Can the consumer-protection laws of a corporate defendant’s home state, where complained-of activities allegedly occurred, apply to the claims of plaintiffs from all 50 states? That is a question that is presently before the Eighth Circuit in two pending appeals. And because a court typically denies certification of a nationwide class when it finds that different states’ laws apply to different plaintiffs, the answer to that question could significantly affect consumer-protection class actions.
The defendants in Hudock v. LG Electronics U.S.A., Inc., appealed a decision from the District of Minnesota certifying a nationwide class of consumers. The Hudock decision held that, as a matter of constitutional due process and Minnesota’s choice-of-law rules, the law of each corporate defendant’s home state could be applied to claims against it by plaintiffs from all 50 states. One day later, conducting a similar due-process and choice-of-law analysis, a different judge in the same district ruled in Johannessohn v. Polaris Industries, Inc. that the law of a plaintiff’s state of residency applies to that plaintiff’s consumer-protection claims and denied class certification. Plaintiffs appealed the Polaris decision. Although class-certification and choice-of-law issues are generally fact intensive, the Eighth Circuit’s decisions on these appeals will be of interest to retail industry groups, consumer-protection advocates, and corporate defendants, as reflected by the number of amicus briefs filed in the appeals.
For a class to be certified, plaintiffs must meet all the requirements of Rule 23(a) and of at least one subsection of Rule 23(b). For many consumer-protection class actions, plaintiffs seek class certification under Rule 23(b)(3), which permits class certification if “the questions of law or fact common to class members predominate over any questions affecting only individual members” and a class-action proceeding is superior to other options. So, for a putative nationwide class action, the need to apply the consumer-protection laws of individual plaintiffs’ home states usually means common questions of law and fact do not predominate over individual ones and, thus, the denial of class certification.
Accordingly, in Hudock, the court’s determination that a single state’s laws applied to certain claims (but not others) was an important part of its decision to certify (or not certify) nationwide classes. In that case, plaintiffs had moved to certify nationwide classes to pursue contract-based and consumer-protection claims stemming from alleged inaccurate representations about the refresh rate of certain televisions made by LG Electronics and sold by various Best Buy entities. The court found that for contract-based claims, like breach of warranty, the laws of plaintiffs’ home states applied, thus precluding nationwide classes. But the court found that the plaintiffs’ statutory consumer-protection and unjust-enrichment claims could be pursued against Best Buy and LG under the laws of the state in which they are headquartered, i.e., Minnesota for Best Buy and New Jersey for LG.
The district court in Polaris reached a different conclusion. There, plaintiffs had sought to certify a nationwide class of purchasers of certain ATVs (All Terrain Vehicles) that plaintiffs alleged had an “exhaust heat defect” about which Polaris should have warned purchasers. Polaris is headquartered in Minnesota and, the plaintiffs had argued that Minnesota law applied to all plaintiffs, because of evidence that Polaris designed, manufactured, tested, and received complaints about the ATVs in Minnesota. The court disagreed, finding that this evidence does not mean that Minnesota’s consumer-protection laws can apply to all plaintiffs irrespective of their state of residency.
In both Hudock and Polaris, the district court applied the choice-of-law rules of the forum state, Minnesota. Under those rules, the court considers, as a threshold matter, whether material conflicts exist between different states’ laws. If a material conflict exists, the analysis proceeds to two more considerations. The court first inquires whether the laws of the different states under consideration may be constitutionally applied in the case at hand. If so, the analysis proceeds to a determination of which state’s law would be picked under Minnesota’s choice-of-law analysis. In both Hudock and Polaris, the court found material conflicts in the consumer-protection laws under consideration.
Turning next to the constitutional analysis, the Hudock and Polaris courts reached different conclusions. Pursuant to Phillips Petroleum Co. v. Shutts, a state’s law may be constitutionally applied only if the state has “a significant contact or significant aggregation of contacts, creating state interests, such that choice of its law is neither arbitrary nor fundamentally unfair.” In Shutts, the Supreme Court explained that the “expectation of the parties” is important in assessing fairness.
For the Hudock defendants, the district court found that their home states had significant contacts. For Minnesota, the court noted that the state “has a strong interest in applying its laws to companies doing business in the state—especially those who are headquartered here.” As to the plaintiffs’ expectations, the court found that to the extent “a consumer contemplated potential choice-of-law issues when purchasing a television—a generous assumption—they likely thought that either the law of the state of purchase, the law of Minnesota, where Best Buy is headquartered, or perhaps the law of New Jersey, where LG is headquartered would apply.” Thus, as a constitutional matter, the court held that Minnesota law could apply to claims against Best Buy and LG, which had substantial Minnesota operations, and New Jersey law could apply to claims against LG.
In Polaris, the court evaluated the plaintiffs’ expectations differently. As to Polaris, the court readily found that its headquarters’ location and product-related activity in state “supports Polaris’s expectation that the [Minnesota statute] would apply.” But the court disagreed that the plaintiffs would have any expectation that their claims would be subject to Minnesota law. The plaintiffs had pointed to the inclusion of Polaris’s Minnesota address in the ATV’s owner manual, but the court gave weight to the fact that some plaintiffs’ sales contracts referenced the laws of the states in which they purchased the ATVs. Accordingly, the court found that the Minnesota Consumer Fraud Act could not constitutionally apply to nonresident plaintiffs’ claims.
