Amicus Curiae Brief — Ford Motor Co. v. McCauley

No. 01-896

In the Supreme Court of the Gnited States

CLERK

FORD MOTOR COMPANY and

CITIBANK (SOUTH DAKOTA), N.A..,

Petitioners,

V.

JOHN B. MCCAULEY, ET AL.

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF FOR THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AS AMICUS

CURIAE IN SUPPORT OF PETITIONERS

ROBIN S. CONRAD EVAN M. TAGER

National Chamber Counsel of Record

Litigation Center, Inc. DAVID M. GOSSETT

1615 H Street, N.W. Mayer, Brown, Rowe & Maw

Washington, D.C. 20062 1909 K Street, N.W.

(202) 463-5337 Washington, D.C. 20000

(202) 263-3000

Counsel for Amicus Curiae the Chamber of

Commerce of the United States of America

aa

TABLE OF CONTENTS

ES See de TABLE OF AUTHORITIES ..........

pes ee ae i ae tata INTEREST OF THE AMICUS CURIAE

ie eee oe : SUMMARY OF THE ARGUMENT ...

ee = ees | Sh one Pia ihivevisakpsancaaats

ik oe CONCLUSION ...........00000000-

ii

TABLE OF AUTHORITIES

Page

CASES

Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014

SRG SUED 6 cenccddcseincunssesueedenusrees 8

Arch v. Am. Tobacco Co., 175 F.R.D. 469

he Bk SEs avncsnwvitbebelasavesatecenseee 8

Avery v. State Farm Mut. Auto. Ins. Co.,

746 N.E.2d 1242 (Ill. App. Ct. 2001) .......... 11,12

Bank of the United States v. Deveaux,

Pe Sr Ge GU cb cdocesctsensunr ces 6

Barrow S.S. Co. v. Kane, 170 U.S. 100 (1898) .......... 6

Blair v. Equifax Check Servs., Inc., 181 F.3d 832

SR SED od voce déneesbbcendcenesvdewentes 7

Broussard v. Meineke Disc. Muffler Shops, Inc.,

SSS Fe FOe CEG FUE hc ccccccnscesesewes 7,8

Busani v. United Servs. Auto. Ass’n,

No. 99-2-68217-1 (Wash. Super. Ct. 2001) ......... ll

Castano v. Am. Tobacco Co., 84 F.3d 734

SE DE naduntoadesekeveundeensesuaces 7,8

Chin v. Chrysler Corp., 182 F.R.D. 448

PD + ov6cnsdesdsannnunddoduedadteneses 8

Ex parte Green Tree Fin. Corp., 723 So. 24 6

Se SET bene ccavoenedssudeedasecedesaniess ll

TABLE OF AUTHORITIES — Continued

Page

Ford Motor Co. v. Sheldon, 22 $.W.3d 444

ee ee eke ebceeeeeedeéseeeet 1]

Georgine v. Amchem Prods., Inc., 83 F.3d 610

(3d Cir. 1996), aff'd sub nom. Amchem Prods.,

Inc. v. Windsor, $21 U.S. 591 (1997) ...........00000e 8

Guaranty Trust Co. of N_Y. v. York, 326 U.S. 99

ee eed ee eee eenknskeunsessveese 6

In re Fibreboard Corp., 893 F.2d 706

ee 8

In re Jackson Nat'l Life Ins. Co. Premium Litig.,

183 F.R.D. 217 (W.D. Mich. 1998) ................ 8

In re Masonite Corp. Hardboard Siding Prods.

Liab. Litig., 170 F.R.D. 417 (E.D. La. 1997) ......... 8

In re N. Dist. of Cal., Dalkon Shield IUD Prods.

