Spence v. Glock Ges M B H ( 2000 )

REVISED, OCTOBER 5, 2000
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________
No. 99-40533
_______________________
STAN SPENCE, Individually and on behalf of others similarly
situated; WILLIAM HATFIELD, Individually and on behalf of others
similarly situated; JOHN JOHNSON, Lieutenant, Individually and on
behalf of others similarly situated,
Plaintiffs-Appellees,
JOHN P. KELLOGG,
Intervenor/Plaintiff-Appellee,
versus
GLOCK, GES.m.b.H., an Austrian limited liability company, GLOCK,
INC., a Georgia Corporation
Defendants-Appellants.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Texas
_________________________________________________________________
September 27, 2000
Before JONES, DUHÉ, and WIENER, Circuit Judges.
EDITH H. JONES, Circuit Judge:
Defendants appeal the district court’s certification of
a nationwide class of owners of Glock pistols who allege that their
pistols are defective in several respects. The district court
certified the class after concluding that Georgia law should be
applied to all the class members’ claims. Because the district
court erred in its choice of law analysis, and thus abused its
discretion on the issue of predominance under Rule 23(b)(3), we
reverse the certification.
FACTS & PROCEDURAL HISTORY
In this class action case, purchasers of particular
models of Glock handguns manufactured between 1986 and 1997 assert
multiple causes of action alleging that Glock guns suffer from an
alleged design defect that causes the guns to jam and/or discharge
accidentally.1 Plaintiffs’ theories of liability include: 1)
design defect; 2) failure to warn; 3) fraud, deceit and material
misrepresentations of fact; 4) negligence; 5) breach of express and
implied warranties; and 6) negligent misrepresentation.2 The
plaintiffs seek damages for economic loss, based on the diminished
value of their pistols and the need for repairs, as well as
punitive damages and attorneys’ fees.
Putative class members number, at a minimum, 50,000, and
reside in all fifty states and the District of Columbia. The named
plaintiffs are all residents of Texas who own various Glock model
handguns. Defendant-appellant Glock Ges.m.b.H. (“Glock Europe”) is
the Austrian corporation that manufactures Glock model pistols.
1
The alleged design defects concern the firing pin safety system and
the ejection port of the gun. Plaintiffs-appellees claim that both defects
increase the likelihood that the gun will jam. The firing pin safety defect can
allegedly also cause accidental discharges.
2
The parties agree that these claims sound both in tort and contract.
2
Glock, Inc. (“Glock USA”) is a Georgia corporation that assembles
and distributes Glock pistols in the United States and Canada.
Glock Austria designs the guns in Austria and manufactures the
parts there. The parts are then shipped to Glock USA in Georgia,
where they are assembled, tested for quality control and sent to
distributors across the United States. Glock USA sells its
products to law enforcement dealers and wholesale distributors
throughout the United States, who then sell the products to retail
handgun dealers for sale to the public.
In the district court, plaintiffs sought class
certification of an opt-out class under Rule 23(b)(3). The
district court referred Plaintiffs’ Motion for Class Certification
to a magistrate judge who issued a recommendation to certify the
class. The district court accepted the recommendation and rejected
the defendants’ objections, reasoning that Georgia law applied by
virtue of Glock USA’s contacts with that state and Georgia’s
regulation of Glock USA, and that therefore the class satisfied
Rule 23(b)(3)’s predominance requirement. The Glock defendants now
appeal, arguing principally that the district court’s choice of
Georgia law was incorrect and that the class should not have been
certified because the proper choice of law precludes a finding that
common questions of law predominate.3
3
Appellants also appeal the certification on the grounds that
individual factual issues defeat predominance and that class certification is not
superior to individual adjudication in this case. Because we decide the appeal
on choice of law grounds, we decline to address these contentions.
3
DISCUSSION
A district court must rigorously analyze Rule 23's
prerequisites before certifying a class. See General Tel. Co. v.
Falcon, 457 U.S. 147, 161, 102 S. Ct. 2364, 2372, 72 L. Ed. 2d 740
(1982); Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir.
1996). The district court has broad discretion to certify a class,
which it must exercise within the confines of Rule 23. See Gulf
Oil Co. v. Bernard, 452 U.S. 89, 100, 101 S. Ct. 2193, 2200, 68
L. Ed. 2d 693 (1981); Castano, 84 F.3d at 740. The party seeking
certification bears the burden of proof. See Castano, 84 F.3d at
740; Horton v. Goose Creek Ind. Sch. Dist., 690 F.2d 470, 486 (5th
Cir. 1982), cert. denied, 463 U.S. 1207, 103 S. Ct. 3536, 77 L. Ed. 2d
1387 (1983). This court reviews a class certification for abuse of
discretion, but if the district court has committed legal error in
the predominance inquiry, reversal is required. Castano, 84 F.3d
at 740.
