# Amicus Curiae Brief — Ford Motor Co. v. McCauley

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0531%3A13

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2002
- **Citation:** 536 U.S. 987

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0531%3A13. Public record. Not legal advice.