For all their differences, both of America’s political parties talk about the restoration of American manufacturing as a major goal of U.S. economic policy. But what if American courts undermine this goal by simply ignoring legal precedent and letting trial lawyers get rich by undermining domestic manufacturing?
That concern arises from a federal class-action lawsuit that just concluded in Ohio last week. The jury in this case ruled that Whirlpool had not negligently designed 20 different models of low-water, energy-efficient washing machines sold over an eight-year period. The case was brought because between one and three percent of the machines developed a musty smell after about 18 months of operation.
The lawsuit was brought on behalf of a class of all people in Ohio who had purchased the machines – not just those who had the problem – on the controversial “price premium” legal theory. Because the washers were of a premium brand yet some had a problem, the argument goes, anyone who paid for one had suffered economic harm and therefore deserved to be paid. As one attorney summed it up for the publication Law360, such complaints assert that “I paid too much because someone else had a problem.”
The issue here is not whether the plaintiffs who actually experienced a problem deserved something for their trouble. In fact, some joined the lawsuit (persuaded by trial lawyer advertising) without even bothering to exercise the rights they enjoyed under Whirlpool’s warranty. The issue is that the lower courts certified this class-action case in the first place, despite the fact that potential class members were quite differently situated.
Many of these 150,000 consumers had experienced no problem. They had purchased 20 different models of the machine. Some class members failed to follow the instructions in their manual (which might have caused the smell), and some were more diligent.
A 2011 Supreme Court precedent — Wal-Mart v. Dukes — specified that plaintiff classes in class-action cases must share common claims based on a common injury. Thus, this class should never have been certified. Yet in two related cases on this same dispute (the other one was in Illinois), federal appeals courts certified the class anyway, in apparent defiance of Supreme Court precedent. When Whirlpool appealed the class certification to the Supreme Court, the justices declined the case, mysteriously refusing to stand up for a precedent they had only recently set.
Whirlpool is surely happy to have won this case on its merits. But the bigger issue is that of lower courts defying the reigning precedent and allowing dubious class-action cases to go to juries. This can only discourage domestic manufacturing, regardless of what politicians scheme to accomplish. Just imagine the consequences for Apple — and to technological innovation in general — if everyone who purchased an iPad was suddenly entitled cash because a few hundred iPads had problems.
This troubling case had a happy ending, but it demonstrates once again how trial lawyers’ creativity can destroy businesses, jobs and innovation.