Liab. Litig., 693 F.2d 847 (9th Cir. 1982) ........... 8

Lumbermen’s Mut. Cas. Co. v. Elbert, 348 U.S. 48

ee ae ee a eked du duenteste 6

Pease v. Peck, 59 U.S. (18 How.) 595 (1856) ........... 6

Simon v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 482 F.2d 880 (Sth Cir. 1973) ..............45. 8

Sitton v. State Farm Mut. Auto. Ins. Co.,

No. 00-2-10013-2 (Wash. Super. Ct. 2000) ......... ll

Snyder v. Harris, 394 U.S. 332 (1969) .......... 3, 4,5, 6

iv

TABLE OF AUTHORITIES — Continued

Page

Sprague v. Gen. Motors Corp., 133 F.3d 388

GG, FHS Kkccccccccessccccccccosccscseces 8

W. Elec. Co. v. Stern, 544 F.2d 1196

CBG, GHG o ches veccccccccevcccccusevecsesses 8

Zahn v. Int'l Paper Co., 414 U.S. 291

SEED a occeerdcesccevecessescosconsessesesss 4,5

STATUTES AND RULES

BOGE. OURS ccccccccvccsccnccessscscsoes passim

TGR. BOG cccccccccccevecccccscscsescescces l

ETE GRE OD on ckdocesckenvesonnseuesesestenss 7

A GE BLED ccnneccseunsusceenesnceneseouns 5,6

Bam. Ca BR. FID 2a ccccccccccccccccccccccccessecees |

MISCELLANEOUS

Class Action Litigation-A Federalist Society

Survey, 1 CLASS ACTION WATCH (available

at http://www.fed.-soc.org/ Publications/

classactionwatch/volumelissue!.htm) .:........... 10

THE FEDERALIST No. 80 (Alexander Hamilton)

(Clinton Rossiter ed., 1961) ....... 2... 62-50 ee- 6,7

Vv

TABLE OF AUTHORITIES — Continued

Manhattan Institute, Civil Justice Report:

They're Making a Federal Case out of it . . . in

State Court (Sept. 2001) (available at http://

www.manhattan-institute.org/cjr_03.pdf) .......... 12

Mass Torts and Class Actions: Hearings Before

the Subcomm. on Courts and Intellectual

Property of the House Comm. on the Judiciary,

105th Cong. (Mar. 5, 1998) (statement of

Rep. James P. Moran) (available at

http://www.house.gov/judiciary/41155.htm) ...... 9,12

Jerry Mitchell, Out-of-State Cases, In-State

Headaches, CLARION-LEDGER, June 17,2001 ...... 1]

Noam Nesner & Brian Brueggemann, The Judges

of Madison County: Lawyers Looking for

Fat Payouts in Class Action Cases Know

Where to Head, U.S. NEWS & WORLD REP.,

le EEE ob ncccceedneestsedcbescecee 12

Richard Schmitt, Justice RFD: Big Suits Land

in Rural Courts, WALL ST. J., OCT. 10, 1996,

eh eee ee es ban 9,10

Stateside Associates, Class Action Lawsuits in

State Courts: A Case Study in Alabama -

(1998) (attached to Statement of

Dr. John B. Hendricks at Mass Torts and

Class Actions: Hearings Before the

Subcomm. on Courts and Intellectual

Property of the House Comm. on the

Judiciary, 105th Cong. (Mar. 5, 1998))

(available at 1998 WL 122544) .................. 10

BRIEF FOR THE CHAMBER OF COMMERCE OF

THE UNITED STATES OF AMERICA AS AMICUS

CURIAE IN SUPPORT OF PETITIONERS

INTEREST OF THE AMICUS CURIAE

The Chamber of Commerce of the United States of America

(“the Chamber”) is the nation’s largest federation of business

companies and associations. The Chamber represents an

underlying membership of more than three million businesses

and professional organizations of every size, sector and

geographic region of the country. The Chamber serves as the

principal voice of the American business community. An

important function of the Chamber is to represent the interests

of its members by filing amicus curiae briefs in cases involving

issues of national concern to American business.

Many of amicus’s members have been subjected to abusive,

extortionate class actions in state courts. They accordingly

have a strong interest in exposing the fallacy in the Ninth

Circuit’s interpretation of the amount-in-controversy

requirement that paradoxically makes it more difficult to

remove class actions to federal court than individual law suits.’

' Pursuant to Rule 37.6, amicus states that no counsel for a party

authored this brief.in whole or in part, and no person or entity other

than amicus, its members, or its counsel made any monetary

contribution to the preparation or submission of this brief. Attorneys

in the Chicago office of Mayer, Brown, Rowe & Maw (then Mayer,

Brown & Platt) briefly served as local counsel for petitioner Citibank

(South Dakota), N.A. (“Citibank”) in one of the six state-court class

actions that were removed to federal court and then transferred to the

Western District of Washington pursuant to 28 U.S.C. § 1407. After

that transfer, in Jannary 1998, Mayer, Brown, Rowe & Maw’s role as

counsel for Citibank in this litigation came to an end.

