In the Matter of BRIDGESTONE/FIRESTONE, INC., Tires Products Liability Litigation.
Appeals of Bridgestone/Firestone, Inc., Bridgestone Corporation, and Ford Motor Company.
No. 02-1437.
No. 02-1438.
No. 02-1439.
United States Court of Appeals, Seventh Circuit.
Argued April 17, 2002.
Decided May 2, 2002.
Rehearing and Rehearing En Banc Denied June 5, 2002.*
COPYRIGHT MATERIAL OMITTED Elizabeth J. Cabraser (argued), Lieff, Cabraser, Heimann & Bernstein, San Francisco, CA, Irwin B. Levin, Cohen & Malad, Indianapolis, IN David Boies, Boies, Schiller & Flexner, Armonk, NY, for Plaintiff-Appellee.
Robin G. Weaver, Squire Sanders & Dempsey, Hugh R. Whiting (argued), Jones, Day, Reavis & Pogue, Cleveland, OH, for Defendant-Appellant in No. 01-1437.
Thomas S. Kilbane, Robin G. Weaver, Squires Sanders & Dempsey, Cleveland, OH, for Defendant-Appellant in No. 02-1438.
John H. Beisner (argued), O'Melveny & Myers, Washington, DC, for Defendant-Appellant in No. 02-1439.
Stephen M. Shapiro, Mayer, Brown, Rowe & Maw, Chicago, IL, for Amicus Curiae.
Before EASTERBROOK, MANION, and KANNE, Circuit Judges.
EASTERBROOK, Circuit Judge.
Firestone tires on Ford Explorer SUVs experienced an abnormally high failure rate during the late 1990s. In August 2000, while the National Highway Transportation Safety Administration was investigating, Firestone recalled and replaced some of those tires. Ford and Firestone replaced additional tires during 2001. Many suits have been filed as a result of injuries and deaths related to the tire failures. Other suits were filed by persons who own (or owned) Ford Explorers or Firestone tires that have so far performed properly; these persons seek compensation for the risk of failure, which may be reflected in diminished resale value of the vehicles and perhaps in mental stress. The Judicial Panel on Multidistrict Litigation transferred suits filed in, or removed to, federal court to the Southern District of Indiana for consolidated pretrial proceedings under 28 U.S.C. § 1407(a). Once these have been completed, the cases must be returned to the originating districts for decision on the merits. See Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach,
No class action is proper unless all litigants are governed by the same legal rules. Otherwise the class cannot satisfy the commonality and superiority requirements of Fed.R.Civ.P. 23(a), (b)(3). Yet state laws about theories such as those presented by our plaintiffs differ, and such differences have led us to hold that other warranty, fraud, or products-liability suits may not proceed as nationwide classes. See, e.g., Isaacs v. Sprint Corp.,
Both Ford and Firestone petitioned for interlocutory review under Fed. R.Civ.P. 23(f). We granted these requests because, as in Rhone-Poulenc and other cases (e.g., West v. Prudential Securities, Inc.,
Indiana is a lex loci delicti state: in all but exceptional cases it applies the law of the place where harm occurred. See Hubbard Manufacturing Co. v. Greeson,
Plaintiffs concede that until 1987 this would have been Indiana's approach. They contend, however, that Hubbard changed everything by holding that when the place of the injury "bears little connection to the legal action" a court may consider other factors, such as the place of the conduct causing the injury and the residence of the parties. It is conceivable, we suppose, that Indiana might think that a financial (or physical) injury to one of its residents, occurring within the state's borders, "bears little connection to the legal action", but the proof of that pudding is in the eating. Has Indiana since 1987 applied the law of a state where a product was designed, or promotional materials drafted, to a suit arising out of an injury in Indiana? As far as we can tell, the answer is no — not even once, and the state has had plenty of opportunities. Yet since 1987 both Indiana and this court have routinely applied Indiana law when injury caused by a defective product occurred in Indiana to Indiana residents. See, e.g., Land v. Yamaha Motor Corp.,
"Ah, but this is not a products-liability case!" So plaintiffs respond to the conspicuous lack of support from state decisions. And indeed it is not a products-liability suit, since all who suffered physical injury are bound to opt out. No injury, no tort, is an ingredient of every state's law. See, e.g., Fogel v. Zell,
Obviously plaintiffs believe that Michigan and Tennessee are in the favorable minority; we need not decide. If recovery for breach of warranty or consumer fraud is possible, the injury is decidedly where the consumer is located, rather than where the seller maintains its headquarters. A contract for the sale of a car in Indiana is governed by Indiana law unless it contains a choice-of-law clause, and plaintiffs do not want to enforce any choice-of-law clause. Plaintiffs have not cited, and we could not find, any Indiana case applying any law other than Indiana's to warranty or fraud claims arising from consumer products designed (or contract terms written) out of state, unless a choice-of-law clause was involved. State consumer-protection laws vary considerably, and courts must respect these differences rather than apply one state's law to sales in other states with different rules. See BMW of North America, Inc. v. Gore,
Against all of this plaintiffs set a single decision: KPMG Peat Marwick v. Asher,
Because these claims must be adjudicated under the law of so many jurisdictions, a single nationwide class is not manageable. Lest we soon see a Rule 23(f) petition to review the certification of 50 state classes, we add that this litigation is not manageable as a class action even on a statewide basis. About 20% of the Ford Explorers were shipped without Firestone tires. The Firestone tires supplied with the majority of the vehicles were recalled at different times;2 they may well have differed in their propensity to fail, and this would require sub-subclassing among those owners of Ford Explorers with Firestone tires. Some of the vehicles were resold and others have not been; the resales may have reflected different discounts that could require vehicle-specific litigation. Plaintiffs contend that many of the failures occurred because Ford and Firestone advised the owners to underinflate their tires, leading them to overheat. Other factors also affect heating; the failure rate (and hence the discount) may have been higher in Arizona than in Alaska. Of those vehicles that have not yet been resold, some will be resold in the future (by which time the tire replacements may have alleviated or eliminated any discount) and some never will be resold. Owners who wring the last possible mile out of their vehicles receive everything they paid for and have claims that differ from owners who sold their Explorers to the second-hand market during the height of the publicity in 2000. Some owners drove their SUVs off the road over rugged terrain, while others never used the "sport" or "utility" features; these differences also affect resale prices.
