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Consumer Nationwide Class Action – A Refreshing Decision

July 17th, 2007 by John Campbell

In Hall v. Sprint Spectrum, an Illinois Appellate Court issued a decision which gives consumers and consumer attorneys a reason to celebrate.  2007 WL 1892679  (Ill. App. 5 Dist. 2007).  In the June 27, 2007 opinion written by Judge Stewart, the court upheld the trial court’s certification of a nationwide class (48 states).  This decision is noteworthy because it conflicts with the fairly pervasive belief that nationwide classes, at least when based on state law, are dead.  By carving out space for nationwide classes to proceed in certain circumstances, the decision is a significant victory for consumers.  The decision is well written and carefully reasoned.  A basic summary of the case is included below.  I then discuss briefly how this decision can be used to more effectively pursue some consumer claims.

A Brief Summary

Ms. Hall attempted to terminate her contract with Sprint.  Sprint charged Ms. Hall a $150 early termination fee.  In February of 2004, she filed a class action complaint.  She later amended the complaint in March of 2005.  She alleged 1) breach of contract, 2) violation of the Kansas Consumer Protection Act (Kan. Stat. Ann. § 50-623 et seq. (2005)) 3) statutory fraud under the Illinois Consumer Fraud Act and the other states where Sprint does business, 4) unjust enrichment, and 5) relief from unlawful penalties.  She sought to certify a nationwide class of all customers who had been charged the penalty.  Importantly, Hall alleged that Sprint placed a choice of law provision in all of its contracts which said that the “laws of the State of Kansas” would govern “without  regard to choice[-]of[-]law principles.”

The trial court certified the following 48-state class: “All persons who were charged a Sprint Early Termination Fee because they canceled their cellular or wireless agreement before the end of its term.” The order suggested that Kansas law would apply to all claims.  Of course, Sprint appealed.

Sprint argued that 1) based on the language of the Kansas Consumer Protection Statute it could not be applied extraterritorially and 2) the Kansas Consumer Protection Act did not apply because the choice-of-law provision does not govern non-contractual claims such as fraud.   The court hammered Sprint on both.  First, the court explained that under Illinois law, the choice of law provision would be enforced because Illinois follows the Restatement (Second) of Conflict of Laws.  Morris B. Chapman & Associates, Ltd. V. Kitzman, 193 Ill. 2d 560, 568 (Ill. 2000).  Section 187 applies when the parties include an express choice-of-law provision in their contract.  Maher & Associates, Inc. v. Quality Cabinets, 267 Ill. App. 3d 69, 76 (Ill. 1994). The court applied the principles found in the Restatement and found that Sprint would have to live with its choice-of-law provision. 

Next, the court rejected Sprint’s argument that because the Kansas Consumer Protection Act, by its own terms, may not apply extraterritorially, that it could not apply to class members outside of Kansas.  The court explained that parties may, by their express choice, select an otherwise inapplicable statute or body of law to govern even though it would not govern absent that choice.  Bartlett Bank & Trust Co. v. McJunkins, 147 Ill. App. 3d 52, 59 (Ill. 1986); Davis v. Miller, 269 Kan. 732, 739 (Kan. 2000). The court also rejected Sprint’s argument that the claims were “non-contractual” and therefore not covered by the choice-of-law provision.  The court reasoned that the “principle that a contract penalty is illegal and unenforceable is, itself, fundamentally a creature of contract law.”

Sprint, by now on its last leg, argued that the Avery v. State Farm decision prohibited the application of Illinois law to the claim.  216 Ill.2d 100 (Ill. 2005).  The court indicated that Avery was limited to its interpretation of the Illinois Consumer Fraud Act’s extraterritorial application (or lack thereof).  It also cited Miner v. Gillete Co., in which a nationwide class was certified despite only minimal contacts with Illinois.  87 Ill.2d 7, 10-16 (Ill. 1981). Turning to the due process issues implicated when applying one state’s law to out-of-state residents, the court looked to Phillips Petroleum Co. v Shutts, 472 U.S. 797, 821-22 (1985).  The court asserted that Phillips Petroleum considers, as an important element, the expectation of the parties.  Since here, there was an express choice-of-law provision, the class members had reason to anticipate the application of Kansas law would govern their claims.  There was, therefore, no due process problem.

What Does Hall Mean for Consumers and Consumer Attorneys?

The court’s remaining analysis in Hall simply upheld the class certification decision after evaluating the elements needed.  It was routine, but the implications of Hall are not.  While many courts insist on requiring consumers to litigate their claims state-by-state, thereby allowing the defendant to divide and conquer, the Hall decision provides at least a limited chance to pursue claims on behalf of all people who have been injured - all at once in one setting.  The decision makes a defendant live with the terms it embeds in its own contract of adhesion, and it allows consumers to finally benefit from a choice-of-law provision.

This case presents a tremendous opportunity, and in my opinion, should be cited and used whenever possible.  I would suggest that in each potential class case, an attorney should at least consider whether or not they could bring a nationwide class in Illinois.  If they can, a partnership with a local firm could be established.  This would allow consumers in all states to pursue their rights, and would provide tremendous leverage to seek a just result.  As I read Hall, here is what is needed in order for a nationwide class to be plausible: 

1)    A choice of law provision (if the choice-of-law points to Illinois law, the case may be even stronger);

2)    A claim arising out of the contract (it appears this could even be a consumer fraud claim if it is rooted in contract principles);

3)    A standardized contract for multiple states (or all states);

4)    An Illinois resident who has been injured by the alleged practice. (Of course, practitioners should consider pushing the Hall line of thinking in their own states as well). 

If you come across a case like this, and you do not practice in Illinois, please feel free to call me.  A partnership might make sense.  This decision was originally written in Madison County, which is only 15 minutes from our office.  We have a number of attorneys who have tried cases there.  Although Madison County has been actively disparaged by the defense bar, in reality, it is a venue in which consumers can expect fairness and even-handed consideration.  Email me here.

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