For the consumer-protection claims, the Hudock and Polaris opinions also reached different conclusions concerning the application of Minnesota’s choice-of-law rules, although the court in Polaris did not need to reach this issue given its constitutional ruling. Minnesota’s choice-of-law rules require a weighing of five factors in deciding the matter: (1) predictability of results; (2) maintenance of interstate order; (3) simplification of the judicial task; (4) advancement of the forum’s governmental interests; and (5) application of the better rule of law, although courts now rarely give weight to the last factor.
Predictability of results. The Hudock decision found that because of the defendants’ respective connections to Minnesota and New Jersey, the factor favored application of those states’ laws. The Polaris opinion observed that because the plaintiffs did not buy the ATVs directly from Polaris, but from dealers in their home states under contracts listing those states’ laws, the parties would have predicted application of the laws of plaintiffs’ states.
Maintenance of interstate order. The court in Hudock noted that the Eighth Circuit had previously found that this “factor is generally not implicated if the state whose law is to be applied has sufficient contacts with and interest in the facts and issues being litigated.” The court then found sufficient contacts given Best Buy and LG’s connections to their headquarters’ states and conduct of activities connected to the claims there. For this factor, the Polaris opinion noted that the “alleged injuries occurred where each plaintiff resides or purchased” an ATV and since the nonresident plaintiffs’ states also have statutory consumer protections, applying Minnesota law would subvert those states’ interests, given the more significant contacts with them.
Simplification of the judicial task. Both Hudock and Polaris opinions agreed that this factor was neutral because a court can apply one state’s law as well as another’s.
Advancement of the forum’s governmental interests. The Hudock opinion found that Minnesota has a “compelling interest in redressing wrongs committed within its borders.” The court acknowledged that for torts generally, this factor favors the place of injury, but concluded that because consumer-protection statutes focus on a defendant’s conduct, this factor weighs in favor of the state with the closest connection to each defendant. The Polaris opinion found that “[t]his factor ‘generally weighs in favor of application of the state law in which the plaintiff lives and in which the injury occurred.’” The court recognized Minnesota’s interest in redressing wrongful actions occurring in state, but saw “no reason to believe that consumer protection laws of the nonresident Plaintiffs’ states could not equally or more effectively hold Polaris accountable for its alleged wrongdoing.”
In sum, with respect to the same constitutional question and the same factors under Minnesota’s choice-of-law rules, the Hudock opinion found they favored application of the laws of a defendant’s state, while the Polaris opinion found they weighed in favor of plaintiffs’ states. Accordingly, the Hudock court certified nationwide consumer classes, while the Polaris court denied class certification. Guidance from the Eighth Circuit may provide more clarity on how the constitutional analysis should be conducted and how Minnesota’s choice-of-law factors should be weighed. But since both appeals raise other issues as well, the Eighth Circuit may decide the appeals on alternate grounds and defer substantively addressing these difficult issues for another day. Regardless, class-action litigants and practitioners should watch these appeals closely. We certainly will.
1. Hudock v. LG Electronics U.S.A., Inc., Appeal No. 20-2317; Johannessohn v. Polaris Indus., Inc., Appeal No. 20-2347.
2. See No. 16-1220 (JRT/KMM), 2020 WL 1515233, at *15-16 (D. Minn. Mar. 30, 2020).
3. Id.
4. See 450 F. Supp. 3d 931, 979-80, 983-85 (D. Minn. 2020).
5. Fed. R. Civ. P. 23(b)(3).
6. Hudock, 2020 WL 1515233, at *1, *16.
7. Polaris, 450 F. Supp. 3d at 962-63.
8. Hudock, 2020 WL 1515233, at *9-10; Polaris, 450 F. Supp. 3d at 949-50.
9. Hudock, 2020 WL 1515233, at *7-8; Polaris, 450 F. Supp. 3d at 950-61.
10. 472 U.S. 797, 818 (1985); see also Hudock, 2020 WL 1515233, at *6; Polaris, 450 F. Supp. 3d at 962.
11. Shutts, 472 U.S. at 822.
12. Hudock, 2020 WL 1515233, at *8.
13. Id.
14. Polaris, 450 F. Supp. 3d at 963.
15. Id.
16. Nodak Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 604 N.W.2d 91, 94 (Minn. 2000).
17. Hudock, 2020 WL 1515233, at *10-12.
18. Polaris, 450 F. Supp. 3d at 964.
19. Hudock, 2020 WL 1515233, at *10 (quoting Hughes v. Wal-Mart Stores, Inc., 250 F.3d 618, 620 (8th Cir. 2001)).
20. Polaris, 450 F. Supp. 3d at 964-65.
21. Id. at 965 (“In considering the simplification of the judicial task, the relevant question is not whether applying the law of one state would be simpler than applying the laws of 50 states. Instead, the question is whether, with respect to any particular claimant, applying the law of Minnesota would be simpler than applying the law that would otherwise apply.” (quotation marks omitted)).
22. Hudock, 2020 WL 1515233, at *11.
23. Polaris, 450 F. Supp. 3d at 965 (quoting In re Baycol Products Litig., 218 F.R.D. 197, 207 (D. Minn. 2003)).
24. Id. at 966.
25. The Polaris court denied class certification on other grounds too. See id. at 986 (“Even if the Court could apply the MCFA to Plaintiffs’ proposed nationwide class, individualized evidence supporting elements of Plaintiffs' claims would predominate over common issues.”).