Firestone's tires likewise exhibit variability; that's why fewer than half of those included in the tire class were recalled. The tire class includes many buyers who used Firestone tires on vehicles other than Ford Explorers, and who therefore were not advised to underinflate their tires. (Note that this description does not reflect any view of the merits; we are repeating rather than endorsing plaintiffs' contention that Ford counseled "underinflation.") The six trade names listed in the class certification order comprise 67 master tire specifications: "Firehawk ATX" tires, for example, come in multiple diameters, widths, and tread designs; their safety features and failure modes differ accordingly. Plaintiffs say that all 67 specifications had three particular shortcomings that led to excess failures. But whether a particular feature is required for safe operation depends on other attributes of the tires, and as these other attributes varied across the 67 master specifications it would not be possible to make a once-and-for-all decision about whether all 60 million tires were defective, even if the law were uniform. There are other differences too, but the ones we have mentioned preclude any finding "that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3). Regulation by the NHTSA, coupled with tort litigation by persons suffering physical injury, is far superior to a suit by millions of uninjured buyers for dealing with consumer products that are said to be failure-prone.
The district judge did not doubt that differences within the class would lead to difficulties in managing the litigation. But the judge thought it better to cope with these differences than to scatter the suits to the winds and require hundreds of judges to resolve thousands of claims under 50 or more bodies of law. Efficiency is a vital goal in any legal system—but the vision of "efficiency" underlying this class certification is the model of the central planner. Plaintiffs share the premise of the ALI's Complex Litigation Project (1993), which devotes more than 700 pages to an analysis of means to consolidate litigation as quickly as possible, by which the authors mean, before multiple trials break out. The authors take as given the benefits of that step. Yet the benefits are elusive. The central planning model — one case, one court, one set of rules, one settlement price for all involved — suppresses information that is vital to accurate resolution. What is the law of Michigan, or Arkansas, or Guam, as applied to this problem? Judges and lawyers will have to guess, because the central planning model keeps the litigation far away from state courts. (Ford asked us to certify legal questions to the Supreme Court of Michigan, to ensure that genuine state law was applied if Michigan's law were to govern the whole country; the plaintiffs stoutly resisted that proposal.) And if the law were clear, how would the facts (and thus the damages per plaintiff) be ascertained? One suit is an all-or-none affair, with high risk even if the parties supply all the information at their disposal. Getting things right the first time would be an accident. Similarly Gosplan or another central planner may hit on the price of wheat, but that would be serendipity. Markets instead use diversified decisionmaking to supply and evaluate information. Thousands of traders affect prices by their purchases and sales over the course of a crop year. This method looks "inefficient" from the planner's perspective, but it produces more information, more accurate prices, and a vibrant, growing economy. See Thomas Sowell, Knowledge and Decisions (1980). When courts think of efficiency, they should think of market models rather than central-planning models.
Our decision in Rhone-Poulenc Rorer made this point, and it is worth reiterating: only "a decentralized process of multiple trials, involving different juries, and different standards of liability, in different jurisdictions" (
No matter what one makes of the decentralized approach as an original matter, it is hard to adopt the central-planner model without violence not only to Rule 23 but also to principles of federalism. Differences across states may be costly for courts and litigants alike, but they are a fundamental aspect of our federal republic and must not be overridden in a quest to clear the queue in court. See BMW v. Gore,
The motion to certify questions of law to the Supreme Court of Michigan is denied as unnecessary in light of this opinion. The district court's order certifying two nationwide classes is REVERSED.
Notes:
Notes
Chief Judge FLAUM and Judge ROVNER took no part in the consideration of the petition for rehearing en banc
Consider an example. Defendant sells 1,000 widgets for $10,000 apiece. If 1% of the widgets fail as the result of an avoidable defect, and each injury creates a loss of $50,000, then the group will experience 10 failures, and the injured buyers will be entitled to $500,000 in tort damages. That is full compensation for the entire loss; a manufacturer should not spend more than $500,000 to make the widgets safer. SeeBammerlin v. Navistar International Transportation Corp.,
On August 9, 2000, Firestone recalled its Radial ATX and Radial ATX II tires, but only in size P235/75R15, plus its Wilderness AT tires in size P235/75R15 (but only if they had been made in Decatur, Illinois). On January 2, 2001, Firestone recalled Wilderness LE tires, size P265/70R16, that had been manufactured the week of April 23, 2000, in Cuernavaca, Mexico. In February 2001 it recalled approximately 98,500 P205/55R16 Firehawk GTA-02 tires, most of which had been installed on Nissan Altima SE cars sold in the United States, Canada, Puerto Rico, and Guam. Finally, on May 22, 2001, Ford began a replacement program for all Firestone Wilderness AT tires in 15-inch, 16-inch, and 17-inch sizes. Other Firestone models, sizes, and plants were not involved in any recall program and these tires, though included in the class definition, may exhibit different (and lower) failure rates. The NHTSA was satisfied that these recalls removed all potentially defective tires from the road and did not require further action. Yet the tire class includes more than twice as many Firestone tires as were recalled