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Raising The Bar: Obtaining Certification Of A Nationwide Class In A Tort Action Brought In New Jersey State Or Federal Court Just Became An Even More Daunting Task

Article

Business & Commercial Litigation Alert

July 2009

By: Michael R. McDonaldAnthony M. Gruppuso

Recent decisions from New Jersey’s high court and the United States Court of Appeals for the Third Circuit should make it more difficult for a plaintiff to obtain nationwide class certification for state-law tort claims and, most likely, certification of such state-wide classes. Proving that common questions of law predominate in multi-state classes has always been difficult. The New Jersey Supreme Court significantly raised that bar when it adopted a new choice of law standard in P.V. v. Camp Jaycee, 197 N.J. 132 (2008). Camp Jaycee throws a wrench into the typical plaintiff strategy of urging the court to apply the law of a single jurisdiction nationwide to avoid the insurmountable obstacles imposed by application of the laws of many States. Similarly, the Third Circuit Court of Appeals in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008) (“H2O2”) has substantially raised the bar for demonstrating that common questions of fact predominate by articulating standards of proof that district courts must follow in conducting a “rigorous analysis” of the requirements of Rule 23. Under H2O2, a district court must resolve all factual and legal disputes relevant to class certification, even when the disputes go to the merits and even when conflicting expert testimony is presented. Class certification will be a daunting task under these decisions, which may prove fatal to the aspirations of plaintiff class action lawyers seeking to use New Jersey’s plaintiff-friendly consumer protection laws to certify nationwide classes.

International Union v. Merck

The New Jersey high court portended the current reality in International Union of Operating Engineers Local No. 68 Welfare v. Merck & Co., Inc., 192 N.J. 372 (2007). In International Union, the plaintiff, a joint union-employer Taft-Hartley trust fund that acted as a third-party payor for prescription drug coverage to its members, sought to certify a nationwide class of third-party, non-government payors that paid for the recalled prescription drug Vioxx. The plaintiff asserted that Merck violated the New Jersey Consumer Fraud Act (the “CFA”) in its marketing and advertising of Vioxx’s safety and that the CFA should apply to the entire class because New Jersey’s interest in regulating the conduct of its corporate citizens outweighed any other State’s interest. The Supreme Court ultimately reversed the order granting nationwide class certification because (among other reasons) it concluded that proving the essential elements of the plaintiff’s CFA claim, and the defenses to those claims, would fundamentally involve individualized issues of fact, and thus, common questions of fact did not predominate. 192 N.J. at 388-94. That is, while the plaintiff sought to focus solely upon the defendant’s uniform deceptive marketing campaign, the Supreme Court found that “the commonality of defendant’s behavior is but a small piece of the required proofs.” Id. at 390-91. The record demonstrated that each third party payor made individual decisions and reacted differently with regard to the purchases at issue. Id. Importantly, the court also expressly rejected the attempt to presume ascertainable loss and causation across a class by use of “a single expert to establish a price effect in place of a demonstration of an ascertainable loss or in place of proof of a causal nexus between defendant’s acts and the claimed damages.” Id. at 392.

Moreover, although the propriety of applying the CFA to a nationwide class was squarely before the Supreme Court in International Union, it declined to reach the merits of the argument in light of its decision on predominance and superiority. Nonetheless, as guidance to courts facing motions to certify nationwide classes under New Jersey’s then-existing choice of law rules, the International Union Court declared that “certification of a nationwide class is ‘rare,’ and application of the law of a single [S]tate to all members of such a class is even more rare.” Id. at 388 n.3. That declaration is even stronger today. Indeed, the court noted that the defendant advanced “strong arguments in support of its appeal from the intermediate appellate court’s choice of law analysis,” and that it did “not agree with the premise that reliance on the CFA necessarily created a common question that meets the test for predominance. Id. at 388 n. 3, 390 n. 4.