Rule 23 of the Federal Rules of Civil Procedure sets
forth several conditions that must be met for a proposed class of
plaintiffs to be certified. Appellants do not focus on whether or
not the proposed class has met the initial requirements of Rule
23(a).4 Instead, they contend that the proposed class has not met
4
Rule 23(a) requires that a class: 1) be so numerous that joinder is
impractical; 2) have common questions of law or fact; 3) have representative
parties with typical claims or defenses; and 4) have representative parties that
will fairly and adequately protect the class’s interest. See Fed.R.Civ.P. 23(a).
4
the requirements of Rule 23(b)(3). Rule 23(b)(3) requires that
questions of law or fact common to the members of the class
predominate over any questions affecting only individual members,
and that a class action is superior to the individual adjudication
of claims. See Fed.R.Civ.P. 23(b)(3).
The district court’s predominance finding depends on its
choice of law analysis that held Georgia law applicable to all the
claims of all the plaintiffs. Appellants assert that, to the
contrary, the laws of 51 jurisdictions apply in this class action.
If appellants are correct, the variations in the laws of the states
and District of Columbia “may swamp any common issues and defeat
predominance.” Castano, 84 F.3d at 741.5 The threshold question
for this court, therefore, is whether the district court conducted
a proper choice of law analysis and correctly decided that Georgia
law controlled. See Castano, 84 F.3d at 741.
In diversity cases, federal courts are obliged to apply
the choice of law rules of the forum state. See Klaxon Co. v.
Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021-
22, 85 L. Ed. 1477 (1941). Texas courts use the ALI Restatement’s
“most significant relationship test” for all choice of law cases
5
See also Georgine v. Amchem Products, Inc., 83 F.3d 610, 627 (3d Cir.
1996) (“Because we must apply an individualized choice of law analysis to each
plaintiff’s claims ... the proliferation of disparate factual and legal issues
is compounded exponentially”) aff’d 521 U.S. 591-117 S.Ct. 2231 (1997); In re Am.
Med. Sys., 75 F.3d 1069, 1085 (6th Cir. 1996) (“If more than a few of the laws
of the fifty states differ, the district judge would face an impossible task of
instructing a jury on the relevant law, yet another reason why class
certification would not be the appropriate course of action”).
5
except those contract cases in which the parties have agreed to a
valid choice of law clause. See Duncan v. Cessna Aircraft Co., 665
S.W.2d 414, 421 (Tex. 1984); Gutierrez v. Collins, 583 S.W.2d 312,
318 (Tex. 1979) (adopting the most significant relationship
methodology for tort choice of law issues). This Court reviews a
district court’s choice of law determination de novo. See In re
Air Disaster at Ramstein Air Base, Germany, 81 F.3d 570, 576 (5th
Cir. 1996).6
Section 6 of the ALI Restatement (Second) of Conflict of
Laws delineates the general principles that inform a choice of law
determination. Section 6 states:
(1) A court, subject to constitutional restrictions, will
follow a statutory directive of its own state on choice of
law.
(2) When there is no such directive, the factors relevant to
the choice of the applicable rule of law include
(a) the needs of the interstate and international
systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and
the relative interests of those states in the determination of
the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of
law,
(f) certainty, predictability and uniformity of result,
and
(g) ease in the determination and application of the law
to be applied.
6
Texas also requires that a choice of law determination be done on an
issue by issue basis. See Duncan, 665 S.W.2d at 421. The district court erred
in not conducting a complete issue by issue analysis. But overarching this error
is its fundamentally incorrect method of choice of law determination for each
issue that it considered. Therefore, this opinion will not proceed on a strict
issue by issue basis.
6
In later sections, the Restatement individually addresses choice of
law analysis for a variety of issues.
Section 145 concerns choice of law for issues in tort and
states that:
(1) The rights and liabilities of the parties with respect to
an issue in tort are determined by the local law of the state
which, with respect to that issue, has the most significant
relationship to the occurrence and the parties under the
principles in § 6.
(2) Contacts to be taken into account in applying the
principles of § 6 to determine the law applicable to an issue
include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury
occurred,
(c) the domicile, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the
parties is centered.
These contacts are to be evaluated according to their relative
importance with respect to the particular issue.
