Washer suit to clean con­sumers’ clock

The Washington Times Weekly - - Culture, Etc. - By J. Gre­gory Si­dak

Last spring, the U.S. Court of Ap­peals for the 6th Cir­cuit up­held class cer­ti­fi­ca­tion in Glazer v. Whirlpool, a case in which two Ohio res­i­dents claim that their front-load­ing wash­ing ma­chines emit­ted un­pleas­ant, but med­i­cally harm­less, odors.

The class con­sists of all Ohio res­i­dents who bought front-load­ing wash­ers made any time since 2001. Sim­i­lar class ac­tions al­ready have been filed against other mak­ers of front-load­ing wash­ers, such as Gen­eral Elec­tric, Elec­trolux and LG.

The 6th Cir­cuit’s de­ci­sion is sig­nif­i­cant be­cause it af­firmed the cer­ti­fi­ca­tion of a class in which the vast ma­jor­ity of class mem­bers had not suf­fered any in­jury. If not ad­dressed by the Supreme Court, and es­pe­cially if fol­lowed by courts in which sim­i­lar law­suits against other man­u­fac­tur­ers have been filed, this case will broadly raise costs for man­u­fac­tur­ers and prices for con­sumers.

Un­der the U.S. Con­sti­tu­tion, fed­eral courts do not have author­ity to de­cide hy­po­thet­i­cal ques­tions. To bring a suit, a plain­tiff must show that he has suf­fered, or im­mi­nently will suf­fer, some harm. This prin­ci­ple is es­sen­tial to a party hav­ing the req­ui­site “stand­ing” to sue and a fed­eral court hav­ing the equally req­ui­site ju­ris­dic­tion to de­cide a “case or con­tro­versy.”

The ba­sic pur­pose of a class ac­tion is to ag­gre­gate many in­di­vid­u­al­ized claims into one rep­re­sen­ta­tive law­suit. When a cer­ti­fied class in­cludes mem­bers who have not suf­fered and are not even likely to suf­fer harm, it in­cludes par­ties whom a court would never al­low to pur­sue in­di­vid­ual ac­tions. There­fore, the class should in­clude only those plain­tiffs who ac­tu­ally have a le­git­i­mate claim of harm.

Even though the two plain­tiffs are Ohio res­i­dents who filed their case in a fed­eral court in Ohio, which means the court must ap­ply Ohio law, the 6th Cir­cuit jus­ti­fied the in­clu­sion of un­harmed mem­bers in the class en­tirely by cit­ing 9th Cir­cuit and Cal­i­for­nia cases that were de­cided un­der a pro­vi­sion of Cal­i­for­nia law that does not ex­ist in Ohio. Un­der the the­ory im­ported by the 6th Cir­cuit, even un­harmed class mem­bers may have in­curred “in­jury” by hav­ing paid a “pre­mium price” for a po­ten­tially un­der­per­form­ing prod­uct. Con­se­quently, the 6th Cir­cuit ex­poses de­fen­dants to li­a­bil­ity for po­ten­tial harm (through the pre­mium-price the­ory) and ac­tual harm (through the tra­di­tional dam­ages ap­proach). In ad­di­tion, by re­ly­ing on non­bind­ing Cal­i­for­nia law, the 6th Cir­cuit sub­verts the Ohio leg­is­la­ture’s right to choose its own prod­uct-li­a­bil­ity law.

Al­low­ing a cou­ple of in­di­vid­u­als and their at­tor­neys to “rep­re­sent” a class that in­cludes thou­sands, or even mil­lions, of un­harmed, sat­is­fied mem­bers forces man­u­fac­tur­ing firms to face a new layer of po­ten­tial li­a­bil­ity, which would in­duce those firms to choose in­ef­fi­ciently high — that is, so­ci­etally sub­op­ti­mal — lev­els of per­for­mance and in­for­ma­tion trans­mit­ted to the pub­lic for the prod­ucts they pro­duce. Firms would pass on to con­sumers through higher prices the added costs of in­creas­ing per­for­mance and in­for­ma­tional de­tail. Fur­ther­more, prod­uct dif­fer­en­ti­a­tion would de­cline through re­duced of­fer­ings of prod­ucts that have fewer ad­vanced fea­tures and cor­re­spond­ingly lower prices.

In a com­pet­i­tive mar­ket, prod­ucts are of­fered based on con­sumer pref­er­ences, not court-im­posed per­for­mance stan­dards. Some con­sumers pre­fer to pur­chase less ex­pen­sive prod­ucts that do not of­fer the per­for­mance fea­tures of more ex­pen­sive prod­ucts. Con­sumer pref­er­ences over price and per­for­mance op­tions will vary for vir­tu­ally all types of prod­ucts. Some con­sumers will pre­fer a Ford Fi­esta to a Ford Mus­tang. Oth­ers will pre­fer to pay a higher price for the Mus­tang, and oth­ers a still higher price for a Lin­coln. By re­mov­ing more af­ford­able prod­ucts from the mar­ket, some con­sumers may be en­tirely pre­vented from pur­chas­ing cer­tain classes of prod­ucts. Prices for all goods would likely in­crease. Con­sumer choice would be re­stricted, and con­sumers would nec­es­sar­ily be worse off.

Whirlpool faces suits be­cause a small per­cent­age of its front-load­ing wash­ers are al­leged to have emit­ted odors that are med­i­cally harm­less. The 6th Cir­cuit has in­creased the po­ten­tial le­gal ex­po­sure not only for Whirlpool, but also for vir­tu­ally any com­pany that sells its prod­ucts in the 6th Cir­cuit. The er­rors in this case will ul­ti­mately be paid for by con­sumers through higher prices. The Supreme Court should take this case and make clear that a class ac­tion is proper only when used to re­cover for harms that its mem­bers ac­tu­ally have suf­fered. J. Gre­gory Si­dak is chair­man of Cri­te­rion Eco­nom­ics LLC and the Ron­ald Coase pro­fes­sor of law and eco­nom­ics at Til­burg Univer­sity.


Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.