The Supreme Court, moldy washers and the future of consumer class actions

December 6, 2013

Are Sears and Whirlpool trying to hoodwink the justices of the U.S. Supreme Court about cases that could devastate consumer class action litigation?

That’s what purchasers of front-loading Whirlpool washing machines with an (allegedly) unfortunate propensity to develop a musty odor assert in a new brief opposing petitions for certiorari that were filed by Sears and Whirlpool in October. Members of separate class actions certified by the 6th and 7th Circuit Courts of Appeal argue in a brief filed Friday that Sears, Whirlpool and their 12 pro-business friends urging Supreme Court review have engaged in a “fundamental mischaracterization” of the cases. The defendants “totemically” represent the moldy washer classes to be an untenable mishmash of consumers, some of whom own machines supposedly developed the moldy smell and others who have no problems with their machines and have – according to the defendants – suffered no injury. The cases are no such thing, according to the classes’ Supreme Court counsel, New York University professor Samuel Issacharoff.

Instead, the new brief argues, the moldy washer class actions are “hornbook” warranty suits that allege the same cause of action for every member of the classes. When defendants and their amici harp on uninjured claimants, the brief contends, they’re attacking a strawman: Everyone in the certified classes claims the same injury. “These cases allege only a single, uniform defect causing a uniform harm, in which a seller delivered a substandard product that does not perform as warranted and is not fit for its ordinary purpose, and thereby does not satisfy the terms of the bargain,” the brief said. “That is the only liability theory presented, and it applies to all class members.”

There is nothing novel or exotic about classwide claims that purchasers didn’t get what they paid for, according to the brief. “Petitioners’ contention that consumers who got less than they bargained for are legally ‘unharmed’ cannot be reconciled with…well-settled state law that consumers are entitled to receive a product suitable for its ordinary and intended use,” the brief said. “Nor can it be reconciled with this court’s unanimous recognition that claims to recover the benefit of the bargain are the very essence of a warranty action.” According to the classes, there’s no split amongst the federal circuits on certification of consumer warranty classes, no division in the appeals courts about whether the Supreme Court’s ruling last term in Comcast v. Behrend precludes the moldy washer class actions, and no question that class members have constitutional standing to assert their warranty claims, even after the court’s 2013 ruling on “certainly impending” injury in Clapper v. Amnesty International. In short, according to Issacharoff’s brief, there is no reason for the Supreme Court to involve itself in the moldy washer class actions.

Sears, Whirlpool and their amici, on the other hand, have pitched the cases to the justices as a chance to resolve unanswered questions about whether supposedly uninjured claimants can even be part of a class action. Mayer Brown, which represents both washer maker Whirlpool and seller Sears at the Supreme Court, told the justices that unless the Supreme Court overturns class certification rulings by the 6th and 7th Circuits, every manufacturer in America is vulnerable to extortionate class action consumer claims whenever any purchaser has a problem with a product. Proponents of Supreme Court review claim that only a small minority of washing-machine purchasers actually experienced a problem, and those problems were usually resolved through the warranty process. Yet millions of consumers are part of class actions in the 6th and 7th Circuits, exposing Whirlpool (which, according to the class brief, has indemnified Sears) to crushing liability.

I called Sears and Whirlpool counsel of record, Stephen Shapiro of Mayer Brown, to ask about Issacharoff’s argument that his briefs misrepresent the nature of the moldy washer class actions. No surprise: Shapiro said his filings portray the case realistically. He called Issacharoff’s brief “off point, rhetorically.” These cases involve a plethora of Whirlpool models and untold individualized circumstances. Some machines were in damp basements, others in dry settings. Some customers called for repairs and replacements, others had no reason to because they never experienced an unpleasant smell. Even if Issacharoff’s characterization of these cases as warranty suits is correct – and the defendants do not concede that point – Shapiro said that claimants still have to prove causation and damages, and they can’t do so on a classwide basis.

“In every case, you could say it’s a class action because at a high level, there are common claims,” he said. “The Supreme Court has said you don’t get away with that characterization anymore…. This is not a class action. This is not a cookie-cutter case.” Shapiro said the Sears and Whirlpool response to the plaintiffs’ opposition brief is due on Dec. 23.

What was clear to me, after reading the class brief and talking to Shapiro, is that the two sides of the moldy washer litigation do not have remotely the same idea of what the class is claiming. Is the case a de facto product liability suit, as the defendants contend? Or is it a classic warranty suit, as described by the purchasers? Who are injured consumers – people whose products may someday fail or only those whose products have already proved defective?

We already know the Supreme Court is interested in these questions. Last term, it vacated previous class certification decisions in both the Sears and Whirlpool cases and remanded the class actions to the 6th and 7th Circuits for reconsideration in light of Comcast. The appellate courts stuck by their previous conclusions; the 6th Circuit citing the Supreme Court’s own securities litigation precedent in Amgen v. Connecticut Retirement plans as an antidote to Comcast and the 7th Circuit emphasized the efficiency using the class action vehicle to determine the adequacy of Whirlpool’s design. Last month, the justices conferenced on a third moldy washer cert petition, this one requesting review of a 9th Circuit class certification ruling in a case involving different manufacturers’ allegedly moldy machines. Rather than decide cert, the Supreme Court decided to hold the petition until it had reviewed the Sears and Whirlpool petitions – another sign the justices’ interest is piqued.

The Sears and Whirlpool petitions will be conferenced on Jan. 10, according to Shapiro.

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See? Just like the soi-disant public intellectual Richard Posner claims in his brilliant 1985 Columbia Law Rev. article:

My analysis can be summarized in the following propositions:

1. The major function of criminal law in a capitalist society is to prevent people from bypassing the system of voluntary, compensated exchange-the “market,” explicit or implicit-in situations where, because transaction costs are low, the market is a more efficient method of allocating resources than forced exchange. Market bypassing in such situations is inefficient — in the sense in which economists equate efficiency with wealth maximization — no matter how much utility it may confer on the offender. … (P. 1195, footnote omitted)

Of course, nothing stops the Corporate Persons from getting the toady Supreme Court to change the rules so they can’t use the tort law.

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