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For a change, the U.S. Supreme Court took a back seat to a U.S. circuit court on a closely watched legal issue. The high court and the 7th U.S. Circuit Court of Appeals handed down class action decisions within days of each other in June. But it was the 7th Circuit’s decision in a Firestone case that bowled over attorneys with its sweeping — and, some say, wrongheaded — curtailment of state court authority to certify nationwide classes after a federal court has declined to do so. The Supreme Court’s June 23 ruling drew mostly yawns from class action experts. Green Tree Financial Corp. v. Bazzle, No. 02-634. But 7th Circuit Judge Frank H. Easterbrook’s June 20 opinion has drawn wide attention. In re Bridgestone/Firestone Inc. Tires Products Liability Litigation, No. 03-1379. The case has been dubbed Firestone II because it follows a 2002 decision, also by Easterbrook, concerning claims that Ford Explorer SUVs and their Firestone tires are unsafe. The Firestone I panel denied nationwide certification to the owners of some 60 million tires and 3 million vehicles largely because a variety of differing state laws would come into play. Plaintiffs’ attorneys ignored that lesson about the unwieldiness of the class and sought nationwide certification in state courts, according to Firestone II. The 7th Circuit’s solution to that problem puts it “out of step with the other federal appellate courts,” said Vanderbilt University Law School Professor Richard A. Nagareda. INAPPROPRIATE CLASSES Easterbrook wrote that a federal determination that a nationwide class was inappropriate precluded state courts from deciding otherwise on the same set of facts. Absent an injunction putting a stop to the state court proceedings, plaintiffs with a weak case for certification would virtually always get their way by shopping the case from one court to another, Easterbrook wrote. John Beisner of O’Melveny & Myers, who argued the case for Firestone and Ford, hailed the decision as groundbreaking. “This is the first time a federal court has said that the denial of certification has a preclusive effect on state court proceedings,” he said. Elizabeth J. Cabraser of San Francisco’s Lieff Cabraser Heimann & Bernstein said the decision is actually a victory for her clients, the plaintiffs. The court expressly upheld the power of state courts to certify statewide, as opposed to nationwide, classes and denied Firestone’s and Ford’s request that even statewide certifications be enjoined. She predicted that the defendants will regret having resisted a nationwide class when they have to confront a multitude of statewide cases. Though expressing sympathy with Easterbrook’s frustrations at state court second-guessing, Nagareda said it is “problematic” whether a decision under federal rules of procedure precludes the states from re-examining certification under their own procedural rules. Professor Howard M. Erichson of Seton Hall University School of Law echoed that sentiment and found it ironic that Easterbrook took so aggressive a stance just as Congress is considering the Class Action Fairness Act, which would go a long way toward making the federal courts pre-eminent. Professor Howard Rosenberg of Harvard Law School said that Easterbrook overstates the advantages to plaintiffs of forum shopping, since most courts will give weight to what others have ruled. He worries that Firestone II will encourage defendants to derail legitimate cases by colluding with a plaintiff willing to sell out his class members by filing in a forum hostile to class actions. In Green Tree, the Supreme Court said that where a contract between a financial services company and its clients called for arbitration of disputes, but was silent about class action arbitration, it was for an arbitrator, and not the courts, to decide whether class action arbitration was appropriate. Brian Brooks, also of O’Melveny & Myers, called Green Tree “dead on arrival,” since most contracts now expressly exclude class action arbitration. Rosenberg said that such exclusionary clauses pose a question not yet addressed by the high court: Should the judiciary continue to defer to arbitration contracts when they rob the states of one of their weapons against consumer fraud, which often involves sums too small to make it worthwhile for an individual to bring suit?

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