# Amicus Curiae Brief — DaimlerChrysler Corp. v. Ysbrand

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_1255%3A7

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2004
- **Citation:** 542 U.S. 937

## Text

l, MAY 24 or24

No. 03-1342

Jn the Supreme Court of the Gnited States

DAIMLERCHRYSLER CORPORATION,

Petitioner,

SHERYL YSBRAND AND MARY COONEY,

Respondents.

On Petition for a Writ of Certiorari to the
Supreme Court of Oklahoma

BRIEF OF THE CHAMBER OF COMMERCE
OF THE UNITED STATES OF AMERICA AND
THE ALLIANCE OF AUTOMOBILE MANUFACTURERS
AS AMICI CURIAE IN SUPPORT OF PETITIONER

ROBIN S. CONRAD
ELLEN DUNHAM BRYANT
National Chamber
Litigation Center, Inc.
1615 H Street, NW
Washington, D.C. 20062
(202) 463-5337

JOHN T. WHATLEY
NANCY ELIZABETH BELL
Alliance of Automobile
Manufacturers, Inc.
1401 Eye Street, NW, Suite 900
Washington, D.C. 20005
(202) 326-5500

EVAN M. TAGER
Counsel of Record
ERIKA Z. JONES
Mayer, Brown, Rowe
& Maw LLP
1909 K Street, NW
Washington, D.C. 20006
(202) 263-3240

LINDA T. COBERLY
Mayer, Brown, Rowe

& Maw LLP-
190 South LaSalle Street
Chicago, Illinois 60603
(312) 782-0600

TABLE OF CONTENTS

Page

py CP oe Pty y kj) 5: Be li
BREE EEEE GAP CEU RIE ioe e etek cea eedvesssesene l
SUMMARY OF THE ARGUMENT ................. 2
Be Pe es ee ee rere 3
I. The Last Decade Has Seen An Explosion In

Nationwide Class Action Litigation, Even

With Regard To Highly Individualized

oe ee ere rey eee eee Tee 3
Il. The Distorted Choice-Of-Law Analysis In

This Case Undermines State Sovereignty,

Principles Of Federalism, And Commerce

pe a eer ree re errr 12
Ill. The Coercive Nature Of Class Action

Litigation And The High Likelihood Of

Settlement Make Review At This Stage

COT LAGIOONION EOGOMENL «ow cece eseenes 17
BS ren Pry Pir ere eae Tr ee 20

il
TABLE OF AUTHORITIES
Page
Cases:
Allstate Ins. Co. v. Hague, 449 U.S. 302 (1981) ........ 11

Am. Medical Sys., In re, 75 F.3d 1069 (6th Cir. 1996) .... 6

Andrews v. American Tel. & Tel. Co., 95 F.3d 1014
th: Te 4 | Bree or ee 5

Avery v. State Farm Mut. Auto. Ins. Co., 746 N.E.2d
1242 (Ill. App. Ct. 2001), appeal granted,

FOG E20 FOO Ge. SH 0 05 0 cee a hw kisses 8
BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) ..... 13
Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520

CIDSP) . . dss seas enn pee ad 13
Bigelow v. Virginia, 421 U.S. 809 (i975) ............. 13
Blair v. Equifax Check Servs., Inc., 181 F.3d 832

CPG Coe, FD ius sana aee eeneene sews 18
Bohannan v. Allstate Ins. Co., 820 P.2d 787 .

CUR. F509)... «00ceusawk eaceeee eee ean e es 11
Bonaparte v. Tax Court, 104 U.S. 592 (1881) .......... 14

Bridgestone/Firestone, Inc., In re, 288 F.3d 1012
€7a Gir. SOGRD os sé 0s wesv enue eee ene ewess 18

Bridgestone/Firestone, Inc., in re, 333 F.3d 763
GOS eer eee 12

oe

ill

TABLE OF AUTHORITIES — Continued —

Page

Brown-Forman Distillers Corp. v. New York State 7

Liquor Auth., 476 U.S. 573 (1986) ............04. 13
Bunting v. Progressive Corp., 2004 WL 936552

ee A CE AOE FU, BE) nw cece vewsnssvcues 16
Busani v. United Servs. Auto. Ass'n,

No. 99-2-08217-1 (Pierce County Wash.