Choice of Law and P.V. v. Camp Jaycee

For more than thirty years, New Jersey courts relied on the bright-line rule of the Restatement (First) of Conflict of Laws (1934) to resolve conflict-of-law issues in tort cases. The First Restatement presented a simple approach that compelled application of the law of the place of the injury (lex loci). Recognizing that the mechanical lex loci rule sometimes led to what it believed to be absurd results, the New Jersey Supreme Court, in 1967, joined the then-rising tide of States abandoning the lex-loci test in favor of the governmental-interest test. Melk v. Sarahson, 49 N.J. 226, 234-35 (1967). Under the flexible governmental-interest test, when an actual conflict exists, a court must “identify the governmental policies underlying the law of each [S]tate and how those policies are affected by each [S]tate’s contacts to the litigation and the parties.” Veazey v. Doremus, 103 N.J. 244, 248 (1986). The rights and liabilities of the litigants are then determined based upon “the law of the [S]tate with the greatest interest in governing the specific issue in the underlying litigation.” Fu v. Fu, 160 N.J. 108, 118 (1999). Although not as easy to apply as the lex loci rule, the governmental-interest test was widely embraced because it required analysis of public policy and the underlying facts and afforded greater flexibility in identifying the governing law.

With its decision in Camp Jaycee, the New Jersey Supreme Court ushered in a new era in New Jersey conflict-of-law analysis in tort actions by abandoning the flexible governmental-interest test in favor of the approach embodied by the Restatement (Second) of Conflict of Laws (1971). 197 N.J. 132 (2008). The new test starts with the presumption that the law of the State in which the injury occurred applies, and the presumption is only overcome if another State has a more significant relationship to the parties and issues in the litigation.

In Camp Jaycee, the plaintiff, a twenty-one year old New Jersey woman with Down syndrome and other disabilities, alleged that she had been sexually assaulted by another camper during her stay at a campsite in Pennsylvania, where the defendant, a New Jersey not-for-profit corporation, operated its charitable summer program. Unlike New Jersey, Pennsylvania had abrogated charitable immunity, and, therefore, application of Pennsylvania law would permit the plaintiff to prosecute her claims. After thoroughly reviewing the history of New Jersey’s choice of law jurisprudence, the Camp Jaycee court announced that “we now apply the Second Restatement’s most significant relationship standard in tort cases,” requiring application of the “law of the [S]tate of the injury … unless another [S]tate has a more significant relationship to the parties and issues.” Id. at 143. Starting with the Second Restatement’s presumption that the law of the State in which the injury occurred (Pennsylvania) applied, the court then identified the contacts set forth in Restatement section 145 and conducted a “qualitative” analysis of the Restatement section 6 factors “to measure the significance of the contacts” to determine whether the presumption was overcome. Based upon its analysis, the court concluded that “Pennsylvania, the [S]tate in which the charity chose to operate and which is the locus of the tortious conduct and injury, has at least as significant a relationship to the issues as New Jersey, and that the presumptive choice of Pennsylvania law therefore has not been overcome.” Id. at 136.

The Camp Jaycee decision represents a sea change2 in the law of conflicts of law in tort cases and should have a dramatic affect on the ability of a plaintiff to certify a nationwide class in tort cases where class members are alleged to have been injured in their home States. New Jersey state courts had often looked to the Second Restatement when identifying and evaluating the relevant governmental interests. See, e.g., Erny v. Estate of Merola, 171 N.J. 86, 101 (2002). Significantly, however, the Supreme Court had never adopted the Second Restatement’s mandatory presumption that the law of the place of the injury applies in tort actions. Indeed, as recently as its decision in Rowe v. Hoffmann-La Roche Inc., the court faithfully applied the governmental-interest test, placing no reliance whatsoever on (indeed, not even mentioning) the Second Restatement’s principles. 189 N.J. 615 (2007).

