Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

It's always nice to do a post that gets back to the basics of product liability law.  And so I bring you Federici v. Ford Motor Co., Nos. 10-2428 and 10-2637, Slip op. (7th Cir. Sept. 19, 2011), in which Chief Judge Frank Easterbrook was faced with the question whether a plaintiff, in proving an automotive design defect case under Illinois's consumer expectations test, was required to introduce expert evidence in support of his claim.

The facts were simple:  plaintiffs' 1993 Ford Explorer was struck near the left rear wheel by a car going 30 miles per hour and rolled over, injuring the plaintiffs.  Plaintiffs filed the suit in state court, but it was removed on diversity grounds and (surprisingly to me) the parties consented to final decision by a magistrate.  At the close of discovery, plaintiffs had no expert on automotive design, so Ford moved for summary judgment, which the magistrate judge granted.

In my book, any case where the plaintiffs' lawyer either can't find or won't spend money on an expert on the design of the product at issue is probably a dog of a case.  From Chief Judge Easterbrook's opinion, however, we cannot determine why plaintiffs had no expert, only that they had none.

Plaintiffs' argument was simple.  Illinois has two tests for proving design defect -- a risk-utility balancing and a consumer expectations test -- and they do not need an expert to tell jurors what consumers expect, as that is within the jurors' experience.

Chief Judge Easterbrook noted that the court was a bit at sea, since the Illinois Supreme Court had not addressed whether a design defect claim on a complex product could survive without expert proof.  Slip op. at 3.  Several intermediate appellate decisions had required expert testimony, however.  Id.

Moreover, there was the question of whether this was an issue of state law or federal law.  The parties (and the magistrate judge below) had assumed that it was a matter of state law, reasoning that the quality of proof was part of the claim's substantive elements.  The Seventh Circuit clearly believed it was an issue of federal law as an evidentiary issue of what proof was essential, reasoning that the consumer-expectation test and the risk-utility test were not separate causes of action, but mere methods of proof of demonstrating strict liability design defect.  Slip op. at 4.  However, the court reserved deciding the issue.  Id. at 7. 

Instead, the court established from the Illinois Supreme Court's decision in Mikolajczyk v. Ford Motor Co., 231 Ill. 2d 516 (2008), that the risk-utility test in Illinois incorporates consumer expectations as one element of the risk-utility balancing and, as such, expert evidence is necessary even where a plaintiff relies on consumer expectations to prove design defect.  Slip op. at 6-7.  The court observed:

Did the design decisions that went into the 1993 Ford Explorer even contribute to the rollover?  Causation is a question about physics, and design options are the province of engineers.  Jurors own cars, but people own lots of products without being able to explain (or even understand) the principles behind their construction and operation. . . .  [M]ost people can't explain what makes a bicycle or a toilet work.  Cars are far more complex.

. . . The record doesn't even tell us even why this car rolled over, let alone what cars usually do in particular kinds of collisions--or what design changes could reduce the rollover rate, by how much. . . . [W]hen wheels are perpendicular to the line of travel, a tilt in the direction of travel can put the center of gravity outside the wheelbase and the car will roll over.  Many articles available on the Internet discuss the physics of this process.  Understanding requires some geometry and algebra; jurors' unguided intuitions will not solve the equations.  Without an expert's assistance the decision would depend on speculation, which cannot establish causation--an issue on which plaintiffs bear both the burden of production and the risk of non-persuasion.

Slip op. at 7-9 (citations omitted).

In discussing how federal law would treat the issue, the court noted that "[f]ederal law often requires expert evidence about consumers' knowledge and behavior, because jurors are supposed to decide on the basis of the record rather than their own intuitions and assumptions."  Slip op. at 5.  Thus, experts testify in trademark litigation on what about packaging or messaging confuses consumers.  And in Fair Credit Reporting Act and Fair Debt Collection Act cases, they opine on what is confusing to unsophisticated borrowers.  "Jurors know less about product design than they know about what confuses people who buy toothpaste or borrow $10,000."  Slip op. at 5. 

Moreover, the sample size of federal jury is far too small to reach any reliable conclusions about consumer expectations.  "Many federal civil cases are resolved by six-person juries, and none by more than twelve," the court observed.  "That is too few to reveal what expectations consumers as a whole will have."  Slip op. at 5.

The decision in Federici makes a strong case for why expert evidence is absolutely necessary to meet a plaintiff's burden of proof and burden of persuasion on the issue of design defect in a complex product liability suit -- even in a state that allows proof under the consumer expectations test.

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Lest any of you think that who bears the burden of proof doesn't really matter, take heed of the recent decision in Chow v. Reckitt  & Colman, Inc., No. 81 (N.Y. May 10, 2011) by New York's highest court, the Court of Appeals. 

In Chow, a restaurant employee who did not speak English sued a manufacturer whose product was marketed and used to unclog drains.  The product correctly warned that the use of lye (sodium hydroxide) presented risks of burns, and instructed users to use rubber gloves and protective eyewear when using the product.  It also cautioned against letting the lye come in contact with aluminum utensils.

