In the

United States Court of Appeals

For the Seventh Circuit

No. 08-1590

STEVEN J. THOROGOOD, individually and on behalf

of all others similarly situated,

Plaintiff-Appellee,

v.

SEARS, ROEBUCK AND COMPANY,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 06 C 1999—Harry D. Leinenweber, Judge.

ARGUED SEPTEMBER 15, 2008—DECIDED OCTOBER 28, 2008

Before POSNER, KANNE, and EVANS, Circuit Judges.

POSNER, Circuit Judge. The plaintiff, a Tennessean,

bought a Kenmore-brand clothes dryer from Sears

Roebuck (Kenmore is a Sears brand name). The words

“stainless steel” were imprinted on the dryer, and point

of sale advertising explained that this meant that the

drum in which the clothes are dried inside the dryer was

made of stainless steel. The plaintiff says he thought it

meant that the drum was made entirely of stainless steel.
2 No. 08-1590

Part of the front of the drum, a part the user would see

only if he craned his head inside the drum, is made of a

ceramic-coated “mild” steel, which is not stainless steel

because it doesn’t contain chromium; stainless steel is a

steel alloy that is at least 11.5 percent chromium. The

plaintiff alleges that the mild-steel part of the drum

rusted and stained the clothes that he dried in his dryer.

He filed this class action suit in federal district court

on behalf of himself and the other purchasers, scattered

across 28 states plus the District of Columbia, of the half

million or so Kenmore dryers advertised as containing

stainless steel drums. He claims that the sale of a dryer

so advertised is deceptive unless the drum is made

entirely of stainless steel, since if it is not it may rust and

cause rust stains on the clothes in the dryer. His individual

claim is that the representation that the dryer contained

a stainless steel drum violated the Tennessee Consumer

Protection Act, Tenn. Code. Ann. §§ 47-18-101 et seq. The

Act provides in pertinent part that “any person who

suffers an ascertainable loss of money or property, real,

personal, or mixed, or any other article, commodity, or

thing of value wherever situated, as a result of the use or

employment by another person of an unfair or deceptive

act or practice declared to be unlawful by this part, may

bring an action individually to recover actual damages.”

Id., § 47-18-109(a)(1). The members of the class that the

plaintiff represents are alleged to have similar claims

under similarly worded state consumer protection

statutes in their own states. Although some members of

the huge class are citizens of the states of which Sears is

a corporate citizen (New York and Illinois), so that diversity of citizenship is not complete, the suit properly
No. 08-1590 3

invoked federal jurisdiction under the Class Action

Fairness Act, 28 U.S.C. §§ 1332(d), 1453, 1711-1715, since

the amount in controversy exceeds $5 million. The

district court certified the class, and we have accepted

the defendant’s appeal from the class certification. Fed. R.

Civ. P. 23(f).

The class action is an ingenious device for economizing

on the expense of litigation and enabling small claims to

be litigated. The two points are closely related. If every

small claim had to be litigated separately, the vindication of small claims would be rare. The fixed costs of

litigation make it impossible to litigate a $50 claim

(our guess—there is no evidence—of what the average

claim of a member of the plaintiff’s class in this case

might be worth) at a cost that would not exceed the

value of the claim by many times. But the class action

device has its downside, or rather downsides. There is

first of all a much greater conflict of interest between

the members of the class and the class lawyers than

there is between an individual client and his lawyer.

The class members are interested in relief for the class

but the lawyers are interested in their fees, and the class

members’ stakes in the litigation are too small to

motivate them to supervise the lawyers in an effort to

make sure that the lawyers will act in their best interests.

Saylor v. Lindsley, 456 F.2d 896, 900-01 (2d Cir. 1972)

(Friendly, J.); see also Susan P. Koniak & George M. Cohen,

“Under Cloak of Settlement,” 82 Va. L. Rev. 1051, 1053-

57 (1996) (describing the class action as “lawyer selfdealing on a grand scale,” id. at 1053); Jonathan R. Macey

& Geoffrey P. Miller, “The Plaintiff’s Attorney’s Role in
4 No. 08-1590

Class Action and Derivative Litigation,” 58 U. Chi. L. Rev.

1, 22-26 (1991).

