Mar. 7, 2018 (statement

of Jason Kratovil, Vice President The Financial Services Roundtable) (“[N]o business or industry segment is immune to hackers.”). It is impossible to anticipate every way a criminal intent on committing a

crime will be able to do so. See Start with Security:

A Guide for Business – Lessons Learned from FTC

Cases, Federal Trade Commission (June 2015), at 10

(“There is no way to anticipate every threat.”).4

Consequently, a manufacturer is not subject to liability whenever a hack occurs. See Comments of

the Staff of the Federal Trade Commission’s Bureau

of Consumer Protection, In the Matter of The Internet

of Things and Consumer Product Hazards, No.

CPSC-2018-007, June 15, 2018, at 2 n.13 [hereafter

“FTC Staff Comments”]5 (“[T]he mere fact that a

breach occurred does not mean that a company has

4 https://www.ftc.gov/system/files/documents/plain-

language/pdf0205-startwithsecurity.pdf (emphasis added).

5 https://www.ftc.gov/system/files/documents/advocacy-

_documents/comment-staff-federal-trade-commissions-bureauconsumer-protection-consumer-product-safety/p185404_ftc

_staff_comment_to_the_consumer_product_safety_commission.

pdf.

13

violated the law.”). Diminution in value claims also

seek to create liability regardless of whether the flaw

was not indicative of a design defect or the manufacturer met the standard of care in designing the security system. Requiring connected devices to have

perfect security is unrealistic and “would deter the

development of devices that provide consumers with

the safety and other benefits.” Id.

Connected devices are at the forefront of major

innovations across society. In the auto industry

alone, “[n]early 100% of cars on the market include

wireless technologies.” Cahen, 717 F. App’x at 723.

Overall, there are more than 8 billion connected devices in circulation, which will rise to more than 20

billion in the next two years. See FTC Staff Comments, at 1. No wonder Plaintiffs’ counsel in this

case told a cybersecurity law conference that lawyers

are “salivating” over the case at bar and that a “tidal

wave” of cases is “about to be triggered.” Ben

Kochman, A Deluge of Suits Over Connected Devices

Could be Coming, Law360 (Aug. 24, 2018).6 Some

lawyers are reportedly setting up forensic labs to find

security gaps in products in order to leverage this

ruling for more litigation. See id.

B. Risk of a Future Hack Is Not a Compensable Harm Under Traditional Tort Law

The deficiencies in this case are clear when compared with the traditional tort law requirement for

compensable injury in cybersecurity and data claims.

A data breach or “hack” has certain parallels to toxic

chemical exposure. Attempts to expand liability

6 https://www.law360.com/articles/1076358/a-deluge-of-suits-

over-connected-devices-could-be-coming.

14

have generally focused on monetizing the latency period after the claimants were exposed to the breach

or chemical, but before injury occurs. These lawsuits

are already highly controversial, seeking liability for

medical or credit monitoring, fear of cancer or identity theft, or increased risk of injury. In addition to

the jurisdictional concerns expressed in Clapper,

many states have held that actionable injury has yet

to occur during the latency period.7

Diminution in value claims fall far below any of

these attempts to lower traditional jurisdictional or

tort law lines. Plaintiffs in these cases are trying to

monetize the mere risk that an exposure or breach

may occur. Nothing has happened, but it might.

Here, class counsel argues that the mere existence of

a flaw in Petitioner’s cybersecurity system when the

car was sold should cost Petitioners $440 million in

liability in just three states. A nearly identical case

against Toyota in the Ninth Circuit demonstrates the

proper response to these claims. See Cahen, 717 F.

App’x at 720. There, the District Court dismissed

the case for lack of Article III standing, which was

upheld by the Ninth Circuit. The Ninth Circuit

called this liability theory “speculative,” “not credible,” and “conclusory.” Id. at 723.

Such abstract class actions are the exact types of

claims the Federal Rules Advisory Committee cautioned against when drafting Rule 23(f). Rule 23(f)

7 The New Jersey Supreme Court, for example, dismissed a Vi-

oxx-related class action, finding that a plaintiff who has not experienced “a personal physical injury” cannot bring what is essentially a product liability claim through asserting a medical

monitoring or consumer protection claim. Sinclair v. Merck &

Co., 948 A.2d 587, 595 (N.J. 2008).

15

was specifically promulgated to guard against class

action theories where “every member of society is a

litigant represented by some representative seeking

to redress the claims of all class members.” Working

Papers at xiii (Niemeyer Memorandum). Because

risks that a product may fail are ever-present, particularly in the cybersecurity arena, the ability to file

class actions based on such risks would be endless.

