All’s Not Well that Ends Well: The Real Lessons of Whirlpool.

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In early 2001, I was asked to argue in opposition to a class certification motion in federal court on behalf of the prominent owner of an automobile distributorship.  The case was brought on behalf of a handful of dealers who alleged violations of RICO, antitrust laws and dealer protection statutes.  My partner who had been handling the case was about to leave our firm for a seat on the bench, and the hearing was seen as an opportunity for the client to observe me in court and decide whether he wanted me to continue to represent him.  Although we lost that motion, the client kept me on as his lead counsel, and after much more costly litigation, we won the case on the merits.

During the class certification hearing, the judge made a comment that has stuck with me through the years.  He said that it wouldn’t necessarily be the worst thing for my client if the class were certified.  Given our victory and its res judicata effect, it’s hard to disagree with his assessment.

Similar observations are now being made about the moldy washing machine cases.  Two cases in particular have achieved some notoriety; one in Cleveland against Whirlpool, and the other in Chicago against Sears.  In both cases, plaintiffs allege that certain models of washing machines are defective, causing mold to build up.  The Ohio district court had granted class certification, and the Sixth Circuit affirmed, while the Illinois district court denied class certification, and the Seventh Circuit reversed.  The Supreme Court granted certiorari in both cases, but after its decision in Comcast Corp. v. Behrend, it vacated the judgments of both the Sixth and Seventh Circuits and directed them to reconsider their rulings in light of that decision.

On reconsideration, both courts held that certification of liability-only classes was appropriate, and the Ohio class action went to trial.  At the conclusion of the liability trial, the jury found for Whirlpool.  Rather than go away quietly, plaintiffs’ counsel reportedly are preparing their appeal and vowing to pursue more cases making the same claims in other states.

Whirlpool is now being trumpeted as the poster-child for liability-only classes.  Whirlpool should be glad, the argument goes, that the Ohio class was certified, because now it has a judgment binding on all class members.  This is the same thinking that the judge in my automobile dealer case had hinted at during the certification hearing 13 years ago.  And while it has surficial appeal, it also has serious flaws.

First, and most obviously, the argument depends on hindsight.  The case may have ended well for Whirlpool, but what if it hadn’t?  Whirlpool could have found itself liable to large numbers of uninjured class members based on a trial that would not have provided a meaningful opportunity to contest absent class members’ claims.  And what would have happened next?  The Sixth and Seventh Circuit decisions contemplate individual determinations of damages, but how would that have worked?  Certainly at the time of the appellate decisions, there was no plan in place to manage a damages phase, and as far as this writer is aware, no subsequent plans have been developed.

At least as important, until the defense verdict, and even afterwards, the class certification ruling continued to place Whirlpool under the cloud of significant potential exposure.  While it apparently did not buckle under the pressure by settling the case, other companies would have.  Our procedural rules were not designed to create pressure on defendants to settle unmeritorious claims.  Absent settlement, the company had to incur what must have been signficant expense to continue to defend the litigation, and based on the press reports of plaintiffs’ counsel’s post-trial comments, it will have to continue to do so for the foreseeable future.

Class litigation is not meant to be a game of Russian Roullette.  We shouldn’t be telling a defendant that it can rest easy because the gun that was pointed at its head did not discharge; the gun never should have been pointed in the first place.  By certifying classes for products about which most consumers have no complaints, courts allow aggressive lawyers to greatly magnify small problems, imposing enormous and unnecessary costs on blameless companies and their shareholders.  Even the argument that class certification in such cases achieves efficiencies is overblown.  Where few consumers experience problems with a product, few individual claims would be made.  In contrast, the class actions themselves place an unnecessary strain on judicial resources, especially when plaintiffs’ lawyers like those in Whirlpool intend to pursue them in multiple jurisdictions.  Also, manufacturers often are willing to resolve individual claims about their products through their warranty service departments, without needing to enrich lawyers in the process.

Finally, courts should not be persuaded by the argument that, because the Supreme Court denied petitions for certiorari from the Sixth and Seventh Circuit decisions on reconsideration, the Court has tacitly blessed the certification of liability classes in those cases.  The Comcast decision is still new and the Court was very much divided.  No doubt the Justices would like to give the decision time to play out in the lower courts before further considering its implications.  And the reconsideration rulings in both of the washing machine cases were interlocutory after all, hardly presenting the best posture for Supreme Court review.

Written by former litigation partner, Donald R. Frederico.