I Ra EY BE g SUMED 6 ban dws sc ce cess ceseens 10
Castano v. American Tobacco Co., 84 F.3d 734

Kk a errr er er rere 5, 18
Clark v. TAP Pharm. Prods., 798 N.E.2d 123

errr Per ee eee Tee Tee 8
Collins Radio Co. v. Bell, 623 P.2d 1039

(Okla. Ct. Civ. App. 1980).............. orreree 11
Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

tLe. ceuhe eso Leet a ea OA) RAGS Ree 17, 20

\

Dailey v. North Coast Life Ins. Co., 919 P.2d 589

CE A Federal Judicial Center study of class actions found that, in three
of the four districts studied, the mean fee award in class actions that
settled after certification and that paid some money to class mernbers
was in excess of $1 million. THOMAS E. WILLGING ET AL., EMPIRICAL
STUDY OF CLASS ACTIONS IN FOUR FEDERAL DISTRICT COURTS:
FINAL REPORT TO THE ADVISORY COMMITTEE ON CIVIL RULES fig. 69
(1996), reprinted in 10 NEWBERG ON CLASS ACTIONS 181, 395 (4th
ed. 2002) (mean in one of those districts was over $2.5 million, and
mean in fourth district was $732,537). And the awards frequently
bear no relationship to the relief garnered by the class. Among the
most extreme examples is the fee award in a recent Madison County,
Illinois case against AT&T and Lucent Technologies, in which the
putative class alleged that the defendants had overcharged for rented
telephones. After settlement, class members claimed $8.4 million

5

news reports for possible bases for class litigation, seek out
individuals to serve as named plaintiffs, and then shop for
friendly courts in which to file suit. They then obtain class
certification—often, as here, without showing that litigation on
a class-wide basis is consistent with the constitutional rights of
the defendant and absent class members—and then use the
threat of a huge verdict to force a settlement that provides a
large fee for class counsel.‘

The most effective way for a class action lawyer to ensure
a lucrative settlement is to allege and certify a nationwide class,
thus maximizing the coercive value of the certification order.
See infra at 17-20. As the federal courts have recognized,
however, nationwide class actions raising claims under state
law generally may not be certified consistent with the
requirements of Rule 23, due process, and federalism because
of complexity resulting from the need to apply the varying laws
of the 50 States. See, e.g., Andrews v. American Tel. & Tel. Co.,
95 F.3d 1014 (11th Cir. 1996); Castano v. American Tobacco

collectively from the settlement fund, whereas class lawyers took
home more than $84.5 million in fees and expenses. See Trisha
Howard, Lawyers Profit Most in Suit, Defendant Says, ST. LOUIS
POST-DISPATCH, Mar. 31, 2004, at Al (settlement agreement also
required defendant AT&T to provide $50 million in free calling cards
to charity). See also, e.g, MassMutual Class-Action Settlement
Withdrawn, BEST’S INSURANCE NEWS, Feb. 27, 2001 (discussing
New Mexico class-action settlement, which would have given almost
$8 million in fees to class counsel and $350,000 to the two named
plaintiffs but no monetary relief to the more than six million absent
class members); Thomas J. Cole, Attorney Backs Out Of Insurance
Settlement, ALBUQUERQUE J., Feb. 23, 2001, at Al (describing
another case in which the same class counsel shared in a $7 million
- fee award, while the two named plaintiffs received $30,000 each and
three million putative class members received no monetary award).

* See 1998 Class Action Hearings (testimony of former Attorney
General Dick Thornburgh, Mar. 5, 1998) (discussing examples).

6

Co., 84 F.3d 734 (Sth Cir. 1996); Georgine v. Amchem Prods.,
Inc., 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem
Prods., Inc. v. Windsor, 521 U.S. 591 (1997); In re Am. Med.
Sys., 75 F.3d 1069 (6th Cir. 1996); Jn re Rhone-Poulenc Rorer,
Inc., 51 F.3d 1293 (7th Cir. 1995).

Seeking a more hospitable forum, many class action
lawyers have shifted their attention to state court. JOHN H.
BEISNER & JESSICA DAVIDSON MILLER, CLASS ACTION
MAGNET COURTS: THE ALLURE INTENSIFIES 3 (Manhattan Inst.
July 2002) (www.manhattan-institute.org/html/cjr_5.htm); see
also Larry Kramer, Choice of Law in Complex Litigation, 71
N.Y.U. L. REV. 547, 575 (1996) (certification of nationwide
classes by state courts “has been increasing in recent years”);
The Interstate Class Action Jurisdiction Act of 1999: Hearing
Before the House Judiciary Comm., 106th Cong. (July 21,
1999) (statement of former acting Solicitor General Walter E.
Dellinger); cf Elizabeth J. Cabraser, Life After Amchem: The
Class Struggle Continues, 31 Loy. L.A. L. REV. 373, 386
(1998) (“It is no secret that class actions—formerly the
province of federal diversity jurisdiction—are being brought
increasingly in the state courts”); Class Action Litigation: A
Federalist Society Survey, supra, at 1, 3 (between 1988 and
1998, state-court class actions were up by 1042%, compared
with 338% in federal court).