The parties have consented to the filing of this brief. Their letters

of consent have been lodged with the Clerk of the Court.

2

SUMMARY OF THE ARGUMENT

The Ninth Circuit accepted the proposition that, in

individual cases seeking injunctive relief, the amount-in-

controversy requirement for diversity jurisdiction is satisfied if

either the value of the injunction to the plaintiff or the

defendant’s cost of complying with the injunction exceeds

$75,000. Pet. App. 7a. It held, however, that, in class actions

seeking injunctive relief, there is an “inherent conflict” between

this “either viewpoint” principle and this Court’s cases holding

that the value of the claims of multiple plaintiffs may not be

aggregated to satisfy the amount-in-controversy requirement.

Id. at 8a-9a. Holding that the former principle “must yield” (id.

at 9a), the Ninth Circuit fashioned a new rule for class actions

seeking injunctive relief: in class actions — but not individual

suits where there is no “inherent conflict” — “the amount in

controversy requirement cannot be satisfied by showing that the

fixed administrative costs of compliance exceed $75,000” (id.

at 12a).

The Ninth Circuit’s new rule is logically flawed for two

independent reasons. First, when, as here, the defendant’s

compliance costs would suffice to create diversity jurisdiction

had a single plaintiff brought the action, the non-aggregation

principle is inapplicable and there therefore is no “inherent

conflict” requiring creation of a special rule. Second, the Ninth

Circuit’s ruling frustrates the rationale for diversity jurisdiction

in the first place. The recent uptick in abusive class-action

lawsuits has demonstrated that, if anything, out-of-state

defendants need more protection from the parochial prejudices

of juries and state court judges beholden to local interests in the

class-action context; they certainly should not be afforded Jess

protection.

ARGUMENT

28 U.S.C. § 1332 provides that, inter alia, when the parties

are citizens of different states, the federal courts have

jurisdiction over the case if “the matter in controversy” exceeds

3

$75,000. The Ninth Circuit recognized that, in determining the

value of “the matter in controversy,” it is necessary to consider

“the pecuniary result to either party which the judgment would

directly produce.” Pet. App. 7a. “In other words,” the court

explained, “where the value of a plaintiff's potential recovery

* * * is below the jurisdictional amount, but the potential cost

to the defendant of complying with [a requested] injunction

exceeds that amount, it is the latter that represents the amount

in controversy for jurisdictional purposes.” Jbid.

That should have been the end of the matter because it is

beyond dispute that the cost to petitioners of affording the

injunctive relief sought by respondents would far exceed

$75,000. The court went on to hold, however, that, although

“logic would dictate that [the either viewpoint rule] should

apply to all multi-party complaints” (id. at 8a), doing so would

create an “inherent conflict” with this Court’s holdings that the

claims of multiple plaintiffs may not be aggregated in

determining whether the amount-in-controversy requirement is

satisfied (id. at 8a-9a). The Ninth Circuit acknowledged that

petitioners’ argument did not involve aggregation: the fixed

costs of injunctive relief would greatly exceed $75,000 whether

there were “one plaintiff or * * * six million.” Jd. at 12a. It

nevertheless felt that fealty to “the principle underlying the

jurisdictional amount requirement” — “to keep smal diversity

suits out of federal court” — required it to hold that “the

amount in controversy requirement cannot be satisfied by

showing that the fixed administrative costs of compliance

exceed $75,000.” Jbid. (emphasis added).

Beyond observing that the plain language of Section 1332

permits no other conclusion, we will leave to petitioners the

task of explaining why the “either viewpoint” rule is correct.

Nor do we here challenge this Court’s adoption of the non-

aggregation principle in Snyder v. Harris, 394 U.S. 332 (1969),

4

and Zahn v. International Paper Co., 414 U.S. 291 (1973).? As

the Ninth Circuit recognized, the fixed costs of providing the

injunctive relief demanded by respondents would exceed

$75,000 even if this were an individual suit. We instead will

endeavor to demonstrate why the Ninth Circuit has turned logic

on its head by adopting a special rule for multi-plaintiff cases

that the administrative costs of complying with an injunction

may not be considered in determining the amount in

controversy.

