This op-ed originally appeared in the Wall Street Journal.
American manufacturers could soon face an onslaught of lawsuits unless the Supreme Court intervenes. The court will decide in early 2014 whether to hear two cases regarding what constitutes a class-action lawsuit—cases in which lawyers bring charges and ask for damages on the assertion that the defendant has injured or adversely affected the plaintiff as well as hundreds or thousands more people.
In Sears v. Butler and Whirlpool v. Glazer, appellate courts have disregarded clear earlier decisions from the Supreme Court about class actions. The high court should take up these cases and uphold its class-action rules, which protect both companies and consumers.
Over the past decade, the Supreme Court has outlined the requirements plaintiffs must meet to proceed with class actions. The restrictions—including requiring that plaintiffs prove a common, measurable harm, and that the issues common to the class predominate over individualized issues—help distinguish true grievances from frivolous lawsuits.
Two of the most important cases dealing with these often multimillion-dollar suits are Wal-Mart WMT -0.33% v. Dukes (2011) and Comcast CMCSA -0.74% v. Behrend (2013). In Wal-Mart, Justice Antonin Scalia wrote that class-action litigation is appropriate only if a "rigorous analysis" of a case's "factual and legal issues" establishes that these requirements for certification, or approval of a class of plaintiffs, are satisfied. In Comcast, he added that the plaintiffs must prove that "damages are capable of measurement on a classwide basis."
Lower courts have interpreted these rulings in different ways. Some have refused to unleash trial lawyers on employers without ample evidence that issues common to the class predominate over individualized issues. Others have taken a more permissive view, allowing more questionable class-action cases to continue.
In January, the Supreme Court can bring more clarity to its certification requirements if it takes up Sears v. Butler from the Seventh Circuit Court of Appeals in Chicago and Whirlpool v. Glazer from the Sixth Circuit Court of Appeals in Cincinnati. In both Sears and Whirlpool, the appellate courts had originally allowed the certification of an unreasonably broad plaintiff class in litigation involving washing machines. (Sears had sold Whirlpool-manufactured machines.) The courts ruled that a "musty odor" emanating from a tiny proportion of washing machines was enough to put every person who ever purchased one of those machines in a plaintiff class, even owners who had never smelled anything and liked their machines.
Neither circuit attempted to account for varying customer experiences. Only 2%-3% of customers even called Whirlpool and Sears service centers to report a musty smell. And the cause of the scent—whether from improper maintenance, specific washing habits, mechanical failure, or something else—differed significantly from customer to customer.
After the company appealed, the Supreme Court vacated these decisions and sent the cases back for reconsideration under the standards of the Comcast decision. But both appellate courts went ahead and recertified the same classes.
Their decisions threaten to destroy the fair, effective way businesses handle consumer complaints. Companies currently address quality problems through warranty and service programs, maintaining large call centers and extensive service networks. After all, excellent customer service is essential to winning customer loyalty in a competitive industry. Substituting billion-dollar, everybody-in-the-pool litigation—potentially turning a single customer complaint into grounds for a lawsuit on behalf of millions of buyers—is a poor substitute for the efficient solutions companies already employ. It could choke even our most vibrant industries.
The plaintiffs bar—which pockets a big share of every plaintiff's payout—eagerly awaits the mayhem. Whirlpool reports that there are 20 nearly identical class-action lawsuits on behalf of hundreds of thousands of customers ready to go if the lower court rulings stand. The suits will slam appliance companies, but they also have major implications for the auto and technology industries.
Business Roundtable has joined a brief asking the Supreme Court to hear Sears and Whirlpool because the future of American businesses depends on it. By opening the door for every single consumer complaint to become a billion-dollar class action lawsuit, the certain proliferation of such broad, cobbled-together lawsuits will eventually cripple U.S. manufacturing, and not just service-center employment. It will also waste resources, shackle companies, and chill innovation.
Mr. Engler, a former three-term governor of Michigan, is president of The Business Roundtable, an association of CEOs of large U.S. companies.
Find the original op-ed at WSJ.com.