But the plaintiff never read the warnings and instructions.  Instead, he used the product on a clogged floor drain after having watched others use the product in the past.  Plaintiff poured roughly three teaspoons into an aluminum container, and then poured three cups of cold water into that container.  The mixture of aluminum, lye and water created an acid that gave off hydrogen.  When plaintiff -- who was not wearing any safety gear -- poured the solution down the drain, it splashed back onto plaintiff's face, causing serious burns and blindness in one eye.

There is no question that plaintiff failed to heed warnings and follow instructions that would have prevented his injuries.  Indeed, the trial court granted summary judgment on the failure to warn cause of action, and that was not challenged on appeal.

But the trial court and the Appellate Division also had ruled that the defendant was entitled to summary judgment on plaintiff's strict liability design defect claim.  The defendant had submitted an attorney affidavit indicating that the product is 100% lye, that lye is commonly known to be dangerous, and that any "alternative design" of the product that changed the chemical composition of the product would not have been the same product:  lye.

The Court of Appeals, however, held that this was not enough to warrant summary judgment because under New York law, a product with adequate warnings still "may be so dangerous, and its misuse may be so foreseeable, that a factfinder employing the required risk-utility analysis our case law has established could reasonably conclude that 'the utility of the product did not outweigh the risk inherent in marketing' it."  Slip op. at 6 (citation omitted).  It was the defendant's burden, the court held, establish in the first instance that "it was not feasible to design a safer, similarly effective and reasonably priced alternative product."  Id. at 7.  What the court wanted from the defendant in the first instance was proof that its product was reasonably safe for its intended use.

This sounds odd to most federal court practitioners, who are used to moving for summary judgment based on the plaintiff's inability to proffer evidence on an element of a cause of action upon which he or she bears the ultimate burden of proof at trial.  Judge Robert Smith filed a concurrence that explained the difference between the summary judgment rule in New York state courts as compared with the rule that applies in federal (and most other states') courts.  Under Celotex Corp. v. Catrett, 477 U.S. 317 (1986), federal litigants can merely point to the opposing party's lack of evidence to prove an element that he or she must prove at trial.  But in New York, the initial burden of making an evidentiary showing rests on the moving party, and thus the manufacturer was required to provide evidence establishing that the design was reasonably safe for its intended use, regardless of the plaintiff's lack of proof that the design was defective.  Judge Smith explained that the plaintiff's expert, in an affidavit responding to the defendant's summary judgment motion:

proposed several products that he called "safer" alternatives to lye, but he did not show that any alternative capable of preventing plaintiff's accident would perform as well as lye at a reasonable cost.  Describing his principal proposal -- a 3% to 5% solution of lye -- the expert admitted that it would take "somewhat longer to do the job" of unclogging drains, and did not say how much longer.

If a record identical to the present one were developed at trial, plaintiff would fail to meet his burden of proof and the court would be required to direct a verdict for defendants.  One might think, therefore, that the record would entitle defendants to summary judgment.  But one who thought that would be wrong under New York law, because the initial burden to make an evidentiary showing on summary judgment rests on the moving party. . . .

. . . The [defendant's] burden of making the necessary evidentiary showing might not have been hard to meet:  an affidavit from someone knowledgeable in the industry -- either a retained expert or an employee of one of the defendants -- could have done it.  But the burden was not met. . . .

. . . If we were writing on a clean slate, I might prefer the Celotex rule to ours, but we are not, and I am not urging a change in our law.  I am urging, however, that parties moving for summary judgment in the future be alert to the burden that New York law places on a moving party.

Concurrence at 2-4 (citations omitted).

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A recent decision out of the Eighth Circuit reminds us that God is in the details.  In Summerhill v. Terminix, Inc., No. 09-3691, Slip op. (8th Cir. Mar. 24, 2011), the plaintiff alleged that Terminix did not completely encircle his home with a chemical barrier prior to 1996 as it was required to do under Arkansas law.  There was no question that plaintiff's causes of action were barred by the statute of limitations, except that plaintiff pled fraudulent concealment.  The district court had held that he failed to meet the Rule 9(b) standard for pleading fraud, but gave him a second chance.  Plaintiff pled:  (1) Terminix failed to disclose that it was required by law to provide a complete chemical barrier, and (2) because the chemical barrier is invisible, the layman plaintiff could not discover that Terminix failed to provide it.  Sounds simple enough, right? 

Wrong!  The district court dismissed the case on statute of limitations grounds, and the Eighth Circuit affirmed.  It began by noting that the burden of proof on tolling rests with plaintiff.  He must plead and prove:  "'(1) a positive act of fraud (2) that is actively concealed, and (3) is not discoverable by reasonable diligence.'"  Slip op. at 4 (citation omitted).