The Ninth Circuit’s holding is illogical in two distinct ways.

First, the premise underlying the Ninth Circuit’s adoption of a

special rule for class actions —- that this case implicates an

“inherent conflict” between the either viewpoint rule and the

non-aggregation rule — is a false one. Second, the policy

concerns that motivated the creation of diversity jurisdiction

apply with greater, not lesser, force in the context of multi-

party actions. As recent experience reflects, the risk that

fundamental fairness to out-of-state defendants will be

sacrificed is atits zenith when massive class actions are filed in

state courts. It thus makes no sense to create a special rule that

would make it harder to remove a class action than it would be

to remove an individual case seeking precisely the same relief.

1. The Ninth Circuit recognized that, if this were an

individual case seeking reinstatement of petitioners’ rebate

program, the “either viewpoint” rule would apply, and, because

the cost of complying with an injunction would exceed

$75,000, the amount-in-controversy requirement would be

satisfied. Indeed, unless the “either viewpoint” rule were

rejected entirely, no other conclusion is possible.

> Having said that, we do think that the non-aggregation rule has no

basis in either the language of Section 1332 or the policy underlying

the amount-in-controversy requirement and that, when a case

properly presents the issue, the Court should overrule Snyder and

Zahn.

5

The court concluded, however, that in class actions seeking

injunctive relief there is an “inherent conflict” between the

either viewpoint rule and the non-aggregation rule, which

necessitates “that the former must yield.” Pet. App. 8a-9a.

Accordingly, it held, in such cases “the amount in controversy

requirement cannot be satisfied by showing that the fixed

administrative costs of compliance exceed $75,000.” Jd. at 12a.

This is a logical fallacy. When, as here, the cost of complying

with an injunction would exceed $75,000, whether there is “one

plaintiff or * * * six million” (ibid.), the non-aggregation

principle is inapplicable. Accordingly, there is no “inherent

conflict” that warrants abandoning the “either viewpoint” rule

and ignoring the administrative costs of compliance.

Nor is the Ninth Circuit’s fallacious reasoning excused by

its ipse dixit that consideration of the administrative costs of

compliance “is fundamentally violative of the principle

underlying the jurisdictional amount—to keep small diversity

suits out of federal court” (ibid. ). If the “either viewpoint” rule

is valid — and we submit that it is for all of the reasons

articulated in petitioners’ brief — a suit seeking an injunction

that would cost millions of dollars to comply with is not a

“small diversity suit[].”

2. Putting aside the direct fallacy in the Ninth Circuit’s

reasoning, maxing it harder to remove class actions than

individual cases requesting the same relief cannot be squared

with the reason Congress created — and has never

withdrawn — diversity jurisdiction.’ It is well established that

> It also merits mention that erecting a stricter rule for class actions

than individual cases finds no support in Snyder and Zahn. To the

contrary, the essential point of Snyder is that the question whether a

lawsuit is a class action should not alter the determination of whether

that litigation meets the standards for diversity jurisdiction. Snyder

held that the aggregation of individual claims would violate Federal

Rule of Civil Procedure 82, which reinforces that the Federal Rules

“*shall not be construed to extend or limit the jurisdiction of the

6

the purpose of diversity jurisdiction is to protect out-of-state

defendants from the parochial interests of juries and state court

judges beholden to local interests. As Justice Frankfurter once

elaborated:

The power of Congress to confer [diversity] jurisdiction

was based on the desire of the Framers to assure out-of-

state litigants courts free from susceptibility to potential

local bias.* * * [T]here was fear [among the Framers

and ratifiers] that parochial prejudice by the citizens of

one State toward those of another * * * would lead to

unjust treatment of citizens of other States * * *.

Lumbermen's Mut. Cas. Co. v. Elbert, 348 U.S. 48, 54 (1954)

(Frankfurter, J., concurring).*

United States district courts.’” 394 U.S. at 337 (quoting Fed. R. Civ.

P. 82). But just as the Rules cannot be construed to “extend”

diversity jurisdiction to a lawsuit where no individual plaintiff could

sue in federal court, so too can they not be construed to “limit” that

jurisdiction to preclude federal diversity jurisdiction over a case

merely because it was brought as a class action. That is exactly what

the Ninth Circuit did here.