Moreover, class action attorneys are not using just any state
court in their effort to circumvent the constitutional limitations
on class actions. With increasing frequency, they are filing their
cases in state courts that have acquired a reputation for
acquiescing in requests for nationwide certification and running
roughshod over the constitutional rights of defendants and
absent class members.

For example, after a few class-friendly decisions in
Alabama, class action lawyers from across the country flocked
to that State to file class actions. In 1995-1997, courts in six

7

thinly populated Alabama counties certified 43 class actions, at
least 28 of which were brought on behalf of nationwide classes.
STATESIDE ASSOCIATES, CLASS ACTION LAWSUITS IN STATE
CourTS: A CASE STUDY IN ALABAMA (1998) (attached to
statement of Dr. John B. Hendricks, on behalf of Small
Business Council of the U.S. Chamber of Commerce, before
the Subcommittee on Courts and Intellectual Property of the
House Judiciary Committee (Mar. 5, 1998)).° The Alabama
Supreme Court finally intervened, making clear that, under that
State’s procedural rules, trial courts were required to perform
a rigorous analysis of factual issues, choice-of-law issues, and
other requirements for class certification.® As a result, class
action filings in Alabama have slowed dramatically. See Eddie
Curran, Welcome to Greene County, America’s Class Action
Capital, MOBILE REGISTER, Dec. 26, 1999, at 1B.

But the intervention of the Alabama Supreme Court has
served only to cause class action lawyers to take their show on
the road to such class-action/mass-joinder havens as

> Onatleast one occasion, the Alabama courts certified a nationwide
class identical to one that a federal court refused to certify on
constitutional grounds. Compare, e.g., Order Certifying Plaintiff
Class at 8, Naefv. Masonite Corp., No. CV-94-4033 (Mobile County
Cir. Ct. Nov. 15, 1995), reprinted in Ex parte Masonite Corp., 681
So. 2d 1068, 1086 (Ala. 1996) (approving plan to try 50-state
consumer fraud class action), with In re Masonite Corp. Hardboard
Siding Prods. Liab. Litig, 170 F.R.D. 417, 422, 425, 427 (E.D. La.
1997) (denying certification of identical class because, among other
things, the suit would involve applying 50 different legal standards,
and Naef’s effort to synthesize those standards into an “Esperanto”
amalgamation that did not represent the legal standard of any State
inadequately protected defendants’ constitutional rights).

® See, e.g., Ex parte Green Tree Fin. Co., 723 So. 2d 6, 9 (Ala.
1998); Ex parte Household Retail Servs., Inc., 744 So. 2d 871, 878-
79 (Ala. 1999); Mann v. GTE Mobilnet, Inc., 730 So. 2d 150, 152
(Ala. 1999).

8

Mississippi, West Virginia, Washington, New Mexico, and
southern Illinois.’ To date, few state appellate courts have
interceded to ensure that class action litigation within their
jurisdictions is conducted in a manner consistent with the
Constitution.

Indeed, appellate courts in Illinois have affirmed the
certification of multistate class actions based upon the
conclusion that Illinois law governs all claims against an
Illinois corporation, regardless of where those claims arose.
E.g., Clark v. TAP Pharm. Prods., 798 N.E.2d 123, 129 (ill.
App. Ct. 2003) (upholding application of Illinois law to
transactions outside Illinois that involved non-Illinois class
members and medical care providers, based solely on fact that
defendant’s corporate headquarters is in Illinois); Avery v. State
Farm Mut. Auto. Ins. Co., 746 N.E.2d 1242, 1254-55 (Ill. App.
Ct. 2001) (in case involving auto insurance claims, applying
law of defendant’s domicile to claims arising elsewhere),
appeal granted, 786 N.E.2d 180 (Ill. 2002). The class action bar
is well aware of this trend and has responded accordingly.
Madison County, Illinois is now ranked third nationwide in
class action filings each year behind the far more populous
counties containing Los Angeles and Chicago. Beisner &
Miller, 25 HARV. J.L. & PUB. POL’Y at 159. Approximately
81% of the putative class actions filed in Madison County
between February 1998 and March 2001 sought to certify
nationwide classes. Jd. at 169; see also Tom McCann, Class
Actions: The Battle Heats Up, CHICAGO LAW., Apr. 2004, at 8,
9 (106 class actions were filed in Madison County in 2003, as
compared with 11 filings in 1999); Mark Ballard, Mississippi
Becomes a Mecca for Tort Suits, NAT’L L.J., Apr. 30, 2001, at

7” See, e.g., John H. Beisner & Jessica Davidson Miller, They're
Making a Federal Case Out of It . . . In State Court, 25 HARV. J.L. &
PUB. POL’Y 143, 159 (2001) (discussing increase in nationwide class
actions in various states).