The district court had held that the "failure to disclose" a breach of contract is not the kind of conduct that rises to the level of fraudulent concealment.  The Eighth Circuit took a pass on that issue, going instead for the area where there were no facts pled whatsoever:  criterion 3, reasonable diligence.  The court explained:

Assuming arguendo that Summerhill sufficiently pled that Terminix engaged in affirmative and fraudulent acts of concealment, the applicable statutes of limitations would only be tolled "until [Summerhill] discover[ed] the fraud or should have discovered it by the exercise of reasonable diligence."  Martin, 3 S.W.3d at 687 (emphasis added) (quotation omitted).  By failing to allege when and how he discovered Terminix's alleged fraud, Summerhill has failed to meet his burden of sufficiently pleading that the doctrine of fraudulent concealment saves his otherwise time-barred claims.  See Wood v. Carpenter, 101 U.S. 135, 140-41, 143 (1879) ("If the plaintiff made any particular discovery, it should be stated when it was made, what it was, how it was made, and why it was not made sooner. . . .  The circumstances of the discovery must be fully stated and proved, and the delay which has occurred must be shown to be consistent with the requisite diligence.") . . .

Slip op. at 5 (citations omitted).

Summerhill is an important reminder that claims of fraudulent concealment can be defeated where the plaintiff does not adequately plead how he discovered his cause of action and why it reasonably took him so long to do so.

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Loyal reader Michael Cessna from Lathrop & Gage in Kansas City turned me on to the First Circuit's recent decision in Amoche v. Guarantee Trust Life Ins. Co., No. 08-2094 (1st Cir.  Feb. 13, 2009), in which the court articulated the standards applicable to a defendant's removal of a consumer fraud class action.

In Amoche, it is plain that the plaintiffs were gaming the system to avoid removal to federal court by refusing to indicate how much they were seeking in their class action, while refusing to issue a binding disclaimer of the $5 million amount in controversy that is the floor for removal under the Class Action Fairness Act ("CAFA").  

Plaintiffs were people who -- as part of obtaining an automobile loan -- had been forced to buy a single-premium life insurance policy so that if they died, the loan would be paid off.  Plaintiffs sought to represent a class of such people who had paid off their loan early, but had not been refunded the unearned portion of the prepaid life insurance premium.  Plaintiffs sought money damages under breach of contract and breach of the covenant of good faith and fair dealing theories, restitution of unearned premiums, and injunctive relief that would require the life insurer to promptly refund unearned premiums to those who pay off loans early.

Plaintiffs had filed a class action in New Hampshire state court, the court had certified it, and plaintiffs had won summary judgment on their breach of contract claim, thereby establishing liability.  Plaintiffs then sought to amend their complaint to add consumers from other states.  But their complaint merely said that the defendant had harmed "thousands of class members" in amounts likely to be "about $200."  The state trial court granted plaintiffs the right to add to their class definition class members from 16 other states.  Plaintiffs then moved the amend the order to allow them to add between 10 and 20 other states.

The defendant was understandably concerned, and based on plaintiffs' representations, it removed the case to federal court, arguing that if the class contained as many as 25,000 people, at $200 a head that would be $5 million.  Plaintiffs filed a motion to remand, and defendants responded by showing that plaintiffs' claims in New Hampshire alone totaled $452,472.29.  The District Court granted plaintiffs' motion to remand, and the First Circuit affirmed, articulating some basic CAFA removal principles:

Because CAFA is both a removal and a jurisdictional statute, we start with some basic principles from those areas.  The party invoking federal jurisdiction has the burden of establishing that the court has subject matter jurisdiction over the case. . . .

We now hold that the burden of showing federal jurisdiction is on the defendant removing under CAFA.  This is also the conclusion reached by the seven other circuits that have considered this issue.

Slip op at 11 (citations omitted).

The court explained that although the question of subject matter jurisdiction is a question of law that is always reviewed de novo by a federal court, there may be instances where the district court has had to make factual findings.  Where that has occurred, the factual findings are reviewed for "clear error."

The court held that where the complaint is silent on the amount in controversy, defendants removing under CAFA must demonstrate a "reasonable probability" that the amount in controversy exceeds $5 million.  The court explained that "the reasonable probability standard is, to our minds, for all practical purposes identical to the preponderance of the evidence standard adopted by several circuits," but the "'reasonable probability language better captures the preliminary nature of this inquiry, reserving the preponderance of the evidence terminology for other conclusions."  Slip op at 14 (citations omitted).

The defendant had argued that it should be treated more like a plaintiff who chooses the federal forum, who only has to show that it is not a "legal certainty" that the amount in controversy is less than $5 million.  But the court rejected that argument as conflicting with the general rule that defers to the plaintiff's choice of forum. 

The First Circuit offered some "brief notes" on the standard that it articulated.  It noted that "[c]onsideration of this preliminary issue should not devolve into a mini-trial regarding the amount in controversy."  Moreover, the court should consider what evidence both parties have put on and which party has better access to relevant information.  In addition, evaluating the defendant's showing regarding the amount in controversy must be focused on the time of removal -- what happens afterward cannot divest the court of jurisdiction.  Finally, the likelihood of success on the merits is irrelevant to the amount in controversy.

Using these guidelines, the court concluded that the defendant had not shown a reasonable probability that the amount in controversy exceeded $5 million, and it affirmed remand of the case to state court, declaring that "[i]t is not unfair that [defendant] wait until the class allegations are more fully developed before attempting to remove, if there is a basis for removal, especially now that class actions under CAFA are exempt from the removal statute's one-year time limit."  Slip op. at 20.

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