While consumer fraud cases routinely present challenges that preclude class certification, the US Court of Appeals for the Seventh Circuit recently ruled that these challenges are not categorically insurmountable. 

In Pella Corp. v. Saltzman, No. 09-8020 (7th Cir. May 20, 2010), the court upheld an order granting certification of a consumer fraud class action. While recognizing that “consumer fraud class actions present problems that courts must carefully consider before granting class certification,” the court declared that “there is not and should not be a rule that they never can be certified.” Turning to the facts of the case, the court held that class treatment was appropriate for certain common questions. However, the Seventh Circuit recognized—and did not disturb—the district court’s decision to reject certification of causation, damages and statute of limitations issues. 

The Pella Corp. case arose from an alleged design defect in casement windows sold by the defendant that purportedly allowed water to seep into the window casing and caused premature rotting. The district court certified six statewide liability classes for consumers whose windows had already experienced rotting and a separate nationwide class to provide declaratory relief for customers whose windows might need replacement in the future.

In upholding the district court’s grant of class certification, the Seventh Circuit rejected several broad arguments suggesting that class treatment is never appropriate for consumer fraud claims, and concluded that these concerns neither prohibit consumer fraud class actions generally nor preclude class treatment for certain common issues. The court first acknowledged that risk of error can sometimes counsel against allowing large numbers of claims to be decided by the same trier of fact. However, the court dismissed that concern because this case involved relatively straight forward factual issues, and because the consequences were not “so high[] that a decentralized process of multiple trials is necessary for an accurate evaluation of the claims.” The court also recognized that, although issues of causation and damages will be addressed on an individual basis, the need for certain individual proof does not categorically preclude class treatment for common issues. According to the court, class treatment “has the potential to eliminate the need for multiple, potentially expensive expert testimony and proof that would cost considerably more to litigate than the claims would be worth to the plaintiffs.” Finally, the Seventh Circuit rejected the defendant’s arguments that the use of separate juries to decide individual and common issues violates the Seventh Amendment and that the class would be unmanageable.

The Pella Corp. decision should cause defendants in the Seventh Circuit to be wary of opposing class certification based solely on the argument that certification of consumer fraud actions is improper as a general matter. Instead, defendants should seek to demonstrate, in a comprehensive fashion, that class treatment is inappropriate in a particular case because the common issues are too limited to predominate over individual issues, because class treatment is not necessary for purposes of efficiency or cost savings, and/or because the risk of error from allowing high-stakes issues to be decided by a single trier of fact is too great. Although the defendant in Pella Corp. was unsuccessful at opposing class certification, defendants in other cases may benefit from careful attention to the Seventh Circuit’s decision.

For more information about any of the issues raised in this Legal Update, please contact Debra Bogo-Ernst at +1 312 701 7403 or Archis A. Parasharami at +1 202 263 3328.

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