Politics & Policy

Reining in Crazy Class-Action Lawsuits

Consumers will pay the price if the Supreme Court doesn’t stop the madness.

If you purchased an iPad six months ago and the device then suddenly froze up, you would simply visit the nearest Apple Store for help. If Apple’s courteous and capable service staff couldn’t do repairs on the spot, they’d provide you with a new iPad. No problem. No charge. And best of all, no lawyers.

Every year, millions of American consumers benefit from warranty protections and service systems that both the makers and the sellers of countless products and services maintain. Warranties have become particularly pervasive in American manufacturing, for good reason. Even the most finely engineered mass-production processes invariably entail some small incidence of error. From the first design drawing to the last unit off the assembly line, unexpected issues crop up.

So manufacturers and large-scale retailers establish call centers, build service organizations, and compete on their responsiveness to customers. Even after warranties expire, service technicians and call-center experts work hard to educate consumers on product use and care and on how most efficiently to resolve problems.

#ad#But the future of warranty programs and call centers is now threatened by the obstinate disregard that two federal courts of appeal have shown toward recent U.S. Supreme Court precedents regarding the certification of class-action lawsuits.

Though the high court in both Wal-Mart v. Dukes (2011) and Comcast v. Behrend (2013) raised the bar for the certification of class actions, particularly with respect to the “commonality” of the claims of prospective class members, both the Sixth and the Seventh Circuits — in Whirlpool v. Glazer and Sears v. Butler, respectively — have ignored those precedents by certifying classes with virtually no commonality.

Both cases involve Whirlpool-manufactured front-load washing machines and are now on appeal, once again, to the Supreme Court. When introduced in 2001, the washers were actually high-tech innovations designed to meet consumer demands and new government efficiency mandates for electricity and water use. Compared with their predecessors, they were 67 percent more energy-efficient and 68 percent more water-efficient. The savings on water and power bills alone amounted to $120 per year for a typical family.

But it turned out that some units eventually emitted what Consumer Reports in 2005 called a “musty” scent. This happened with less than 1 percent of machines, according to a 2010 Consumer Reports survey, or with 2 to 3 percent, based on call-center data from Sears and Whirlpool in 2001–12. In any case, that 2005 report named the machines “the best all around,” an enthusiasm that consumers heartily seconded with millions of purchases, even as the musty odor was regularly noted in print and online reviews.

Nonetheless, to class-action lawyers, that statistically rare scent smelled just like cold, hard cash. They ultimately crafted the largest class actions ever to reach the Supreme Court after both circuit courts unfathomably upheld trial-judge certifications of respective classes that included buyers who had not experienced any problem with their washers— which is to say, at least 97 percent of all buyers. And of the tiny percentage who alleged problems, the lower courts ruled that they did not need to demonstrate a common cause for them.

If the certifications for these widely diverse classes are allowed to stand, not only will class-action lawyers stand to make out like bandits, but consumers would pay the price as huge new litigation costs are passed on to them. Manufacturing companies, many with error rates higher than Whirlpool’s, would be left no choice but to shut down helpful call centers and extended-service programs, out of fear that those records would be targeted by discovery-happy lawyers looking to gin up their next jackpot.

The Supreme Court can and should put a stop to this madness before it has a chance to start in earnest. Justices will meet on Friday, January 10, to consider additional cases the Court will hear this term. It should decide to hear both Whirlpool and Sears and then make it abundantly clear to activist lower courts that “no” means “no.”

No more widely divergent claims within a single class. No more classes composed overwhelmingly of happily satisfied consumers. And no more litigation when warranty programs, consumer call centers, and extended-service programs are perfectly capable of handling individual and varying buyers’ issues far more efficiently and far less expensively.

The high court has been fairly gentle thus far in steering lower courts toward a better understanding of its Wal-Mart and Comcast decisions. But disrespectful lower courts have now forced it to apply a firmer hand.

— Tiger Joyce is president of the American Tort Reform Association, based in Washington, D.C.

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