Every consumer would be in multiple class actions.

These actions also provide little benefit to class

members. Studies have shown that when these lawsuits result in settlement, there is little interest

among class members to participate; they do not feel

aggrieved. See The State of Class Actions Ten Years

After the Enactment of the Class Action Fairness

Act, Hearing Before the Subcomm. on the Constitution and Civil Justice of the H. Comm. on the Judiciary, 114th Cong. 6 (Feb. 27, 2015) (statement of Andrew Pincus on behalf of the U.S. Chamber of Commerce) (reporting on an empirical analysis conducted

by his law firm). Class counsel will structure their

settlements to allocate money to non-class members

through cy pres awards to try to justify their fees and

releasing the claims against the defendant.

Thus, these lawsuits are largely lawyer-driven to

leverage class certification to collect attorney fees.

After a manifestly erroneous class certification ruling, defendants will want to avoid litigation costs

and class counsel will seek to avoid an appeal. There

will be no opportunity to correct this error.

16

C. Abstract Consumer Class Actions Should

Not Overtake Products Liability

The basis for the District Court’s error here can

be tied to its false assertion that this is “a typical

products liability lawsuit for damages.” Pet. at 17a.

It is not. This case may reflect product liability

themes, but its novel liability theory is predicated on

consumer protection law. The District Court certified classes under Illinois’s implied warranty of merchantability law, Missouri’s Merchandising Practices

Act, and Michigan’s Consumer Protection Act. This

shift from product liability to consumer protection

laws reflects an intentional effort in recent years to

avoid traditional elements and defenses of product

liability law. See Sheila B. Scheuerman, Against Liability for Private Risk-Exposure, 35 HARV. J.L. &

PUB. POL’Y 681, 691 (2012).

In most other product-turned-consumer cases, it

is typical that at least some individuals actually experienced the alleged harm. The Fifth Circuit characterized these claims as, “you sold it, I bought it,

there was a defect in the product’s design or warnings, other patients were injured, pay me.” Rivera v.

Wyeth-Ayerst Labs., 283 F.3d 315, 321 (5th Cir.

2002). This is not a recognized liability theory. In

another case, a car owner testified in deposition that

after the manufacturer fixed his anti-lock brakes, he

was “happy” and the car was “working fine.” In re

Toyota Motor Corp. Hybrid Brake Mktg., Sales Practices & Prods. Liab. Litig., 915 F. Supp. 2d 1151,

1154, 1159 (C.D. Cal. 2013). Yet, he sought to represent a class of purchasers alleging they did not receive the benefit of the bargain. The court dismissed

the case, refusing to allow consumers to fabricate

17

consumer protection claims: “Merely stating a creative damages theory does not establish the actual injury that is required to prevail on [these] product liability claims.” Id. at 1157-58.

These faux consumer actions also deter beneficial

behavior. They are perversely filed after a company

reports a problem or undertakes a repair program, as

with the anti-lock brakes above or closing the cyber

port in the case at bar. The Court should grant the

Petition to ensure that consumer class actions do not

undermine traditional product liability principles

that have been developed to incentivize appropriate

corporate conduct. Litigation against manufacturers

should not be allowed to extrapolate theoretical

damages to thousands or millions of people, potentially including statutory damages, treble damages,

and attorneys’ fees. See Victor E. Schwartz & Cary

Silverman, The Rise of "Empty Suit" Litigation.

Where Should Tort Law Draw the Line?, 80 BROOK.

L. REV. 599 (2015). Such liability is unsustainable,

and appellate courts should be encouraged to review

such manifestly erroneous class certification rulings

if and when they occur.

CONCLUSION

For these reasons, amici curiae respectfully request that this Court grant the Petition.

Respectfully submitted,

Philip S. Goldberg

Counsel of Record

18

SHOOK, HARDY & BACON L.L.P.

1155 F Street, N.W., Suite 200

Washington, D.C. 20004

(202) 783-8400

pgoldberg@shb.com

Counsel for Amici Curiae

Of Counsel

Peter C. Tolsdorf

Leland P. Frost

MANUFACTURERS’ CENTER

FOR LEGAL ACTION

733 10th Street, N.W., Suite 700

Washington, D.C. 20001

(202) 637-3000

Counsel for National Association

of Manufacturers

H. Sherman Joyce

Lauren Sheets Jarrell

AMERICAN TORT REFORM ASSOCIATION

1101 Connecticut Avenue, N.W., #400

Washington, D.C. 20036

(202) 682-1163

Counsel for American Tort Reform

Association

Dated: October 29, 2018