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Sears UCL Class Action Defense Cases–Thorogood v. Sears: Seventh Circuit Decertifies Class Action Holding Reliance Cannot Be Presumed And Trial On Consumer Protection Class Action Claims Would Require Individual Hearings And Proof

Class Action Certification of Multi-State Class Action Alleging Consumer Protection Act Violations Improper because Reliance on Allegedly False/Deceptive Advertisements cannot be Presumed and Commonality not Present Seventh Circuit Holds

Plaintiff filed a putative multi-state class action against Sears, Roebuck alleging false advertising under various state consumer protection statutes and individual claims for violations of Tennessee’s Consumer Protection Act; specifically, the class action complaint asserted that Sears engaged in deceptive advertising practices in connection with the sale of its Kenmore clothes dryers. Thorogood v. Sears, Roebuck & Co., 547 F.3d 742 (7th Cir. 2008) [Slip Opn., at 1]. According to the class action, “the words ‘stainless steel’ were imprinted on the dryer, and point of sale advertising explained that this meant that the drum in which the clothes are dried inside the dryer was made of stainless steel”; plaintiff, however, believed that this meant “that the drum was made entirely of stainless steel.” Id. The class action was filed in federal court, asserting federal jurisdiction under the Class Action Fairness Act (CAFA). Id., at 2-3. The district court granted plaintiff’s motion for class action certification, id., at 3. In concluding that class action treatment was warranted, the district court reasoned that because “Sears marketed its dryers on a class wide basis…reliance can be presumed.” Id., at 10. The Seventh Circuit granted Sears’ appeal and reversed.

The Seventh Circuit discussed at length the pros and cons of class action lawsuits. See Thorogood, at 3-6. It identified one of the problems with class action lawsuits as “the tendency, when the claims in a federal class action are based on state law, to undermine federalism.” Id., at 6. The Circuit Court explained at page 6, “Our plaintiff wants to litigate in a single federal district court half a million claims wrested from the control of the courts of the 29 jurisdictions in which those claims arose and the law of which govern the claimants’ entitlement to and scope of relief. The instructions to the jury on the law it is to apply will be an amalgam of the consumer protection laws of the 29 jurisdictions, and procedural rules by which particular jurisdictions expand or contract relief will be ignored.” The Court noted, for example, that Tennessee’s Consumer Protection Act does not permit class actions. Id. Defense attorneys argued, therefore, that the class action sought relief on behalf of Tennessee residents that would not be available to them in state court. Id., at 7-8. The Seventh Circuit agreed, observing that “the purpose of the diversity jurisdiction is to protect out-of-state residents against state judicial bias in favor of residents; it is not to expand relief obtainable under state law.” Id., at 8.

Turning to the merits of the class action certification order, the Seventh Circuit stated that “there are no positives” in class action treatment in this case: “not only do common issues of law or fact not predominate over the issues particular to each purchase and purchaser of a ‘stainless steel’ Kenmore dryer…but there are no common issues of law or fact, so there would be no economies from class action treatment.” Thorogood, at 8. The Circuit Court concluded that “[plaintiff’s] concerns are idiosyncratic,” id., at 9, and explained at pages 8 and 9:

The plaintiff claims to believe that when a dryer is labeled or advertised as having a stainless steel drum, this implies, without more, that the drum is 100 percent stainless steel because otherwise it might rust and cause rust stains in the clothes dried in the dryer. Do the other 500,000 members of the class believe this? Does anyone believe this besides Mr. Thorogood? It is not as if Sears advertised the dryers as eliminating a problem of rust stains by having a stainless steel drum. There is no suggestion of that. It is not as if rust stains were a common concern of owners of clothes dryers. There is no suggestion of that either, and it certainly is not common knowledge.

The Circuit Court explained further that “[t]he evaluation of the class members’ claims will require individual hearings” and that [e]ach class member who wants to pursue relief against Sears will have to testify to what he understands to be the meaning of a label or advertisement that identifies a clothes dryer as containing a stainless steel drum.” Thorogood, at 10. And the Seventh Circuit rejected the district court’s assumption that “reliance can be presumed,” id., at 10-11. Put simply, the “deal breaker” in the class action certification order “is the absence of any reason to believe that there is a single understanding of the significance of labeling or advertising clothes dryers as containing a ‘stainless steel drum.’” Id., at 12. Accordingly, the Circuit Court reversed the district court order and remanded with instructions to decertify the class. Id.

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