In re Bridgestone/Firestone, Inc.

• Citation: 288 F.3d 1012
• Decision Date: 02 May 2002
• Docket Number: No. 02-1437.,No. 02-1438.,No. 02-1439.,02-1437.,02-1438.,02-1439.
• Parties: In the Matter of BRIDGESTONE/FIRESTONE, INC., Tires Products Liability Litigation. Appeals of Bridgestone/Firestone, Inc., Bridgestone Corporation, and Ford Motor Company.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

288 F.3d 1012

In the Matter of BRIDGESTONE/FIRESTONE, INC., Tires Products Liability Litigation Appeals of Bridgestone/Firestone, Inc., Bridgestone Corporation, and Ford Motor Company.

No. 02-1437.

No. 02-1438.

No. 02-1439.

United States Court of Appeals, Seventh Circuit.

Argued April 17, 2002.

Decided May 2, 2002.

Rehearing and Rehearing En Banc Denied June 5, 2002.^*

COPYRIGHT MATERIAL OMITTED

Elizabeth J. Cabraser (argued), Lieff, Cabraser, Heimann & Bernstein, San Francisco, CA, Irwin B. Levin, Cohen & Malad, Indianapolis, IN David Boies, Boies, Schiller & Flexner, Armonk, NY, for Plaintiff-Appellee.

Robin G. Weaver, Squire Sanders & Dempsey, Hugh R. Whiting (argued), Jones, Day, Reavis & Pogue, Cleveland, OH, for Defendant-Appellant in No. 01-1437.

Thomas S. Kilbane, Robin G. Weaver, Squires Sanders & Dempsey, Cleveland, OH, for Defendant-Appellant in No. 02-1438.

John H. Beisner (argued), O'Melveny & Myers, Washington, DC, for Defendant-Appellant in No. 02-1439.

Stephen M. Shapiro, Mayer, Brown, Rowe & Maw, Chicago, IL, for Amicus Curiae.

Before EASTERBROOK, MANION, and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge.

Firestone tires on Ford Explorer SUVs experienced an abnormally high failure rate during the late 1990s. In August 2000, while the National Highway Transportation Safety Administration was investigating, Firestone recalled and replaced some of those tires. Ford and Firestone replaced additional tires during 2001. Many suits have been filed as a result of injuries and deaths related to the tire failures. Other suits were filed by persons who own (or owned) Ford Explorers or Firestone tires that have so far performed properly; these persons seek compensation for the risk of failure, which may be reflected in diminished resale value of the vehicles and perhaps in mental stress. The Judicial Panel on Multidistrict Litigation transferred suits filed in, or removed to, federal court to the Southern District of Indiana for consolidated pretrial proceedings under 28 U.S.C. § 1407(a). Once these have been completed, the cases must be returned to the originating districts for decision on the merits. See Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 118 S.Ct. 956, 140 L.Ed.2d 62 (1998). In an effort to prevent retransfer, counsel representing many of the plaintiffs filed a new consolidated suit in Indianapolis and asked the judge to certify it as a nationwide class action, which would make all other suits redundant. The district court obliged and certified two nationwide classes: the first includes everyone who owns, owned, leases, or leased a Ford Explorer of model year 1991 through 2001 anytime before the first recall, and the second includes all owners and lessees from 1990 until today of Firestone ATX, ATX II, Firehawk ATX, ATX 23 Degree, Widetrack Radial Baja, or Wilderness tire models, or any other Firestone tire "substantially similar" to them. In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 205 F.R.D. 503 (S.D.Ind.2001); see also 155 F.Supp.2d 1069 (S.D.Ind.2001). More than 60 million tires and 3 million vehicles fit these definitions.

No class action is proper unless all litigants are governed by the same legal rules. Otherwise the class cannot satisfy the commonality and superiority requirements of Fed.R.Civ.P. 23(a), (b)(3). Yet state laws about theories such as those presented by our plaintiffs differ, and such differences have led us to hold that other warranty, fraud, or products-liability suits may not proceed as nationwide classes. See, e.g., Isaacs v. Sprint Corp., 261 F.3d 679 (7th Cir.2001); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir. 2001); In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir.1995). See also In re Mexico Money Transfer Litigation, 267 F.3d 743, 746-47 (7th Cir.2001). The district judge, well aware of this principle, recognized that uniform law would be essential to class certification. Because plaintiffs' claims rest on state law, the choice-of-law rules come from the state in which the federal court sits. See Klaxon v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). The district judge concluded that Indiana law points to the headquarters of the defendants, because that is where the products are designed and the important decisions about disclosures and sales are made. Ford and Firestone engaged in conduct that was uniform across the nation, which the district court took to imply the appropriateness of uniform law. This ruling means that all claims by the Explorer class will be resolved under Michigan law and all claims by the tire class will be resolved under Tennessee law. According to the district court, other obstacles (such as the fact that the six named tire models represent 67 designs for different sizes and performance criteria, and that half of all 1996 and 1997 model Explorers came with Goodyear tires) are worth overcoming in light of the efficiency of class treatment. Nor did the district court deem it important that Firestone's tires were designed in Ohio, and many were manufactured outside Tennessee, as many of Ford's vehicles are manufactured outside Michigan.