The defendants in class actions are interested in minimizing the sum of the damages they pay the class and

the fees they pay the class counsel, and so they are willing

to trade small damages for high attorneys’ fees, especially

since, as Judge Friendly put it, “a juicy bird in the hand

is worth more than the vision of a much larger one in

the bush, attainable only after years of effort not

currently compensated and possibly a mirage.” Alleghany

Corp. v. Kirby, 333 F.2d 327, 347 (2d Cir. 1964); see also

Bruce L. Hay, “Asymmetric Rewards: Why Class Actions

(May) Settle for Too Little,” 48 Hastings L.J. 479, 485-89

(1997); Bruce L. Hay & David Rosenberg, “ ‘Sweetheart’

and ‘Blackmail’ Settlements in Class Actions,” 75 Notre

Dame L. Rev. 1377, 1389-92 (2000). The result of these

incentives is to forge a community of interest between class

counsel, who control the plaintiff’s side of the case, and the

defendants. (For a notable example, see Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir. 2002); see also

Mars Steel Corp. v. Continental Illinois National Bank & Trust

Co., 834 F.2d 677, 681-82 (7th Cir. 1987).) The judge who

presides over the class action and must approve any

settlement is charged with responsibility for preventing

the class lawyers from selling out the class, but it is a

responsibility difficult to discharge when the judge confronts a phalanx of colluding counsel.

A further problem with the class action is the enhanced

risk of costly error. “When enormous consequences turn

on the correct resolution of a complex factual question, the
No. 08-1590 5

risk of error in having it decided once and for all by one

trier of fact rather than letting a consensus emerge from

several trials may be undue.” Mejdrech v. Met-Coil

Systems Corp., 319 F.3d 910, 912 (7th Cir. 2003); see also

Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir.

1996); Lance P. McMillian, “The Nuisance Settlement

‘Problem,’ ” 31 Am. J. Trial Advoc. 221, 252-53 (2007); Jeffrey

W. Stempel, “Class Actions and Limited Vision,” 83 Wash.

U. L.Q. 1127, 1213-14 (2005). Suppose a company is sued

in a number of different cases for selling a defective

product. It wins some of the cases and loses some, so

that the aggregate outcome is a fair reflection of the

uncertainty of the plaintiffs’ claims. But when the

central issue in a case is given class treatment and so

resolved by a single trier of fact, a trial becomes a roll of

the dice; a single throw will determine the outcome of

a large number of separate claims—there is no averaging

of divergent responses from a number of triers of fact

having different abilities, priors, and biases.

The risk is asymmetric when the number of claims

aggregated in the class action is so great that an adverse

verdict would push the defendant into bankruptcy, for

then the defendant will be under great pressure to

settle even if the merits of the case are slight. In re RhonePoulenc Rorer, Inc., 51 F.3d 1293, 1298-99 (7th Cir. 1995);

Hay, “ ‘Sweetheart’ and ‘Blackmail’ Settlements in Class

Actions,” supra, at 1391-92; Barry F. McNeil & Beth L.

Fancsal, “Mass Torts and Class Actions: Facing Increased

Scrutiny,” 167 F.R.D. 483, 489-90 (1996). It is true that in

principle and often in practice, shareholders whose

shares in a particular company are part of a diversified
6 No. 08-1590

portfolio of securities are indifferent to the fortunes of a

particular stock in their portfolio. But corporate managers—the shareholders’ imperfect agents—are not indifferent to bankruptcy and so they are unwilling to bet

their company on the outcome of a trial. This, however, is

not such a case, as the aggregate claims are well within

Sears Roebuck’s ability to pay.

There is still another downside to the class action, and

it is well illustrated by this case. It is the tendency, when

the claims in a federal class action are based on state

law, to undermine federalism. In re Bridgestone/Firestone,

Inc., 288 F.3d 1012, 1020-21 (7th Cir. 2002); In re RhonePoulenc Rorer, Inc., supra, 51 F.3d at 1300-02; Elizabeth M. v.

Montenez, 458 F.3d 779, 788 (8th Cir. 2006). Our plaintiff

wants to litigate in a single federal district court half a

million claims wrested from the control of the courts of

the 29 jurisdictions in which those claims arose and the

laws of which govern the claimants’ entitlement to and

scope of relief. The instructions to the jury on the law it

is to apply will be an amalgam of the consumer protection laws of the 29 jurisdictions, and procedural rules

by which particular jurisdictions expand or contract relief

will be ignored. The Tennessee Consumer Protection Act,

for example, does not authorize class actions. Walker v.

Sunrise Pontiac-GMC Truck, Inc., 249 S.W.3d 301 (Tenn.