Now, the lex loci presumption is the starting point of the analysis. And the presumption is strong. As the Camp Jaycee court explained in rejecting the application of New Jersey law, the Second Restatement approach “recognizes the intuitively correct principle that the [S]tate in which the injury occurs is likely to have the predominant, if not exclusive, relationship to the parties and issues in the litigation.” 197 N.J. at 144. The competing governmental public policies at issue—which previously were the touchstone of the analysis—are now simply one of many factors that a court must consider under Camp Jaycee to determine whether a State other than the one in which the injury occurred has such a significant relationship to the tortious conduct that the lex loci presumption must give way. Id. at 141-42.

As if International Union and Camp Jaycee were not disheartening enough for aspiring nationwide class representatives, the Third Circuit’s recent decision in In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008) (“H2O2”) raised the bar to class certification even higher.

H2O2

In H2O2, purchasers of hydrogen peroxide and other related chemical compounds alleged that numerous chemical manufacturers conspired to fix prices and restrain trade in violation of antitrust laws. The district court certified a class of person and entities that purchased the chemical compounds in the United States from the defendants during an eleven-year period. Id. at 308-09. The Third Circuit granted the defendants’ petition for interlocutory appeal, which challenged only the district court’s conclusion that common questions of fact and law predominated. Id. at 309, 310. The district court had “found [that] the predominance requirement was met because plaintiffs would be able to use common, as opposed to individualized, evidence to prove antitrust impact at trial.” Id. at 312. On appeal, the defendants argued that the district court’s finding was wrong for three reasons: (1) the court applied “too lenient a standard of proof for class certification,” (2) the court failed to consider the defendants’ expert while accepting the plaintiffs’ expert’s opinions, and (3) the court applied a presumption that antitrust impact existed. Id.

Addressing those arguments, the Third Circuit explained that Rule 23 is not a “mere pleading rule[].” Id. at 316. Much more than just a “threshold showing” is necessary to meet the certification requirements of Rule 23. Id. at 321. A district court may not rely upon the plaintiff’s stated “’intention’ to try the case in a manner that satisfies the predominance requirement.” Id. There are no certification-favoring presumptions in particular cases, and a court must not “suppress doubt as to whether a Rule 23 requirement is met—no matter the area of substantive law.” Id. Rather, a district court must conduct a “rigorous analysis” that includes “consideration of all the evidence and arguments offered by the parties.” Id. “[T]o certify a class the district court must find that the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23.” Id. at 320. The 2003 amendments to Rule 23 eliminated any suggestion that class certification could be conditional or tentative. Id. at 319-20. The Third Circuit plainly instructed that a district court “errs as a matter of law when it fails to resolve a genuine legal or factual dispute relevant to determining” whether each of Rule 23’s requirements have been met. Id. at 320.

The merits of the plaintiff’s claims are not out of bounds. Even when factual and legal disputes relevant to the certification inquiry are bound up in the merits, a district court must nevertheless resolve them, as the court’s resolution is binding on the parties for certification purposes only. Id. at 318. The H2O2 court explained, “An overlap between a class certification requirement and the merits of a claim is no reason to decline to resolve relevant disputes when necessary to determine whether a class certification requirement is met.” Id. at 317. The decision to certify a class “requires a thorough examination of the factual and legal allegations,” and the “court’s rigorous analysis may include a preliminary inquiry into the merits” and consideration of “the substantive element of the plaintiffs’ case in order to envision the form that a trial on those issues would take.” Id. at 317-18 (internal quotations and citations omitted). “A contested requirement is not forfeited in favor of the party seeking certification merely because it is similar or even identical to one normally decided by a trier of fact.” Id. at 318.

Similarly, a court’s assessment of “all relevant evidence” and duty to resolve factual issues extends to the opinions of experts offered by the parties. “Like any evidence, admissible expert opinion may persuade its audience, or it may not.” Id. at 323. A district court need not simply accept the opinion of the plaintiff’s expert solely because the district court has found it admissible. Id. at 322. “Weighing conflicting expert testimony at the certification stage is not only permissible; it may be integral to the rigorous analysis Rule 23 demands.” Id.

