This is part two in a six-part series on attacking class certification on constitutional grounds. Read part one here.
The plaintiffs’ bar often tries to raise the stakes in class actions by seeking to bring nationwide or multi-state class actions. But courts have appropriately recognized that differences among the various states’ laws often preclude class certification. For example, the 5th Circuit has stated that certification is inappropriate “in a multi-state class action [where] variations in state law” would “swamp any common issues and defeat predominance”—thus flunking Federal Rule of Civil Procedure 23(b)(3).(Castano v. American Tobacco Co. ) In an attempt to sidestep these limitations on sprawling, nationwide classes, plaintiffs’ counsel often contend that courts may simply apply the law where the defendant is located to the entire putative class, regardless of where the class members may reside.
These attempts not only raise concerns under Rule 23 and most of its state-law equivalents, but also raise two serious constitutional issues—ones that defendants should consider invoking in opposition to class certification, especially when a case is pending in state court. First, as the Supreme Court enunciated in Phillips Petroleum Co. v. Shutts, due process forbids a state from applying its laws to the claims of non-residents when that state lacks “a significant contact or significant aggregation of contacts to the claims asserted by each member of the plaintiff class.” Second, as the 9th Circuit recently explained in Mazza v. American Honda Motor Co., principles of federalism, which is an integral part of the constitutional design, militate against permitting one state to apply its policy preferences nationally when doing so would “impair [a foreign state’s] ability to calibrate liability to foster commerce.”
In Shutts, a Kansas court applied Kansas law to a nationwide class, despite substantive differences between the relevant Kansas law and the laws of other states. The Supreme Court held that even though Kansas could assert personal jurisdiction over the non-resident class members, “it may not use this assumption of jurisdiction as an added weight in the scale when considering the permissible constitutional limits on choice of substantive law.” In other words, a state court “may not take a transaction with little or no relationship to the forum and apply the law of the forum in order to satisfy the procedural requirement that there be a ‘common question of law.’” Accordingly, the court held “that application of Kansas law to every claim in this case is sufficiently arbitrary and unfair as to exceed constitutional limits” imposed by the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution.
Similarly, in Mazza, a federal district court certified a nationwide class of car buyers in an action alleging that a car manufacturer engaged in deceptive advertising. Although California’s false-advertising laws differ dramatically from those of other states, the plaintiffs persuaded the district court that California law should apply to the nationwide class because “no foreign state has ‘an interest in denying its citizens recovery under California’s potentially more comprehensive consumer protection laws.’” This argument is one that the plaintiffs’ class-action bar has been making with increasing frequency, in our experience. In Mazza, however, the 9th Circuit refused to accept it, and instead reversed the district court’s order certifying a nationwide class. As the 9th Circuit explained, “discounting or not recognizing each state’s valid interest in shielding out-of-state businesses from what the state may consider to be excessive litigation” runs counter to key federalism principles. Quoting State Farm Mutual Auto Insurance Co. v. Campbell—a landmark Supreme Court case involving the Due Process Clause in the punitive damages context—the Mazza court explained: “It is a principle of federalism that ‘each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders.’” Accordingly, the 9th Circuit held, “each class member’s consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place.”
Importantly, the 9th Circuit’s approach is consistent with the Supreme Court’s pronouncements in other contexts—both due-process limitations on awards of punitive damages and the dormant commerce clause—that a “single state [cannot] impose its own policy choice on neighboring States” (BMW of N. Am., Inc. v. Gore,) nor “project its legislation into [other states].” (Brown-Forman Distillers Corp. v. New York State Liquor Auth. ) As such, defendants should not hesitate to use Mazza as persuasive authority outside of the 9th Circuit in opposing efforts to certify a nationwide or multi-state class.
With the increasing number of nationwide or multi-state class actions seeking to take advantage of plaintiff-friendly laws in a particular state, defendants need to be cognizant of the fact that such approaches frequently may raise due process and federalism concerns. When faced with these nationwide or multi-state class actions, defendants should consider making constitutional arguments in accord with Shutts or Mazza in addition to simply challenging to whether plaintiffs have met class-certification requirements.