* See also, e.g., Guaranty Trust Co. of N.Y. v. York, 326 U.S. 99,

111-112 (1945) (“Diversity jurisdiction is founded on assurance to

non-resident litigants of courts free from susceptibility to potential

local bias.”); Barrow S.S. Co. v. Kane, 170 U.S. 100, 111 (1898)

(“The object of the provisions of the Constitution and statutes of the

United States, in conferring upon the Circuit Courts of the United

States jurisdiction of controversies between citizens of different

States of the Union, * * * was to secure a tribunal presumed to be

more impartial than a court of the State in which one of the litigants

resides.”); Pease v. Peck, 59 U.S. (18 How.) 595, 599 (1856) (“The

theory upon which jurisdiction is conferred on the courts of the

United States, in controversies between citizens of different States,

has its foundation in the supposition that, possibly the state tribunal(s]

might not be impartial between their own citizens and foreigners.”);

Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87

(1809) (Marshall, C.J.); THE FEDERALIST NO. 80, at 478 (Alexander

7

While diversity jurisdiction has always been a significant

protection for out-of-state parties against being treated unfairly

by local courts, the need for that protection has multiplied with

the advent of modern class-action litigation. Thus, Judge

Easterbrook recently explained:

[A] grant of class status can put considerable pressure

on the defendant to settle, even when the plaintiff's

probability of success on the merits is slight. Many

corporate executives are unwilling to bet their company

that they are in the right in big-stakes litigation, and a

grant of class status can propel the stakes of a case into

the stratosphere.

Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 834 (7th Cir.

1999). The Fifth Circuit has similarly noted:

In addition to skewing trial outcomes, class

certification creates insurmountable pressure on

defendants to settle, whereas individual trials would

not. The risk of facing an all-or-nothing verdict

presents too high a risk, even when the probability of an

adverse judgment is low. These settlements have been

referred to as judicial blackmail. ‘

Castano v. Am. Tobacco Co., 84 F.3d 734, 746 (Sth Cir. 1996)

(citations and footnote omitted).

The federal courts have recognized that, in order to prevent

the class action device from being used as a weapon of

extortion, it is necessary to apply the requirements of Federal

Rule of Civil Procedure 23 rigorously.’ In particular, they have

refused to paper over differences in the laws of the various

states simply to make a case manageable as a multi-state class

Hamilton) (Clinton Rossiter ed., 1961).

* See, e.g., Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d

331, 345 (4th Cir. 1998); Castano, 84 F.3d at 740.

8

action.© The federal appellate courts have also uniformly

refused to permit class actions when the claims of the class

members would require individualized proof and the defendant

would have individualized defenses to those claims.’ Indeed,

several federal courts have recognized that it would violate the

defendant’s due process rights to try a case on the basis of

class-wide proof when claims and defenses are individualized.*

_ Regrettably, the state courts, as a group, have been far more

lax in enforcing statutory and constitutional limitations on class

actions.” As one Member of Congress recently testified at a

® See, e.g, Andrews v. Am. Tel. & Tel. Co., 95 F.3d 1014, 1024,

1025 (11th Cir. 1996); Castano, 84 F.3d at 749-750; Jn re Jackson

Nat'l Life Ins. Co. Premium Litig., 183 F.R.D. 217,223 (W.D. Mich.

1998); Chin v. Chrysler Corp., 182 F.R.D. 448, 457-462 (D.N.J.

1998).

” See, e.g., Broussard, 155 F.3d at 340-344; Sprague v. Gen. Motors

Corp., 133 F.3d 388, 397-399 (6th Cir. 1998) (en banc); Andrews, 95

F.3d at 1023-1025; Castano, 84 F.3d at 744-745; Georgine v.

Amchem Prods., Inc., 83 F.3d 610, 626-630 (3d Cir. 1996), aff'd sub

nom. Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997): In re N.

Dist. of Cal., Dalkon Shield IUD Prods. Liab. Litig., 693 F.2d 847,

854-856 (9th Cir. 1982); Simon v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 482 F.2d 880, 882-883 (Sth Cir. 1973).