With these pronouncements, the Third Circuit in H2O2 clarified, in three significant respects, the standard of proof that a plaintiff must satisfy to obtain class certification. First, a plaintiff must prove and a district court must find—by a preponderance of all relevant fact and expert evidence—that each of the requirements of Rule 23 has been met. Second, the “rigorous” evidentiary and legal analysis that a district court must conduct under Rule 23 includes the resolution of factual and legal issues that go to the merits of the plaintiff’s substantive claims. And third, when experts clash, the district court must resolve the conflict through factual findings.

The H2O2 plaintiffs did not satisfy their burden of proving that class certification was warranted. To prevail on the merits, the plaintiffs’ antitrust claims required them to prove individual injury (i.e., antitrust impact) as to each class member. Id. For certification purposes, the plaintiffs had the burden of demonstrating that “the element of antitrust impact is capable of proof at trial through evidence that is common to the class rather than individual to its members.” Id. at 311-12. When determining whether the plaintiffs had met that burden, the district court should have conducted a “rigorous assessment of the available evidence and the method or methods by which plaintiffs propose[d] to use the evidence to prove impact at trial.” Id. at 312. Because, however, the district court believed it was precluded from resolving the expert opinions offered by the parties (indeed, it simply credited the plaintiffs’ expert), it did not conduct the “rigorous analysis” and did not make the factual findings required by Rule 23 before it concluded that antitrust impact would be proved by common evidence at trial. Id. at 325. The Third Circuit therefore vacated the order certifying the alleged class. Id.

Predominance of Questions of Fact: McNair v. Synapse Group

In evaluating the predominance requirement in cases seeking class certification of CFA claims, federal district courts will now have to consider the significant impact of both International Union and H2O2. For example, in McNair v. Synapse Group, Inc., 2009 U.S. Dist. LEXIS 54908 (D.N.J. June 29, 2009) (Linares, D.J.), the plaintiffs claimed that the defendant, a marketer of magazine subscriptions, violated the CFA in its practice of automatically renewing a customer’s magazine subscriptions by charging the credit or debit card used at sign-up unless the customer calls to cancel. The plaintiffs argued that the defendant’s marketing practices represented a common deception, that they were injured by inappropriate subscription charges, and that causation may be presumed. Id. at *14. In rejecting class certification, and the presumption of causation, the district court in McNair noted that to establish causation in a CFA case, the New Jersey Supreme Court in International Union “looked not only to defendant’s conduct but also to the class members’ conduct and then evaluated whether both were sufficiently uniform or common for class certification to be inappropriate.” Id. at **16-17. More importantly, the McNair court explained that the International Union court’s decision that causation under the CFA should not be presumed merely on a showing of a common course of conduct is also consistent with the Third Circuit’s recent decision in H2O2, where the court rejected a presumption of antitrust injury and “emphasize[d] that ‘[a]ctual, not presumed, conformance’ with Rule 23 is essential.” Id. at **17-18 (quoting H2O2, 552 F.3d at 326).

Predominance of Questions of Law: Agostino v. Quest Diagnostics and In re Mercedes-Benz

The predominance inquiry also requires consideration of the impact of both Camp Jaycee and H2O2. The holdings of Camp Jaycee and H2O2 recently converged in Agostino v. Quest Diagnostics, Inc., Civ. No. 04-4362 (D.N.J. Feb. 11, 2009) (Chesler, D.J.). In Agostino, the plaintiffs asserted claims under federal law, common law, and the CFA and similar consumer protection laws of the various States, challenging the billing and collection practices of Quest and its outside debt collection agencies. The plaintiffs sought to certify, under Rule 23(b)(2), a class of people in the United States who had been improperly billed by Quest or its outside debt collection agencies. The plaintiffs also asked the district court to certify four sub-classes: two under Rule 23(b)(2) seeking injunctive and declaratory relief and two under Rule 23(b)(3) seeking monetary remedies. According to the plaintiffs, the CFA could be applied to the statutory fraud claims of all members of the class. After conducting the “rigorous analysis” required by H2O2, the district court denied the plaintiffs’ motion in its entirety.