Restatement (Second) of Conflict of Laws §145. Courts should
evaluate these contacts for their quality, not their quantity. See
Gutierrez, 583 S.W.2d at 319.
Georgia’s contacts with the case are as follows. First,
the guns at issue are imported, assembled, and tested for quality
control in Georgia. Second, Glock USA is incorporated and has its
principal place of business in Georgia and is regulated under
Georgia firearm law in order to comply with BATF certification.
Third, Glock distributes its products from Georgia and receives
warranty cards there. Fourth, the alleged ejection port defect is
corrected in Georgia. Of these contacts, only one is mentioned in
7
Section 145 -- Glock USA’s domicile in Georgia -- and it is offset
by the fact that the plaintiffs are domiciled all over the country.
The district court also counted Georgia as the place of
injury and the place where the conduct causing the injury occurred.
In regard to its description of Georgia as the place of injury, the
district court was clearly wrong. Plaintiffs allege that they
suffered economic loss because of the defective design of the guns
they bought. The manufacture of allegedly defective goods is no
wrong unto itself. See Crisman v. Cooper Ind., 748 S.W.2d 273, 277
(Tex. App. 1988). Instead, the economic injury occurred when and
where plaintiffs bought the guns. Furthermore, the district
court’s conclusion that Georgia is the place where the conduct
causing the injury occurred is also suspect. The plaintiffs claim
that the defect is a design defect, making it more logical to
conclude that the conduct causing the injury occurred in Austria,
where the gun was designed and its parts manufactured, than in
Georgia, where the guns were merely assembled. The argument that
Georgia is the locus of the conduct causing the injury is more
plausible in regard to plaintiffs’ fraud-related claims.
In short, while the actual contacts with Georgia are
certainly enough to suggest that Georgia has more than a negligible
relationship to the tort issues in this case, they are not so
overwhelming that it is clear that Georgia has the most significant
relationship to those issues. To answer that question, one must
8
compare Georgia’s contacts and the state policies those contacts
implicate with those of the 50 other interested jurisdictions.
The central problem with the district court’s opinion is
its failure to make this comparison. Instead, the district court
essentially counted the contacts Glock had with Georgia, considered
Georgia’s regulation of Glock and concluded from those factors that
Georgia had the most significant relationship to the tort issues.
Critically, the court did not examine the relationship of other
interested states -- for example, the states where class members
bought their guns -- to the tort issues, as Section 6 requires. If
it had, it would have recognized that this case implicates the tort
policies of all 51 jurisdictions of the United States, where
proposed class members live and bought Glock pistols.
This Court finds instructive the opinion in In re Ford
Motor Co. Bronco II Product Liability Litigation, 177 F.R.D. 360
(E.D.La. 1997). In that case, plaintiffs argued that Michigan law
controlled their claims that Ford had knowingly marketed a
defective automobile and fraudulently concealed the truth from the
public, thereby causing plaintiffs economic loss as owners of the
car. The court rejected this contention, stating:
[T]he choice of law determination is a function of the
individual defendant, plaintiff, and the circumstances of the
claim. What is required is a comparative analysis of Michigan
law and the law and policies of each state with which the
claim has contacts. As far as can be discerned at this time,
all 51 jurisdictions have some contact with the claims.... The
policies of each state with contacts must be examined.
Plaintiff has not undertaken this analysis.
9
Id. at 370 - 71. Although that case was decided under Louisiana
law, Louisiana follows similar comparative choice of law principles
to those in the Restatement. Oliver v. Davis, 679 So. 2d 462, 468
(La. Ct. App. 1996). Texas’s adoption of the most significant
relationship test requires that the policies of each state with
contacts be examined,7 yet the plaintiffs have not undertaken this
analysis.
The burden of proof lies with the plaintiffs; in not
presenting a sufficient choice of law analysis they have failed to
meet their burden of showing that common questions of law
predominate. See Castano, 84 F.3d at 741. The district court is
required to know which law will apply before it makes its
predominance determination. See id. The district court here could
not discharge its duty because plaintiffs did not supply adequate
information on the policies of other interested states relevant to
the choice of law. Nor did the plaintiffs provide the court with
a sub-class plan in case the court disagreed that Georgia law
controlled. See Allison v. Citgo Petroleum Corp., 151 F.3d 402,
420 n. 15 (5th Cir. 1998) (where plaintiffs did not offer a
7
See Restatement (Second) of Conflict of Laws §6 cmt. f (“In determining
a question of choice of law, the forum should give consideration not only to its
own relevant policies ... but also to the relevant policies of all other
interested states.”); Restatement (Second) of Conflict of Laws §145 cmt. e
(“[T]he forum should give consideration to the relevant policies of all
potentially interested states.”).