® See, e.g., Inre Fibreboard Corp., 893 F.2d 706 (Sth Cir. 1990); W.

Elec. Co. v. Stern, 544 F.2d 1196, 1199 (3d Cir. 1976); Arch v. Am.

Tobacco Co., 175 F.R.D. 469, 487-489 & n.21 (E.D. Pa. 1997); In re

Masonite Corp. Hardboard Siding Prods. Liab. + De 170 F.R.D.

417, 425 (E.D. La. 1997).

* We are not suggesting that every state court (or even the majority)

has acquiesced in class action abuse, but simply that such abuse

occurs with sufficient regularity in the state court system as to make

it both counterintuitive and contrary to the core rationale of diversity

jurisdiction to endorse a construction of Section 1332 that makes it

harder to remove class actions than individual cases that seek the

same relief.

House hearing:

Opportunistic lawyers have identified those states

and particular judges where the class action device can

be exploited. The most significant of these devices is

the certification of the class itself. For many

companies, it is easier and less costly to settle a class

action suit once it has been certified than to fight it in a

foreign jurisdiction before a potentially unfriendly

judge and jury. Some state courts, however, d> not give

the defendants a fighting chance. They routinely certify

classes before the defendant has been served with a

complaint and given an opportunity to defend itself. In

one case, a state court judge certified the class before

the case was even filed in the court.

Mass Torts and Class Actions: Hearings Before the Subcomm.

on Courts and Intellectual Property of the House Comm. on the

Judiciary, 105th Cong. (Mar. 5, 1998) (statement of Rep. James

P. Moran) (available at http://www.house.gov/judiciary/41155.

htm) (hereinafter “Moran Testimony”).

The more sophisticated members of the plaintiffs’ class

action bar have managed to identify specific counties within

particular states in which they can be virtually assured of

finding a judge who will certify a case as a class action without

regard to whether it can fairly be tried as one. As the Wall

Street Journal has reported:

Plaintiffs’ lawyers are going out of their way to sue big

companies these days. All the way to backwaters like

Plaquemine, La., Union City, Tenn., and Eutaw, Ala.

A growing number of big lawsuits are landing in small

towns * * *.

Rural courts offer lawyers a strategic advantage. In

major metropolitan areas, judges are assigned to cases

by lottery, but small communities often have only one

or two judges in town. * * * Unlike federal judges,

10

many state judges are popularly elected, raising the

possibility of bias.

Richard Schmitt, Justice PFD: Big Suits Land in Rural Courts,

WALL ST. J., Oct. 10, 1996, at B1.

A few states have become particularly notorious for

allowing extortionate class actions and running roughshod over

the constitutional rights of out-of-state defendants and absent

class members alike. For example, one study found that in

1995-1997 courts in six thinly populated rural Alabama

counties certified 43 class actions, at least 28 of which were

brought on behalf of nationwide classes, primarily against large

national companies. Stateside Associates, Class Action

Lawsuits in State Courts: A Case Study in Alabama (1998)

(attached to Statement of Dr. John B. Hendricks at Mass Torts

and Class Actions: Hearings Before the Subcomm. on Courts

and Intellectual Property of the House Comm. on the Judiciary,

105th Cong. (Mar. 5, 1998)) (available at 1998 WL 122544)."°

Another study found that the number of class actions filed in

Texas state courts rose by 820% between 1988 and 1998. See

Class Action Litigation—A Federalist Society Survey, 1 CLASS

ACTION WATCH (available at http://www.fed-soc.org/Publica

tions/classactionwatch/volumelissuel.htm). That rate of in-

crease is significantly higher than in the federal courts, where

the number of pending class actions increased during the same

ten-year period by 338%. Jbid.