Both Ford and Firestone petitioned for interlocutory review under Fed. R.Civ.P. 23(f). We granted these requests because, as in Rhone-Poulenc and other cases (e.g., West v. Prudential Securities, Inc., 282 F.3d 935 (7th Cir.2002)) the suit is exceedingly unlikely to be tried. Aggregating millions of claims on account of multiple products manufactured and sold across more than ten years makes the case so unwieldy, and the stakes so large, that settlement becomes almost inevitable — and at a price that reflects the risk of a catastrophic judgment as much as, if not more than, the actual merit of the claims. Permitting appellate review before class certification can precipitate such a settlement is a principal function of Rule 23(f). See Blair v. Equifax Check Services, Inc., 181 F.3d 832, 834-35 (7th Cir.1999). Another function is permitting appellate review of important legal issues that otherwise might prove elusive. The district court's conclusion that one state's law would apply to claims by consumers throughout the country — not just those in Indiana, but also those in California, New Jersey, and Mississippi — is a novelty, and, if followed, would be of considerable import to other suits. Our review of this choice-of-law question is plenary, so we start there.

Indiana is a lex loci delicti state: in all but exceptional cases it applies the law of the place where harm occurred. See Hubbard Manufacturing Co. v. Greeson, 515 N.E.2d 1071 (Ind.1987). Those class members who suffered injury or death as a result of defects were harmed in the states where the tires failed. As a practical matter, these class members can be ignored; they are sure to opt out and litigate independently. These classes therefore effectively include only those consumers whose loss (if any) is financial rather than physical: it is the class of persons whose tires did not fail, whose vehicles did not roll over. Many class members face no future threat of failure either, because about 30 million tires were recalled and replaced, while other tires have been used up and discarded. Financial loss (if any, a qualification we will not repeat) was suffered in the places where the vehicles and tires were purchased at excessive prices or resold at depressed prices. Those injuries occurred in all 50 states, the District of Columbia, Puerto Rico, and U.S. territories such as Guam. The lex loci delicti principle points to the places of these injuries, not the defendants' corporate headquarters, as the source of law.

Plaintiffs concede that until 1987 this would have been Indiana's approach. They contend, however, that Hubbard changed everything by holding that when the place of the injury "bears little connection to the legal action" a court may consider other factors, such as the place of the conduct causing the injury and the residence of the parties. It is conceivable, we suppose, that Indiana might think that a financial (or physical) injury to one of its residents, occurring within the state's borders, "bears little connection to the legal action", but the proof of that pudding is in the eating. Has Indiana since 1987 applied the law of a state where a product was designed, or promotional materials drafted, to a suit arising out of an injury in Indiana? As far as we can tell, the answer is no — not even once, and the state has had plenty of opportunities. Yet since 1987 both Indiana and this court have routinely applied Indiana law when injury caused by a defective product occurred in Indiana to Indiana residents. See, e.g., Land v. Yamaha Motor Corp., 272 F.3d 514, 517 (7th Cir.2001) (Indiana law); Morgen v. Ford Motor Co., 762 N.E.2d 137 (Ind.App.2002). Neither Indiana nor any other state has applied a uniform place-of-the-defendant's-headquarters rule to products-liability cases. It is not hard to devise an argument that such a uniform rule would be good on many dimensions, but that argument has not carried the day with state judges, and it is state law rather than a quest for efficiency in litigation (or in product design decisions) that controls.

"Ah, but this is not a products-liability case!" So plaintiffs respond to the conspicuous lack of support from state decisions. And indeed it is not a products-liability suit, since all who suffered physical injury are bound to opt out. No injury, no tort, is an ingredient of every state's law. See, e.g., Fogel v. Zell, 221 F.3d 955, 960-62 (7th Cir.2000); In re Orthopedic Bone Screw Products Liability Litigation, 193 F.3d 781, 789 (3d Cir.1999); Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278, 258 Ill.Dec. 792, 757 N.E.2d 481 (2001). Plaintiffs describe the injury as financial rather than physical and seek to move the suit out of the tort...