Considering whether it should certify the Rule 23(b)(2) class, the district court observed that the cohesiveness requirement under Rule 23(b)(2) is analogous to the predominance requirement under Rule 23(b)(3). Agostino at *10. Accordingly, “significant variation in the statutory and common law elements of the claims alleged by the class” will preclude class certification for lack of cohesiveness, just as such a finding would equate to a lack of predominance precluding class certification. Id. at *11. After applying Camp Jaycee to the plaintiffs’ state consumer fraud and common law fraud claims, the court found cohesiveness lacking for precisely this reason.

The Agostino plaintiffs argued that the CFA and New Jersey’s common law of fraud applied to the claims of all class members because Quest’s principal place of business is located in New Jersey and the allegedly unlawful billing practices occurred there. Id. at *32. They also argued that the CFA should apply to the statutory fraud claims of class members because the CFA provides protection at least equal to, if not greater than, the consumer protection laws of the various States. Id. The district court found both arguments unpersuasive under Camp Jaycee and section 148 of the Second Restatement. Section 148 states:

(1) When the plaintiff has suffered pecuniary harm on account of his reliance on the defendant’s false representations and when the plaintiff’s action in reliance took place in the state where the false representations were made and received, the local law of this state determines the rights and liabilities of the parties unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the occurrence and the parties, in which event the local law of the other will be applied.

Judge Chesler ruled § 148(1) applicable, finding that (1) class members received the allegedly unlawful bills and dunning letters in their home States, (2) relied upon the alleged misrepresentations made to them in their home States, and (3) remitted payment from their home States in reliance upon the alleged misrepresentations. These circumstances thus required application of a “strong presumption” that the law of each class member’s home State applied to her statutory and common law fraud claims. Id. at *37. Finding no evidence to rebut the presumption, the court found that “each [S]tate has an overwhelming interest in seeing its own consumer protection statute govern in cases where residents were victims of fraud perpetrated within the [S]tate’s borders.” Id. at **37-38. The court then concluded that the “marked variations among the [applicable] [S]tate consumer fraud statutes … destroy any modicum of Class cohesiveness,” id. at *46, just as “the variations among [the applicable] [S]tate laws of common law fraud” militated against certifying those claims on a nationwide basis, id. at *50.

The Agostino court also found cohesiveness lacking because individualized (rather than class-wide) evidence was needed for the plaintiffs to prove their claims. “Plaintiffs,” the court observed when examining their common law fraud claim, “cannot show through class-wide proof that Quest … falsely billed or dunned patients for amounts that were due and owing. Id. at *49. The court recognized that to determine whether a false representation of fact was made to a class member, each billing transaction would have to be reviewed. Id.; see also id. at **49-50 (finding that individualized proof of scienter and damages was necessary as well). Similarly, the district court concluded that the plaintiffs’ contract, RICO and ERISA claims could not be proven by class-wide proof. Id. at **16, 28, 30. Notably, in making its findings and rendering its conclusions, the Agostino court expressly rejected the plaintiffs’ suggestion that the “rigorous analysis” required by H2O2 could be relaxed in medical billing disputes. Id. at **19-20.