9

A1 (describing similar phenomenon for mass-joinder suits in
Mississippi).

The courts of Minnesota have taken the same approach. In
Peterson v. BASF Corp., a nationwide class of farmers asserted
claims under the New Jersey Consumer Fraud Act with regard
to BASF’s marketing of two herbicide products. See 618
N.W.2d 821, 822 (Minn. Ct. App. 2000). Although BASF is
headquartered in New Jersey, neither the products themselves
nor the marketing materials were developed in that State.
Nevertheless, the trial court certified a nationwide class and
allowed it to pursue claims under New Jersey law. The court
of appeals affirmed the certification in an opinion that did not
even consider BASF’s arguments with regard to choice of law.
See id. at 825-26. A $52 million judgment was ultimately
awarded against BASF. See 657 N.W.2d 853 (Minn. Ct. App.
2003). .

In the post-trial appeal, the appellate court and the
Minnesota Supreme Court both invoked ill-founded procedural
theories in order to avoid reaching the question whether the
Constitution would permit the application of New Jersey law to
claims that arose elsewhere.’ Indeed, the only substantive
discussion of the choice-of-law issue by any court in Peterson
is in a concurrence by one appellate court judge, who observed:

[A]t the end of the day, this dispute is the poster child

for national class action reform. We have here a

Minnesota district court, applying a New Jersey

* See 657 N.W.2d at 875 (court of appeals: BASF could not appeal
application of New Jersey law after final judgment because court’s
previous decision affirming class certification, which did not mention
choice of law, nevertheless constituted “law of the case” on that
issue); 675 N.W.2d 57, 67-68 (Minn. 2004) (supreme court: BASF
“waived” supreme court review on choice of law by failing to seek
discretionary review of the issue following the appellate court’s
interlocutory decision affirming class certification).

10

consumer fraud statute to a nationwide class of

plaintiffs, with few of those plaintiffs residing in New

Jersey. And it is probably a fair assumption that the

legislative authors of the New Jersey consumer

protection scheme did not have in mind midwestern

farmers purchasing agricultural chemicals as the
protected class. * * *

This is not a recipe for uniformity or consistency, it
is fair neither to claimants nor defendants and it is long
past time for national policy makers to address class
action procedures.

657 N.W.2d at 875 (Anderson, J., concurring specially).
Unfortunately, these sentiments did not persuade the Minnesota
courts to take action themselves to correct the problem.

Courts in other States also have certified nationwide or
multistate class actions based upon the law of a single State
without paying the slightest attention to the due process and
sovereignty concerns implicated by such an approach. For
example, a Washington court certified a 27-state class action
seeking “inherent diminished value” (“IDV”) damages under |
the putative class members’ automobile insurance policies, on
the theory that the laws of the various States did not materially
differ. Busani v. United Servs. Auto. Ass'n, No. 99-2-08217-1,
Class Certification Order (Pierce County Super. Ct. May 11,
2001). In so holding, the court ignored the fact that many |
jurisdictions had never addressed whether IDV damages were |
cognizable and others had expressly held that they are not. See,
e.g., Johnson v. State Farm Mut. Auto. Ins. Co., 754 P.2d 330,
331 (Ariz. Ct. App. 1988) (denying IDV claim); Ray v.
Farmers Ins. Exch., 200 Cal. App. 3d 1411, 1415-17 (1988) ‘
(same). In a ditferent insurance case, a New Mexico trial court
certified a nationwide class of MassMutual policyholders and
proceeded to apply New Mexico law, with no choice-of-law

eT a.

1]

analysis at all. Wilson v. Massachusetts Mut. Life Ins. Co., No.
D-0101-CV-98-02814 (1st Jud. Dist. Ct. Santa Fe County Nov.
16, 1999) (orders certifying class and awarding partial
summary judgment in favor of lead plaintiff).’