10
workable subclass plan they failed to meet their certification
burden).
The plaintiffs’ attempt to finesse the choice of law by
omitting comparison of laws other than Georgia’s is surprising in
light of governing authority. Castano is predicated squarely on
the court’s duty to determine whether the plaintiffs have borne
their burden where a class will involve multiple jurisdictions and
variations in state law. 84 F.3d at 744. Before Castano, then-
Judge Ginsburg wrote that class action plaintiffs must provide an
“extensive analysis” of state law variations to reveal whether
these pose “insuperable obstacles” to certification. Walsh v. Ford
Motor Co., 807 F.2d 1000, 1017 (D.C. Cir. 1986), cert. denied, 107
S. Ct. 3188 (1987). Plaintiffs’ failure to carry their burden, and
the district court’s unwillingness to hold plaintiffs to their
proof, have resulted in a critical legal deficiency -- insufficient
evidence of predominant common legal issues.8
8
The insuperability of this problem, if plaintiffs had met their
burden, is suggested in another recent case, where a district court refused to
certify a class action case against Ford Motor company based on claims arising
in 51 jurisdictions: “Defendants have provided a comprehensive appendix detailing
the variations among the states’ laws on strict liability, breach of express and
implied warranty, fraud, and consumer protection acts. . . . For example,
regarding plaintiffs’ strict liability claim, alone, defendants point to at least
five different approaches to defining a “design defect;” differing positions as
to whether the “economic loss doctrine” precludes strict liability actions;
differing views as to whether physical harm is a prerequisite to bringing a cause
of action; different warning requirements; and different affirmative defenses.
Defendants have likewise demonstrated a multitude of different standards and
burdens of proof with regard to plaintiffs’ warranty, fraud and consumer
protection claims.” In re: Ford Motor Company Ignition Switch Products Liability
Litigation, 174 F.R.D. 332, 350-51 (D.N.J. 1997).
11
If the district court had performed a proper choice of
law analysis, it likely would not have found Georgia law
controlling on the tort issues in this nationwide class action.9
As was discussed earlier, the place of injury was not Georgia, but
the place of purchase. The place where the conduct causing the
injury occurred is more likely to be Austria than Georgia, at least
for the non-fraud claims. Also, the class members are domiciled
and likely bought their guns in all 50 states and the District of
Columbia. All these 51 relevant jurisdictions are likely to be
interested in ensuring that their consumers are adequately
compensated in cases of economic loss,10 but many will have
different conceptions of what adequate compensation is. Georgia’s
laws may not provide sufficient consumer protection in the view of
9
The district court also may well not have found Georgia law applied
if it had performed an adequate choice of law analysis for the contracts issue.
Section 188 of the Restatement sets forth contacts to consider in regard to a
contract issue. They include: 1) the place of contracting; 2) the place of
negotiation; 3) the place of performance; 4) the location of the contract’s
subject matter; and 5) the domicile, residence, place of incorporation and place
of business of the parties. See Restatement (Second) of Conflict of Laws §188.
Glock USA is incorporated and has its principal place of business in Georgia, but
plaintiffs are domiciled in the 50 states and the District of Columbia. The
place of contracting would presumably be the place of purchase; the location of
performance and the location of the subject matter of the contract would be the
place where the gun is used; and the place of negotiation would not apply.
Related state policies of all the interested states would also, of course, need
to be examined for a thorough approach to this issue.
10
See, e.g., In re Ford Motor Co. Ignition Switch Products Liability
Litigation, 174 F.R.D. 332, 348 (D.N.J. 1997) (“Each plaintiff’s home state has
an interest in protecting its consumers from in-state injuries caused by foreign
corporations and in delineating the scope of recovery for its citizens under its
own laws.”).
12
other states.11 Indeed, as the home state of the
assembler/distributor, Georgia’s policies might tend to favor those
interests over consumers’. For such reasons, several courts that
have confronted similar situations in other multistate class
actions have refused to find a single state’s law controlling.12
Appellees argue that, in design defect cases, the most
important factors are where the product was manufactured and where
it was placed in the stream of commerce, and that those factors
point toward Georgia. This argument has several problems. First,
in most of the cases that appellees cite for support, the location
of the accident was either fortuitous or the sole connection with
a particular state, so the place of injury was not given the weight
it normally would have in a choice of law issue in tort. See
Mitchell v. Lone Star Ammunition, 913 F.2d 242, 249-50 (5th Cir.