It must be noted that Judge Chesler’s opinion in Agostino was recently criticized by a brother jurist, Senior District Judge Debevoise, in In re: Mercedes-Benz Tele Aid Contract Litigation, 257 F.R.D. 46 (D.N.J. 2009). In that case, the plaintiffs sought to certify a class of individuals who purchased model year 2002-2006 automobiles from Mercedes-Benz U.S.A., LLC (“Mercedes”). With their claims for unjust enrichment and violation of the CFA, the plaintiffs alleged that Mercedes misled its customers by promoting automobiles equipped with “Tele-Aid,” an emergency response system that links subscribers to road-side assistance based upon an analog signal provided by AT&T Wireless Services, Inc. (“AT&T”). Id. at 48. AT&T informed Mercedes in August 2002 that they would cease providing their analog network to Mercedes at the end of 2007. Id. at 52. Yet according to the plaintiffs, Mercedes continued to market Tele Aid without disclosing its future obsolescence. Id. at 48. It wasn’t until November 2006 when Mercedes stopped selling new vehicles equipped with the analog-only Tele Aid system. Id. at 52. Coupled with the change from an analog to a digital Tele Aid system was Mercedes’ offering of a “Digital Tele Aid Upgrade program” that allowed customers with the analog system to upgrade to a digital system for the cost of $1,000. Id.

As part of its choice-of-law analysis, the Mercedes-Benz court purported to apply the “most significant relationship” test as instructed by Camp Jaycee. Id. at 57. But in concluding that New Jersey law applied to the claims of all class members in the multi-state class action, id. at 61, Judge Debevoise strayed from the holdings of Camp Jaycee, Agostino and H2O2.

Mercedes-Benz parted company with Agostino as to whether to apply the mandatory presumption in § 148(1) of the Restatement. Judge Debevoise found that Agostino “relie[d] on an interpretation of the Restatement that is at odds with the plain meaning of section 148, which calls for such a presumption only in cases where ‘the plaintiff’s action in reliance took place in the state where the false representations were made and received.’” Id. at 65-66 (quoting § 148(1)). The court explained that although the court “in Agostino did apply a presumption in favor of the application of the law of each plaintiff’s home state, it did so based on its implied ruling that the alleged misrepresentations underlying the claim in that case were both made and received in the plaintiffs’ home states,” and therefore § 148(1)–not § 148 (2)–applied to the plaintiffs’ consumer fraud claim. Id. at 66. According to Judge Debevoise, because the alleged omissions were not both “made and received” in the same state, § 148(2) was the appropriate provision to be applied. Id.

The reasoning of Mercedes-Benz—which rests initially and primarily on the conclusion that § 148(1) did not apply—may well be flawed. Critical to that conclusion is Judge Debevoise’s finding that the alleged omissions were “made” in New Jersey (where Mercedes-Benz allegedly “planned and implemented” its actions) rather than in each plaintiff’s home State (where plaintiffs received and relied upon such misrepresentations). Id. (opining that “all of the conduct underlying Plaintiffs’ consumer fraud claim took place in [New Jersey]”). Indeed, Judge Debevoise criticized Judge Chesler’s “implied ruling that the alleged misrepresentations underlying the claim in that case were both made and received in the plaintiffs’ home states” as a basis for applying § 148(1)’s presumption. Id. at 65. Yet it appears that Judge Debevoise himself did not conduct the proper analysis in determining that § 148(1)’s presumption did not apply.

Mercedes-Benz is an omissions case. The Mercedes-Benz court observed that the plaintiffs’ CFA claim seeks relief for Mercedes’ alleged failure to disclose to them prior to their purchase of a Mercedes-Benz automobile the future obsolescence of the Tele Aid analog system. Id. at 49. The Mercedes-Benz court generally identified advertisements for Tele Aid and a brochure distributed to Tele Aid subscribers as the materials that allegedly failed to disclose this fact. Id. at 50.

Underlying an omissions case must be some interaction between the plaintiff and the defendant during which the defendant had an opportunity to disclose to the plaintiff a material fact but did not. In Mercedes-Benz, it appears that such an interaction would have taken place when the plaintiff was presented with information concerning Tele Aid and a subscription to Tele Aid. The opinion observes that the plaintiffs “were required to sign a Subscriber Agreement that was separate from their purchase or lease contracts.” Id. Under the Subscriber Agreement, the plaintiffs received free Tele Aid service for one year, “after which [they] were required to periodically renew their subscriptions by pre-paying fees corresponding to a given number of years of Tele Aid service.” Id. at 51. The pecuniary loss allegedly suffered by the plaintiffs as a result of Mercedes’ alleged omissions consisted “only of the Tele Aid activation and subscription fees paid in anticipation of the continued operation of that system and the cost of a digital upgrade [to the analog Tele Aid system purchased].” Id. at 53.

