Plaintiffs may not file for nationwide class certification in state courts, Seventh Circuit says.

Plaintiffs in a Firestone tire case whose nationwide class certification was reversed on appeal last year are not permitted to seek similar certification in state courts, according to a follow-up ruling by the appeals court. (In re Bridgestone/Firestone, Nos. 03-1379, 03-1564, 2003 WL 21418413 (7th Cir. June 20, 2003).)

In its decision, which observers are calling Firestone IL the Seventh Circuit stated that its earlier reversal of a district court's class certification was sufficiently firm as to have collateral estoppel effect.

Following the appellate court's original ruling--and after the U.S. Supreme Court refused to review the case--plaintiffs filed class actions in several jurisdictions around the country. In its recent decision, the Seventh Circuit claimed that in at least five of those suits, plaintiffs sought certification of the same class the court denied the first time around. One state judge certified a nationwide class on the day the complaint was filed.

"Ford and Firestone asked the district judge to enforce our decision by enjoining other class actions," Judge Frank Easterbrook wrote for the majority. "Not just other efforts to launch nationwide classes, but any class action, even one limited to a single product in a single state." The defendants argued that an anti-class-action injunction was necessary to carry out the appellate court's original ruling, he wrote.

"[The district judge] denied the motion sua sponte," said Elizabeth Cabraser, a San Francisco lawyer representing the plaintiffs. "She basically said to the defendants, 'You knew this was going to happen. You got what you asked for. If you wanted centralized case management in the multi-district litigation, why did you oppose class certification?'" The defendants appealed that decision, sending the case to the Seventh Circuit for a second time.

The new element, Cabraser said, was that the defendants asked the Seventh Circuit to say that "after a court has decertified a class action, [it] could then rule that no one else could have a class action either, which seemed to us strange mad unsupported in the jurisprudence."

The appeals court agreed in part with the plaintiffs, stating in its recent decision that the only classes that had been certified had national scope and that the only enforceable judgment is one concerning such classes.

The Seventh Circuit "[told] both sides, 'you're half right,'" said Cabraser. Because it hadn't ruled on the issue of statewide class actions, the court of appeals told the defendants that they should have known they would be faced with multiple class actions, she said; the plaintiffs, on the other hand, should have known that they would not be certified for a nationwide class action.

"This decision has been giving the academics fits," Cabraser said, "because according to them--and I think they are probably right--the Seventh Circuit got it wrong with respect to the notion that a class certification decision can be res judicata. A decertification order is not a judgment, and other courts can look at the issue again independently, even the issue of nationwide class certification."

In November 2001, the U.S. District Court for the Southern District of Indiana certified two classes that covered multiple models of Ford Explorers and Firestone tires sold between 1990 and 2001.

Class members were consumers who bought or leased Explorers that were equipped with tires that had an abnormally high failure rate, but had not experienced fire failure. The plaintiffs sought to recover damages for risk of failure.

"The district court thought that Indiana's choice-of-law doctrines select a single state's law to govern each kind of product," Easterbrook wrote in the Seventh Circuit's recent decision. "We disagreed with this conclusion and held that Indiana would apply the law of the state where the injury occurred."

In reversing the district court's certification, the court of appeals pointed out that more than 60 million tires and 3 million vehicles fit the criteria outlined in the original certification request. The court indicated that such classes would be unsuitable for several reasons, including that laws of several states would govern different members of each class.

"Plaintiff's lawyers sought nationwide classes that depended on an implausible uniformity of both law and fact, grinding down all differences among the buyers and the products to make a mega-class manageable," Easterbrook wrote. "Defendants replied by extolling the virtues of federalism and the wisdom of allowing each state a free hand to resolve these disputes."

When the appeals court denied the nationwide class certification, each side took on the other's argument, according to Easterbrook: "Today the plaintiffs celebrate federalism and trumpet the acumen of state judges in handling complex litigation, while defendants seek a uniform outcome, which would forbid any state court to entertain any class action of any kind concerning these products."

Cabraser said the Seventh Circuit's latest decision allowed it to retain the notion of centralization for settlement purposes while upholding its previous order precluding a nationwide class for trial purposes.

The appellate court was faced with the natural consequences of its first decision, "[which] was to let the marketplace decide," she said, but when nationwide class actions began to crop up, the Seventh Circuit decided to take control. "That's part of what disturbs the academic commentators: It's not that free a market, it turns out."

Will the plaintiffs seek a Supreme Court hearing?

"We've been urged to do so," said Cabraser, "and I think as a matter of law we have the better argument. On the other hand, we got what we wanted: recognition from the Seventh Circuit that we are able to go forward in state courts on a statewide basis."