In the instant case, Oklahoma has joined the ranks of States
that are willing to set aside the U.S. Constitution in order to
foster class-based litigation. To avoid the manageability
problems that would inevitably result from litigating this case
under 50 different legal standards, the Oklahoma Supreme
Court analyzed the claims collectively and applied the law of
the only State that all the claims had in common—the
defendant’s home State—regardless of whether Michigan had
any relevant contacts to the underlying transactions. Pet. App.
13a (applying Michigan law because Michigan had a “more
significant” relationship “to the parties and this litigation” than
any other State). This analysis flies in the face of this Court’s
directive to assess—for each individual claim—the
constitutionality of applying a particular State’s law. Shutts,
472 U.S. at 818, 821-22 (the governing State “must have a
‘significant contact or significant aggregation of contacts’ to
the claims asserted by each member of the plaintiff class,
“contacts creating state interests,’ in order to ensure that the
choice of [that State’s] law is not arbitrary or unfair”) (quoting
Allstate Ins. Co. v. Hague, 449 U.S. 302, 312-13 (1981)
(plurality opinion)).'°

* See also Wershba v. Apple Computer, Inc., 110 Cal. Rptr. 2d 145,
159-60 (Ct. App. 2001) (affirming certification and settlement of
nationwide class action under California’s consumer protection laws).

'© There can be no serious doubt that, in an individual breach-of-
warranty suit filed by an Oklahoma resident against the petitioner,
_ Oklahoma courts would apply Oklahoma law, not Michigan law. See
Pet. App. 1la-13a (citing Collins Radio Co. v. Bell, 623 P.2d 1039,
1047 (Okla. Ct. Civ. App. 1980), and Bohannan v. Allstate Ins. Co.,
820 P.2d 787, 795 (Okla. 1991)). It should thus be self-evident that

12

As discussed in more detail below, the disruptive effect of
nationwide class action litigation on U.S. commerce cannot be
overstated. Any State that shows a willingness to set aside
constitutional limitations in order to certify a class will
necessarily attract far more than its share of nationwide class
litigation. Like Illinois, Oklahoma will undoubtedly draw
lawyers from across the nation who are attempting to certify
nationwide classes. Through the nationwide class action, a few
class-friendly state courts can effectively hijack significant
portions of the U.S. economy. As Judge Easterbrook has
explained, even if only 10% of judges would be receptive to a
nationwide class action, one such judge “is bound to turn up if
plaintiffs file enough suits—and, if one nationwide class is
certified, then all the no-certification decisions fade into
insignificance. A single positive trumps all the negatives.” Jn re
Bridgestone/Firestone Inc., 333 F.3d 763, 766-67 (7th Cir.
2003). This Court’s intervention is desperately needed to ensure
that constitutional limitations on choice of law are applied with
equal force in the class action context and thereby prevent the
abuse that is now rampant in the state courts.

II. The Distorted Choice-Of-Law Analysis In This Case
Undermines State Sovereignty, Principles Of
Federalism, And Commerce Across The Nation.

The choice-of-law analysis in this case threatens to work a
radical change in the legal foundation on which U.S. commerce
proceeds. For more than two hundred years, the several States
have regulated the conduct of business within their respective
borders. Only Congress has the power to encroach on a State’s

the Oklahoma Supreme Court used the procedural device of the class
action to alter the substantive law with regard to many class
members’ claims. That alone should be sufficient reason to doubt the
validity of the state courts’ insistence on applying Michigan law
nationwide.

eT cn OS = ca

ee

13

sovereignty by imposing a system of uniform national
regulation on interstate commerce. U.S. CONST. art. I, § 8, cl.
3. In this case, however, the state courts of Oklahoma have
usurped that role, imposing the law of a single State upon the
conduct of the defendant in all States solely for the convenience
of the lawyers who filed the case.

The U.S. Constitution contemplates that each of the 50
States is a sovereign of “equal dignity” with a distinct sphere of
authority. Bibb v. Navajo Freight Lines, Inc., 359 U.S. 520,
529 (1959). Accordingly, this Court consistently has rejected
States’ efforts to apply local law to transactions that occurred
entirely in other States. See, e.g., Campbell, 538 U.S. at 422
(“A basic principle of federalism is that each State may make
its own reasoned judgment about what conduct is permitted or
proscribed within its borders, and each State alone can
determine what measure of punishment, if any, to impose on a
defendant who acts within its jurisdiction”); BMW of N. Am.,
Inc. v. Gore, 517 U.S. 559, 568-73 (1996) (Alabama jury could
not apply Alabama law to punish defendant for transactions
taking place in other States); Healy, 491 U.S. at 336
(Commerce Clause “precludes the application of a state statute.
to commerce that takes place wholly outside of the State’s
borders”); Brown-Forman Distillers Corp. v. New York State
Liquor Auth., 476 U.S. 573, 582-83 (1986) (rejecting New
York’s attempt to “project its legislation” into other States);
Shutts, 472 U.S. at 818-23 (Kansas court could not apply forum
law to claims of class members with no connection to Kansas);
Edgar v. MITE Corp., 457 U.S. 624, 641-43 (1982) (plurality
op.) (Illinois anti-takeover statute impermissibly regulated
transactions occurring entirely outside of Illinois); Bigelow v.
Virginia, 421 U.S. 809, 824 (1975) (“A State does not acquire
| power or supervision over the internal affairs of another State
merely because the welfare and health of its own citizens may
be affected when they travel to that State”); New York Life Ins.