1990) (recognizing that North Carolina’s only contact with the case
was as the place of injury); In re Air Disaster at Ramstein Air
Base, Germany, 81 F.3d 570, 577 (5th Cir. 1996) (stating that the
place of injury is fortuitous in this air crash case); In re Air
Crash Disaster at Mannheim, Germany, 769 F.2d 115 (3d Cir. 1985)
11
In fact, defendants-appellants point out several doctrines that might
limit recovery in Georgia in this case: the economic loss doctrine, lack of
privity, limits on punitive damages, among others.
12
See, e.g., In re Ford Motor Co. Ignition Switch Products, 174 F.R.D.
at 348; Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595 (S.D.N.Y.
1982); Poe v. Sears, Roebuck & Co., 1998 WL 113561 (N.D.Ga. 1998). But see Lerch
v. Citizens First Bancorp, Inc., 144 F.R.D. 247, 256-57 (D.N.J. 1992); Elkins v.
Equitable Life Ins. Co. of Iowa, 1998 WL 133741, *17 (M.D.Fla. 1998).
13
(concerning a helicopter crash). Generally, the place of injury
(i.e., the place of purchase) in this class action case will
neither be fortuitous nor the only contact with a particular state.
For example, many class members will have bought their guns where
they live, and the guns will have been shipped for sale in the same
state.
Second, the products in this case were designed in
Austria, and all component parts were manufactured there, and,
following assembly in Georgia, each gun entered the stream of
commerce in the state where it was shipped to be sold. See
Crisman, 748 S.W.2d at 277 (finding that a trailer manufactured in
Illinois entered the stream of commerce in Florida). Thus, even
the place of manufacture and the place where the product entered
the stream of commerce do not point unmistakably to Georgia.
Third, appellees’ argument understates the importance
that place of injury plays in a tort choice of law analysis. The
comment to Section 145 emphasizes this:
In the case of personal injuries or injuries to tangible
things, the place where the injury occurred is a contact that,
as to most issues, plays an important role in the selection of
the state of the applicable law.... This contact likewise
plays an important role in the selection of the state of the
applicable law in the case of other kinds of torts.
Restatement (Second) of Conflict of Laws §145 cmt. e. The
exception to this guideline comes where the place of injury is
fortuitous or bears little relation to the occurrence and the
14
particular issue. See id. In an economic loss case, that cannot
be said to be true. Furthermore, in a Texas case in which
plaintiffs claimed tortious financial harm, the El Paso Court of
Appeals considered the place of injury an important factor. See
CPS Int’l Inc. v. Dresser Ind., Inc., 911 S.W.2d 18, 29 (Tex. App.
1995). Here, the fact that the place of injury was the place of
purchase points to all 51 jurisdictions.
Nevertheless, the class’s contract claims (breach of
express and implied warranty) would still be controlled by Georgia
law if the district court correctly interpreted a choice of law
provision in Glock USA’s instruction manual.13 Under Texas law, the
parties’ choice of law provision governs contract claims within its
scope;14 where such a provision exists, courts are not obliged to
perform a most significant relationship test. In this case,
however, the instruction manual’s choice of law provision does not
reach the contract issues. The manual states: “For all sales
contracts with GLOCK Inc., place of jurisdiction shall be Atlanta,
GA and Georgia State Law shall be applicable.” By its terms, class
members are not parties to this choice of law provision, for they
had no sales contracts with Glock USA. Instead, they bought their
guns from distributors who had bought them from Glock USA. The
13
The court also stated perfunctorily that even if it used the
Restatement Sections 187 and 188, the provisions for choice of law for contract
issues, to determine the applicable law, it would still apply Georgia law.
14
See Duncan, 665 S.W.2d at 421.
15
language on the warranty registration card to some degree
buttresses this conclusion: Glock’s limited warranty states that
some of its provisions may not apply in some states.
Since the putative class members are not parties to the
choice of law provision in the instruction manual, the most
significant relationship analysis determines the controlling law.
As with the tort claims, the district court did not perform an
adequate choice of law analysis, and the plaintiffs did not supply
adequate information with which to conclude that the predominance
requirement of Rule 23(b)(3) was satisfied.
CONCLUSION
By not providing the district court with a sufficient
basis for a proper choice of law analysis or a workable sub-class
plan, the plaintiffs failed to meet their burden of demonstrating
that common questions of law predominate. Therefore, the district
court abused its discretion in certifying the class and the class
is hereby decertified.
REVERSED and RENDERED.
16
17