Tuesday, May 08, 2007

Million-Dollar Wise, and Billion-Dollar Foolish (Kelly v. Ford)

Plaintiffs' counsel in aggregate litigation frequently have one goal: To try something -- anything! -- on an aggregated basis. If a defendant is confronting the aggregated claims of thousands (or more) plaintiffs, then the defendant is at huge risk and is likely to be coerced into settling, no matter the merits of the individual plaintiff's claims.

Plaintiffs' counsel pursue many routes to the aggregation end. They insist, for example, that the laws of all 50 states are uniform on some subject, so choice-of-law concerns will not prevent certifying a nationwide class. Or they insist that the law of the defendant's home state should govern the claims of all plaintiffs nationally, again to avoid insurmountable choice-of-law issues. Or plaintiffs' counsel narrow the issue that they'd like to try on an aggregated basis, so that some tiny fragment of a single cause of action (if not "causation," then "general causation," maybe?) can supposedly be tried in one proceeding. Or they suggest that one state's laws can be applied to one claim, or one piece of a claim, or one prayer for damages, to allow aggregation.

Needless to say, we think all of this is poppycock, and we resist it at every turn. Plaintiffs' counsel cannot selectively pick -- or create -- tiny little pieces of lawsuits that should be tried on an aggregate basis solely to achieve the tactical goals of counsel, rather than to resolve fairly critical issues in dispute. We are almost always resisting efforts to peel off small pieces of cases to be decided under one state's laws.

On this topic, Ford has a different -- but we don't think better -- idea. Michigan law prohibits awards of punitive damages. Ford's principal place of business is in Michigan. Thus, in high-stakes product liability cases, Ford is seemingly irresistably drawn to assert that Michigan law -- the law of Ford's home state -- should govern claims for punitive damages. And Ford has even prevailed in that argument once, in Kelly v. Ford Motor Co., 933 F. Supp. 465 (E.D. Pa. 1996). That case involved an accident on the Pennsylvania Turnkpike that killed a resident of Bucks County, Pennsylvania. Pennsylvania law applies, right?

Not so fast. Ford insisted -- and convinced the court -- that Michigan law governed plaintiff's claims for punitive damages. That's a clever argument, and it is plainly worth real money to Ford in individual wrongful death cases. The argument, if successful, could easily save Ford millions of dollars.

But, when the argument is plucked from individual lawsuits and applied in aggregate litigation, the underlying principle could cost Ford, and other product manufacturers, billions of dollars. When plaintiffs' counsel are struggling to isolate individual issues to be tried under one state's laws, counsel will be drawn, as moths to flame, to the logic of the Kelly case. If Michigan law governs punitive damages claims against Ford, then perhpas New York law could govern punitive damage claims against a New York corporation, which, plaintiffs will say, permits a unified trial of the defendant's alleged malice under New York law. More broadly, if one state's law can be applied to one narrow piece of a case -- Michigan law to punitive damages only in a case otherwise governed by Pennsylvania law -- then other courts can, counsel will say, cull small pieces of other lawsuits to be tried on an aggregate basis under one state's law.

We don't like where this is heading.

Happily, the courts don't, either. So far as we can tell, no Pennsylvania state court has ever followed Kelly and applied a foreign state's law to one piece of a lawsuit otherwise governed by Pennsylvania law. Moreover, many courts in other states have considered Kelly's reasoning and squarely rejected it. Those cases include Moody v. Ford Motor Co., No. 03-CV-0784-CVE-PJC, 2006 U.S. Dist. Lexis 7483 (N.D. Okla. Feb. 13, 2006), Danziger v. Ford Motor Co., No. 03-1508, 2005 U.S. Dist. Lexis 14356 (D.D.C. July 11, 2005), and Dodson v. Ford Motor Co., No. PC 96-1331, 2006 R.I. Super. LEXIS 115 (R.I. Super. Sept. 5, 2006).

Indeed, Kelly itself has been read by a later Eastern District of Pennsylvania judge to apply, if at all, only to design defect claims, and not to product liability cases based primarily on failure to warn. See Bearden v. Wyeth, No. 05-4507, 2006 WL 4474723 (E.D. Pa. May 5, 2006). The more Kelly is rejected or limited, the more we like it. But why does Ford keep pressing this position?

Ford is a big company, defended by some very fine lawyers. We know; we've worked with some of them, and we respect them. Maybe there's even some method to Ford's apparent madness. But we sure wish the company would take a long, hard look at whether its insistence on applying one state's law to particular pieces of individual causes of action will ultimately serve defendants' greater good. In fact, we suspect that strategy won't even ultimately serve Ford's greater good.

Product liability defendants should be opposing efforts to peel off pieces of cases to be tried under the defendant's home state laws. Defendants should not be pursuing strategies in individual cases that will come back to haunt them (and others) in more dangerous aggregate litigation in the future.

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