14

Co. v. Head, 234 U.S. 149, 161 (1914) (“it would be impossible
to permit the statutes of Missouri to operate beyond the
jurisdiction of that State * * * without throwing down the
constitutional barriers by which all the States are restricted
within the orbits of their lawful authority and upon the
preservation of which the Government under the Constitution
depends”); Bonaparte v. Tax Court, 104 U.S. 592, 594 (1881)
(“No State can legislate except with reference to its own
jurisdiction”).

The theory adopted by the Oklahoma Supreme Court is
flatly inconsistent with the system of state sovereignty and
federalism contemplated by the Constitution. Through common
law and legislation, each of the 50 States is free to develop its
own standards for regulating business, based upon its own
assessment of the relevant policy interests. But if choice of law
in a nationwide class action may depend upon where the
defendant maintains its headquarters—rather than, for example,
where the product at issue is sold or delivered (see
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 191 & cmts.
e, f (1971))}then each State necessarily loses the ability to
apply the standard of its choosing to business conduct within its
own borders. Thus, in this case, because of a state court
decision in Oklahoma, the law of Alabama will not govern the
breach of warranty claims of a class member who resides in
Alabama and who purchased a vehicle in Alabama from an
Alabama dealership for use in Alabama."

'! The Alabama Supreme Court, for example, has definitively
rejected causes of action based on the risk of future injury, like the
cause of action at issue here. See Ford Motor Co. v. Rice, 726 So. 2d
626, 631 (Ala. 1998). Under the Oklahoma Supreme Court’s _
approach, an Alabama plaintiff—whose claims would clearly be
barred in an individual lawsuit—may have the opportunity to
persuade the court to accept her claims under a different State’s law,
simply because they are part of a case certified as a class action.

15

The absurdity of this approach is heightened in this case, in
which a State with no real interest in regulating its citizens’
extraterritorial conduct was foisted into doing so by another
State’s courts. Here, it was the state courts of Oklahoma that
decided to apply Michigan law to transactions that occurred
beyond Michigan’s borders—over the objection of the State of
Michigan itself. See Pet. 6-7 (discussing amicus brief filed by
State of Michigan in support of DaimlerChrysler’s petition for
rehearing). In this respect, too, the plaintiffs’ theory
undermines the sovereignty of each State.

This result is potentially harmful, not only to businesses
operating nationwide, but also to absent class members who
may see their substantive rights sacrificed in order to ensure
certification of the broadest class possible. If the defendant
maintains its headquarters in Washington, for example, which
permits punitive damages only when authorized by statute,’
class members from more permissive States may be prejudiced
by the application of Washington law. In such a case, the
burden would be on the absent class member to be aware of the
legal issue and to opt out of the class in order to avail herself of
the legal protections afforded her by her own State’s law.

The practice of applying the law of the defendant’s
domicile in order to facilitate nationwide class litigation also
has the deleterious effect of concentrating tremendous
regulatory power in the courts of a few class-friendly
jurisdictions around the country. In Madison County, Illinois,
for example, plaintiffs’ lawyers often file cookie-cutter lawsuits
against many different defendants in the same industry. Of the
43 class action suits filed in Madison County in 2001, 25
proposed nationwide or multistate classes challenging common

_ Eg, Dailey v. North Coast Life Ins. Co., 919 P.2d 589, 590
(Wash. 1996); Spokane Truck & Dray Co. v. Hoefer, 25 P. 1072
(Wash. 1891).

16

practices allegedly used by many different corporations in the
financial services or insurance industries. BEISNER & MILLER,
supra, at 4-6 (discussing, for example, lawsuits against Allstate,
AIG, Prudential, Country Mutual, Progressive, Farmers, St.
Paul Fire and Marine, CGU, Hartford, Geico, and Shelter
Insurance, all challenging the same practice). Using the
theory adopted by the Oklahoma Supreme Court, the Madison
County courts could certify nationwide or multistate class
actions in each of these cases under the law of the defendant’s
home State. Thus, the Madison County courts would be in a
position to regulate an entire industry nationwide—a power
ordinarily reserved for Congress under the Commerce Clause.