2008).

Sears argues that the Tennessee rule precludes the

maintenance of the present case as a class action. That is

wrong. The procedure in diversity suits is governed by

federal law. What is true is that some procedural rules
No. 08-1590 7

are intended to implement substantive policy, and such

rules do control in diversity cases. The clearest example

is the parol evidence rule of contract law. Another is the

contract doctrine of “mend the hold,” which limits the

right of the defendant in a breach of contract suit to

change his defense in the course of litigation and is thus

a facet of the doctrine of good-faith performance of contracts. Harbor Ins. Co. v. Continental Bank Corp., 922 F.2d 357,

364-65 (7th Cir. 1990). We gave another example in S. A.

Healey Co. v. Milwaukee Metropolitan Sewerage District, 60

F.3d 305, 310 (7th Cir. 1995): “Suppose a state (as many

states have done) establishes a compulsory arbitration

mechanism in medical malpractice cases in order to cut

down on litigation and reduce malpractice insurance

premiums. The state’s goals are substantive—designed

to shape conduct outside the courtroom and not just

improve the accuracy or lower the cost of the judicial

process—though the means are procedural. The goals

would be thwarted if parties having access to a federal

district court under the diversity jurisdiction could

thumb their noses at the compulsory procedure.” In

contrast, the holding of the Walker decision that consumer

protection suits can’t be maintained under Tennessee

law as class actions was a “plain meaning” statutory

interpretation and did not suggest that the class action

had been precluded in consumer protection suits in

order to advance a substantive policy concerning consumer protection.

Still, Sears is on to something. Even though the plaintiff

bases his claim, and that of any other Tennesseans who

happen to be members of the class, on Tennessee law, he
8 No. 08-1590

and they are seeking a breadth of relief that Tennessee

does not offer them in its courts. Maybe that is a defect of

Tennessee law. But the purpose of the diversity jurisdiction is to protect out-of-state residents against state

judicial bias in favor of residents; it is not to expand the

relief obtainable under state law.

The concerns that we have expressed (which are amplified, and supported by copious references, in our opinion

in In re Rhone-Poulenc, Inc., supra, and in such later opinions, apart from those cited already, as Szabo v. Bridgeport

Machines, Inc., 249 F.3d 672 (7th Cir. 2001); Blair v. Equifax

Check Services, Inc., 181 F.3d 832, 834 (7th Cir. 1999); Parker

v. Time Warner Entertainment Co., L.P., 331 F.3d 13, 22 (2d

Cir. 2003), and Newton v. Merrill Lynch, Pierce, Fenner &

Smith, Inc., 259 F.3d 154, 165-68 (3d Cir. 2001)) suggest

caution in class certification generally. And this case turns

out to be a notably weak candidate for class treatment.

Apart from the usual negatives, there are no positives:

not only do common issues of law or fact not predominate

over the issues particular to each purchase and purchaser

of a “stainless steel” Kenmore dryer, as Rule 23(b)(3) of

the Federal Rules of Civil Procedure requires, but there

are no common issues of law or fact, so there would be

no economies from class action treatment.

The plaintiff claims to believe that when a dryer is

labeled or advertised as having a stainless steel drum,

this implies, without more, that the drum is 100 percent

stainless steel because otherwise it might rust and cause

rust stains in the clothes dried in the dryer. Do the other

500,000 members of the class believe this? Does anyone
No. 08-1590 9

believe this besides Mr. Thorogood? It is not as if Sears

advertised the dryers as eliminating a problem of rust

stains by having a stainless steel drum. There is no suggestion of that. It is not as if rust stains were a common

concern of owners of clothes dryers. There is no suggestion of that either, and it certainly is not common

knowledge. (At argument the plaintiff’s lawyer, skeptical

that men ever operate clothes dryers—oddly, since his

client does—asked us to ask our wives whether they are

concerned about rust stains in their dryers. None is.)

Stainless steel appliances are common even when no

issue of rust is presented. A porcelain sink does not rust,

but many people prefer a stainless steel sink, partly

because it does not stain, partly because when polished

it looks better (some people think) than porcelain, but

not because they think a sink made of “mild” steel coated

with ceramic would cause rust stains on their dishes;

ceramic doesn’t rust. It is true that the drum is inside

the dryer, and you just see its shiny surface when you

open the door; but the same is true of dishwashers,

many of which are stainless steel too.