These hand-picked state courts have demonstrated a

propensity to certify classes that federal courts have refused to

certify and to dispense casually with the procedural safeguards

required by the Constitution and faithfully applied in the federal

courts. Whenever the courts of one state begin to enforce the

'° Dr. Hendricks is the founder of an Alabama research and

development company who appeared on behalf of the Chamber.

ll

state-law and constitutional limits on class certification,’’ class

action plaintiffs and their attorneys have merely moved their

“litigation road show” to more hospitable forums — such as

Mississippi,’ Washington,’’ and southern Illinois, where an

October 1999 judgment of more than a billion dollars’* has

'' The Alabama Supreme Court has recently begun to rein in runaway

State trial courts that were certifying classes without adequate

analysis, see, e.g , Ex parte Green Tree Fin Corp , 723 So. 2d 6, 10-

11 (Ala. 1998) (ordering decertification of nationwide class because

laws of difterent states would apply to different class members’

claims and because the claims would present individual issues

requiring subjective proof), and Texas, which was similarly known

as a hotbed of class action activity, has also of late tightened its

requirements for class certification through its highest court. See,

eg. Ford Motor Co v Sheldon, 22 $.W.3d 444 (Tex. 2000)

(ordering decertification of class that was not clearly ascertainable).

> See Jerry Mitchell. Out-of-State Cases In-State Headaches,

CLARION-LEDGER, June 17, 2001 (noting that “[njews of

Mississippi's multimillion-dollar verdicts has attracted trial lawyers

from other states, particularly Texas and Alabama’).

® See, e.g, Sittonv. State Farm Mut Auto. Ins. Co., No. 00-2-10013-

2 (Wash. Super. Ct. 2000) (certifying a class action for injunctive

relief and damages on behalf of State Farm insureds alleging

improper denials of first-party medical benefits provided by their

automobile policies, even though numerous other courts had refused

to. certify class actions involving the same defendant, many of the

same putative class members, and virtually identical legal claims):

Busani v. United Servs. Auto. Ass'n, No. 99-2-68217-1 (Wash. Super.

Ct. 2001) (certifying a 27-state class action seeking “inherent

diminished value” (“IDV”) damages under the putative class

members’ automobile insurance policies, even though in many

jurisdictions it remains a question of first impression whether IDV

claims are legally cognizable even in individual actions, and courts

in several other states have already held that they are not).

'* See Avery v. State Farm Mut. Auto. Ins. Co., 746 N.E.2d 1242 (Il.

App. Ct. 2001) (affirming all but $130,000,000 of $1,1 86,636,180

12

oan

served as a magnet attracting class-action lawyers.

Southern Illinois in particular has become the focal point of

a flurry of class-action activity. In fact, the biggest growth

industry in Madison County, Illinois now seems to be the

litigation of class actions; that one jurisdiction has experienced

a “steep rise in class action filings over the last several years”

and is now “ranked third nationwide (after [the significantly

laizer] Los Angeles County, California and Cook County,

Illinois) in the estimated number of class actions filed each

year.”"°

In short, out-of-state class action defendants have been

subjected to procedural unfairness in state courts that would not

be tolerated by the federal courts. That trend has been

accelerating in recent years. As Congressman Moran put it,

“{i}Jn essence, we have a situation where out of state defendants

are being haled into the plaintiffs’ state court where they face

complex litigation with large sums of money at stake. These

are the types of cases for which diversity jurisdiction was

created.” Moran Testimony, supra.

In view of the serious threat to fundamental fairness posed

by state-court class actions — and the severe extortionate

potential of claims for injunctive relief that would cost millions

of dollars to effectuate — it makes no sense to interpret Section

1332 to make it more difficult to remove class actions than

individual cases. The only approach that is consistent with both

the language and the purpose of the diversity statute is to apply

judgment) (petition for leave to appeal pending).

'* See Manhattan Institute, Civil Justice Report They're Making a

Federal Case out of it... in State Court at 7 (Sept. 2001) (available

at http://www.manhattan-institute.org/cjr_03.pdf), see also Noam

Nesner & Brian Brueggemann, The Judges of Madison County:

Lawyers Looking for Fat Payouts in Class Action Cases Know Where

to Head, U.S. NEWS & WORLD REP., Dec. 17, 2001, at 39.

13

the either viewpoint rule across-the-board. The Ninth Circuit's

refusal to do so necessitates reversal.

CONCLUSION

The judgment of the Ninth Circuit should be reversed.

Respectfully submitted.

ROBIN S. CONRAD EVAN M. TAGER

National Chamber Counsel of Record

Litigation Center. Inc DAVID M. GOSSETT

1615 H Street. NW Mayer. Brown, Rowe & Maw

Washington, DC. 20062 1909 K Street, NW

(202) 463-5337 Washington. DC. 20006

(202) 263-3000

May 2002