The prohibition on the extraterritorial application of state
law is not just a matter of constitutional law; it is also a
practical necessity. Under the approach adopted by the
Oklahoma courts, two companies that compete directly against
one another for business in a particular region would find
themselves operating under different legal standards if they
maintain their respective headquarters in different States. For
example, the advertising of packaged baked goods in Idaho
might be governed by the law of Illinois (for the Illinois-based
Sara Lee), as well as the law of Connecticut or New Jersey (for
Pepperidge Farm, which is a Connecticut subsidiary of a New
Jersey company). The two companies, meanwhile, would need
to structure their business operations in Idaho based upon both

'3 See also Bunting v. Progressive Corp., 2004 WL 936552 (Ill. App.
Ct. Apr. 30, 2004) (non-Illinois member of multistate class alleging
that insurence company and its valuation vendor systematically
undervalued vehicles declared to be a total loss could state claim
against defendant/vendor under Illinois consumer fraud statute
because Illinois is where defendant/vendor maintained its principal
office and presumably created its allegedly deceptive policy of
undervaluing automobiles).

17

Idaho law and the law of their respective home States, even
though the relevant legal standards may be in conflict.

This is no way to run an economy. The orderly process of
commerce depends upon uniform expectations. States need the

“authority to regulate local markets, and companies need to be

able to predict with reasonable certainty which law will govern
their conduct in a particular State. If, with respect to a particular
industry, Congress determines that nationwide standards are
necessary, then it may choose to take action. Until then,
principles of federalism and state sovereignty require that each
State have the ability to achieve local uniformity through the
application of its own laws. This system cannot tolerate the
application of one State’s law beyond its borders in nationwide
class actions.

III. The Coercive Nature Of Class Action Litigation
And The High Likelihood Of Settlement Make
Review At This Stage Of Litigation Essential.

The procedural posture of this case—after class certification
and before a trial on the merits—is not a bar to this Court’s
consideration of the choice-of-law issue. As the petition
explains, the decision below resolved the important
constitutional question now before the Court and is a final
judgment for purposes of 28 U.S.C. § 1257(a). Pet. 26-30
(discussing Cox Broadcasting Corp. v. Cohn, 420 U.S. 469
(1975)). Indeed, to wait for a case that presents a similar issue
following entry of final judgment on the merits would be
unrealistic, because defendants who face the prospect of
litigating a case certified as a nationwide class action often
have no choice but to settle long before the case goes to trial.

In any nationwide class action, a class certification order
hangs like a Damoclean sword over the defendant, often forcing
it into an unwarranted settlement and a coerced relinquishment
of its right to trial. As the Fifth Circuit has explained:

18

[C]ertification dramatically affects the stakes for
defendants. Class certification magnifies and
strengthens the number of unmeritorious claims.
Aggregation of claims also makes it more likely that a
defendant will be found liable and results in
significantly higher damage awards.

Castano, 84 F.3d at 746 (citations omitted). Accordingly, the
certification of a large class “can put considerable pressure on
the defendant to settle, even when the plaintiff's probability of
success on the merits is slight.” Blair v. Equifax Check Servs.,
Inc., 181 F.3d 832, 834 (7th Cir. 1999); see also Castano, 84
F.3d at 746 (“certification creates insurmountable pressure on
defendants to settle” because of “[t]he risk of facing an all-or-
nothing verdict * * * even when the probability of an adverse
judgment is low”); Parker v. Time Warner Entm’t Co., 331
F.3d 13, 22 (2d Cir. 2003); In re Bridgestone/Firestone, Inc.,
288 F.3d 1012, 1015-16 (7th Cir. 2002); Newton v. Merrill
Lynch, 259 F.3d 154, 164 (3d Cir. 2001); In re Rhone-Poulenc
Rorer, Inc., 51 F.3d 1293, 1298 (7th Cir. 1995); cf Robert G.
Bone & David S. Evans, Class Certification and the
Substantive Merits, 51 DUKEL.J. 1251, 1254 (2002) (“Loose
certification standards risk high costs by inviting frivolous class
action suits that defendants settle rather than face potentially
crippling, even bankrupting, damage awards”).