Stainless steel clothes dryers are not advertised as

preventing rust stains on clothes. The only reference to

rust in Sears’s marketing that the plaintiff refers to or that

we have found is “Stainless Steel Drum resists rust and

won’t chip, peel or snag clothes.” The only thing potentially deceptive about this claim is that a ceramic coating

on non-stainless steel is unlikely to rust, chip, peel, or

snag clothes either. But that is not Mr. Thorogood’s

complaint. His concerns are idiosyncratic. A further

indication of this is that to rally fellow victims of the
10 No. 08-1590

stainless steel Kenmores he posted his bad experience on

a web site (“Fight Back.com,” http://fightback.com) that

advertises itself as a “conduit for consumer problem

solving and redress.” No one responded, as the “feed

back” file on the web site invites persons who agree

with a posted complaint to do.

The evaluation of the class members’ claims will

require individual hearings. Each class member who

wants to pursue relief against Sears will have to testify to

what he understands to be the meaning of a label or

advertisement that identifies a clothes dryer as containing a stainless steel drum. Does he think it means

that the drum is 100 percent stainless steel because otherwise his clothes might have rust stains, or does he

choose such a dryer because he likes stainless steel for

reasons unrelated to rust stains and is indifferent to

whether a part of the drum not easily seen is made of a

different material? Sears does not advertise its stainless

steel drum as a protection against rust stains on clothes;

it does not even say that the drum itself will not rust—only

that it “resists rust.” Advertisements for clothes dryers

advertise a host of features that might matter to consumers, such as price, size, electrical usage, appearance,

speed, and controls, but not, as far as anyone in this

litigation has suggested except the plaintiff, avoidance

of clothing stains due to rust.

In granting class certification, the district judge said that

because “Sears marketed its dryers on a class wide

basis . . . reliance can be presumed.” Reliance on what? On

stainless steel preventing rust stains on clothes? Since
No. 08-1590 11

rust stains on clothes do not appear to be one of the

hazards of clothes dryers, and since Sears did not

advertise its stainless steel dryers as preventing such

stains, the proposition that the other half million buyers,

apart from Thorogood, shared his understanding of

Sears’s representations and paid a premium to avoid rust

stains is, to put it mildly, implausible, and so would

require individual hearings to verify.

An additional variable in the class action calculus is

relief. Even if some consumers, like Mr. Thorogood, would

not pay a premium for a stainless steel drum that was

not 100 percent stainless steel, the amount of damages

will vary from consumer to consumer. Some may (though

we are dubious) have experienced rust stains, or be

fearful of experiencing them, and therefore seek as damages the difference between the resale value of their

stainless steel dryer and what a new dryer would cost.

Some may have bought a Kenmore at a discount and so

ended up paying no more than they would have paid

for a machine with a porcelain drum. And some—because

the stainless steel drum is packaged with other

premium features rather than offered as a separately

priced option—may have incurred no damages at all

because on the whole they prefer their stainless steel

dryer to any other dryer they could buy even if the stainless steel feature itself was a neutral or even negative

consideration in their purchasing decision. The plaintiff

is seeking on behalf of himself and the members of the

class actual damages, not statutory damages, which

might not require individual proof.
12 No. 08-1590

The difficulty of determining the relief to which the

individual class members are entitled, though serious, is

not the deal breaker. If it were proved that X thousand

buyers of Kenmores had been deceived, a settlement that

provided each with an amount equal to an estimate of

the average damages they had sustained would be a

sensible and legally permissible alternative to remitting

all the buyers to individual suits each of which would

cost orders of magnitude more to litigate than the

claims would be worth to the plaintiffs. “Aggregate class

proof of monetary relief may . . . be based on sampling

techniques or other reasonable estimates, under accepted

rules of evidence.” 3 Herbert B. Newberg & Alba Conte,

Newberg on Class Actions § 10.3, p. 480 (4th ed. 2002); see

also id., § 10.5; Stewart v. General Motors Corp., 542 F.2d

445, 452-53 (7th Cir. 1976); United States v. City of Miami,

195 F.3d 1292, 1299-1300 (11th Cir. 1999); Pettway v. American Cast Iron Pipe Co., 494 F.2d 211, 259-63 (5th Cir. 1974).

The deal breaker is the absence of any reason to believe

that there is a single understanding of the significance

of labeling or advertising clothes dryers as containing a

“stainless steel drum.”

The district court is instructed to decertify the class.

REVERSED.

10-28-08