In light of these allegations and as required by H2O2, the Mercedes-Benz court should have made findings of fact, on a plaintiff by plaintiff basis, concerning the circumstances surrounding Mercedes’ alleged failure to disclose Tele Aid’s future obsolescence. Id. at 54 (recognizing that a choice of law analysis must be conducted for each of the actions that comprised the multi-district litigation before it). For example, the court should have determined how each plaintiff learned of Tele Aid, the place where each plaintiff learned of Tele Aid, and the place where each plaintiff subscribed to Tele Aid. Perhaps most importantly, the court should have identified the place where Mercedes allegedly failed to disclose to each plaintiff Tele Aid’s future obsolescence. It appears that the Mercedes-Benz court did not inquire into these facts, and it does not appear that the plaintiffs presented any of them. The opinion recounts only that the plaintiffs argued in support of class certification that “all of Mercedes conduct relating to Tele Aid was planned and coordinated by a ‘Telematics team’ located in Montvale, New Jersey.” Id. at 53. And on the face of the Mercedes-Benz decision, the most that can be found as fact is that Mercedes allegedly decided, in New Jersey, not to tell consumers that AT&T would stop providing analog services to support Tele-Aid as of the end of 2007. Id. at 48.

Mercedes may have allegedly made the decision, in New Jersey, not to disclose Tele Aid’s future obsolescence, but making that decision itself did not injure any consumers and cannot serve as the basis for a cause of action under the CFA. The place where a defendant planned to make future material omissions is not a factor to be considered under § 148(1). It is the place where the omission was actually made that must be considered when determining whether the law of that place should apply to a plaintiff’s fraud claim. Certainly, for example, New York would not apply to a fraud claim brought by a New Jersey resident against a New York resident where the New York resident may have conceived of the fraud in New York, but then traveled to New Jersey to carry it out. Mercedes-Benz makes no findings regarding where the alleged omissions were actually made.

It would seem that the Mercedes-Benz court failed to follow H2O2 when it did not make specific findings of fact concerning the place where the alleged omissions were made. Id. at 54 (quoting H2O2‘s instruction that a district court “must make whatever factual and legal inquiries are necessary” to determine whether a class should be certified). Mercedes-Benz failed to follow Camp Jaycee, as well. The New Jersey Supreme Court in Camp Jaycee stated unequivocally that the “most significant relationship” test—under which “the law of the state of the injury is applicable unless another state has a more significant relationship to the parties and issues”—applies “in tort cases.” 197 N.J. at 142-43. Camp Jaycee does not limit the applicability of the place-of-injury presumption to personal injury cases. It broadly declares that the presumption is applicable in “tort cases,” without limitation. The Mercedes-Benz court appears, however, to have disregarded that instruction by not applying the presumption and by ultimately favoring the place where Mercedes was headquartered over the place where each plaintiff was injured. See, e.g., Mercedes-Benz at 56, 59-60 (showing that Camp Jaycee’s presumption of the place of injury is absent from the court’s choice of law analysis). This reasoning cannot be reconciled with Camp Jaycee. Rather than giving paramount importance to the place of injury, the Mercedes-Benz court subjugated the place of injury to the place of the defendant’s domicile. This error and the others made by the Mercedes-Benz court render the opinion of, at best, questionable precedential value. It is noteworthy that, even in the absence of the presumption afforded by § 148(1), many courts have refused to consider the domicile of the corporate defendant as an overriding factor in the choice of law analysis, finding instead that there are far greater contacts militating in favor of applying the law of each consumer’s home state. See e.g., In re Bridgestone/Firestone, Inc. Tires Prods. Liab. Litig., 288 F.3d 1012, 1018 (7th Cir. 2002); Cooper v. Samsung Elecs. Am., Inc., No. 07-3853, 2008 WL 4513924, at *5 (D.N.J. Sept., 30, 2008); Fink v. Ricoh Corporation, 365 N.J. Super. 520, 590-92 (Law Div. 2003); In re Ford Motor Co. Ignition Switch Products Liability Litigation, 194 F.R.D. 484, 490 (D.N.J. 2000); In re Ford Motor Co., 174 F.R.D. 332, 347-48 (D.N.J. 1997); Lyon v. Caterpillar, 194 F.R.D. 206, 211-14 (E.D. Pa. 2000).