As aresult of these pressures, “the vast majority of certified
class actions settle.” Bone & Evans, supra, at 1291. A 1995
study conducted by the Federal Judicial Center found that for
the four federal district courts studied, the percentage of
certified class actions terminated by a class settlement ranged
from 62% to 100%. WILLGING ET AL., supra, tbl. 40, reprinted
in 10 NEWBERG at 437. And this study did not include either
mass tort class actions—which are “one of the most settlement-
prone areas of class action litigation”—or class actions filed
only for settlement purposes under Rule 23(e). Bone & Evans,

19

supra, at 1292 n.148; see also George L. Priest, Procedural
Versus Substantive Controls of Mass Tort Class Actions, 26 J.
LEGAL STUD. 521, 522 (1997) (observing that “virtually every
mass tort class action that has been successfully certified has
settled out of court rather than been litigated to judgment”).
Other studies have produced similar results. E.g., Bryant G.
Garth, Studying Civil Litigation Through the Class Action, 62
IND. L.J. 497, 501 (1987) (reporting settlement rate of more
than 78% for certified and consolidated class actions based
upon sample from the Northern District of California).
Moreover, even if a certified class action is litigated to final
judgment, an improper grant of certification—such as the one
here—will still evade review if the defendant is able to prevail
on the merits.

For obvious reasons, the settlement pressure in a case
involving a nationwide class is even greater, given the stakes.
A nationwide class action can threaten even the largest U.S.
corporations with enormous business disruption, staggering
damages, and even bankruptcy. If, not wanting to “roll the[]
dice,” the defendant decides to settle the suit, “the class
certification—the ruling that will have forced them to
settle—will never be reviewed.” Rhone-Poulenc, 51 F.3d at
1298. By definition, the important choice-of-law issue
presented here will arise only when a nationwide class is
certified by a class-friendly court. In such a case, it is
particularly unlikely that the Court would have an opportunity
to review the issue after final judgment on the merits.

This Court recognized the importance of immediate review
of class certifications when it submitted to Congress the
amendment to Fed. R. Civ. P. 23 that gives the federal courts of
appeals discretion to hear appeals from the grant or denial of
class certifications without applying either the requirements of
28 U.S.C. § 1292(b) or the exacting standards for a writ of
mandamus. The Advisory Committee Note accompanying the

20

new rule specifically recognizes that a discretionary power of
interlocutory review of class certifications is desirable because
“Tajn order granting certification * * * may force a defendant
to settle rather than incur the costs of defending a class action
and run the risk of potentially ruinous liability.” Fed. R. Civ. P.
23(f) 1998 Adv. Comm. Notes. Similarly, the 1997 Report of
the Judicial Conference’s Committee on Rules of Practice and
Procedure recommending approval of Rule 23(f) opined that
“the proposed change to Rule 23(f) could have immediate and
substantial beneficial impact on class action practice” because
“Ta] certification decision is often decisive as a practical
matter.” Whereas the denial of certification can put an end to an
action seeking to vindicate large numbers of small claims,
“certification can exert enormous pressure to settle.”

For the same reasons, this Court can and should grant
certiorari to review important constitutional issues relating to
class litigation at the certification stage, rather than deferring
review until final judgment on the merits—a time that, for the
vast majority of cases, will never come. See Cox Broadcasting,
420 U.S. at 482-83 (review of interlocutory state court decision
resolving an issue of federal law is appropriate when “the
federal issue has been finally decided in the state courts,” the
party seeking review “might prevail on the merits on non-
federal grounds” and render Supreme Court review of the
federal issue unnecessary, and “reversal of the state court on the
federal issue would be preclusive of any further litigation on the
relevant cause of action”).

CONCLUSION

This Court should grant the petition for certiorari.

Respectfully submitted.

ROBIN S. CONRAD
ELLEN DUNHAM BRYANT
National Chamber
Litigation Center, Inc.
1615 H Street, NW
Washington, D.C. 20062
(202) 463-5337

JOHN T. WHATLEY
NANCY ELIZABETH BELL
Alliance of Automobile

Manufacturers, Inc.

EVAN M. TAGER
Counsel of Record
ERIKA Z. JONES
Mayer, Brown, Rowe
& Maw LLP
1909 K Street, NW
Washington, D.C. 20006
(202) 263-3240

LINDA T. COBERLY
Mayer, Brown, Rowe
& Maw LLP

1401 Eye Street, NW, Ste.900 190 South LaSalle Street

Washington, D.C. 20005
(202) 326-5500 -

MAY 2004

Chicago, Illinois 60603
(312) 782-0600

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386001_1255%3A7. Public record. Not legal advice.