Thus, the Mercedes-Benz choice of law analysis may not meet the scrutiny required by H2O2. For example, the Third Circuit in Powers v. Lycoming Engines, 2009 U.S. App. LEXIS 6785 (3d Cir. March 31, 2009) recently reversed class certification, finding that “proper application of Pennsylvania’s choice of law principles may have indicated that the law of more than one state governs the parties’ dispute.” Id. at *15. Moreover, the Third Circuit noted that other Courts of Appeals have confronted similar scenarios (citing In re Bridgestone/Firestone and Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 725 n.6 (11th Cir. 1987)) and that “[a]ttempting to apply the law of a multiplicity of jurisdictions can present problems of manageability for class certification under Rule 23(b)(3).” Id. at *15.

Conclusion

Notwithstanding Mercedes-Benz, the decisions in International Union, H2O2, and Camp Jaycee should have a tremendous impact on the disposition of nationwide tort class actions brought in New Jersey state and federal courts, which are bound to apply Camp Jaycee to state-law tort claims brought before them. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Berg Chilling Sys. v. Hull Corp., 435 F.3d 455, 462 (3d Cir. 2006). In the past, the governmental-interest test allowed a court great flexibility (i.e., discretion) in identifying the applicable law. In non-class action cases, the conclusion that the law of the home State of the defendant should apply could often easily be justified by reasoning that the policies of the home State in policing conduct occurring within its borders outweighed the policies of any other State involved. Whether driven by parochialism or a desire for certainty in the law for corporate citizens doing business within its borders, a class representative stood an even better chance of persuading a court to adopt that reasoning when the court sat in the State in which the defendant resided.

Under Camp Jaycee, that reasoning standing alone is probably insufficient in the non-class action context. In the nationwide class action context, the likelihood of a class representative convincing a court to apply the law of only one State should decrease dramatically. When Camp Jaycee is applied to a nationwide class action alleging State-law tort claims, the court must start with the mandatory presumption that the law to be applied is the law of each State in which an absent class member was injured. In other words, to certify a nationwide class under a single State’s laws, a court must conclude that the interests of one State are so significant as to trump the laws of every other State. The extraordinary circumstances that would allow for such a conclusion are rare indeed, perhaps even rarer than the International Union court could envision. Furthermore, the Third Circuit’s new guidance on the “rigorous analysis” required in order to determine that common questions of fact actually predominate, and the requirement that the district court consider conflicting expert testimony and resolve disputed factual and legal claims relevant to certification, will likewise make class certification an even more difficult challenge. Indeed, International Union’s conclusion that the commonality of the defendant’s conduct is but a small piece of the required proofs, and its rejection of presumptions to establish the elements of a claim, will make class certification particularly challenging.

Damian Santomauro, Melissa DeHonney, George Forbes and Jed Goldstein also contributed to this article.


1 Although the court stated that it would continue “to denominate our standard as a kind of governmental interest test,” id. at 142-43, the dissenting Justices accurately observed that, with the decision in Camp Jaycee, “a majority of this Court has chosen to adopt a new framework for deciding conflict of law disputes,” id. at 156 (Hoens, J., dissenting).