Articles

Man Bites Dog: Class Action Plaintiff Representative is Sued
By: Ronald S. Katz

Last Fall, State Farm Mutual Automobile Insurance Co. lost a $1.2 billion verdict to a nationwide class of plaintiffs complaining that the use of generic aftermarket automobile crash parts (fenders, hoods, etc.) was inherently inferior to the use of crash parts manufactured by the car companies. This decision has had a devastating impact on the small businesses that distribute aftermarket parts because the insurance companies are no longer buying these parts as a result of the class action.

One of these aftermarket competitors, Collision Parts Network of Fresno, California, has now brought a lawsuit to reverse this devastating impact. Collision Parts Network has sued Michael Avery, the lead representative of the class certified in the class action called Avery v. State Farm. Collision Parts Network does nearly all of its business in California. In the lawsuit it is asking a California state court to declare that the law of California - not the law of Illinois (where the Avery case was brought) - applies to the sale of aftermarket automotive parts in California.

The relief that Collision Parts Network is seeking seems quite obvious, but nothing is obvious in the topsy-turvy world that the Avery case has created. Avery is a class action (now on appeal) brought in an Illinois state court on behalf of all automobile insurance policyholders of State Farm Insurance Company nationwide. Even more ironic, Mr. Avery is a resident of Louisiana, so presumably he will be hard pressed to explain his fascination with and respect for the law of Illinois.

State Farm required its policyholders to use aftermarket parts if the aftermarket parts are functionally equivalent to the parts sold by the original equipment manufacturers (OEMs), - Ford, GM, Chrysler, etc. Among the claims in the Avery case is that aftermarket automobile parts cannot be as good as the OEM parts because only the OEMs know the exact specifications, which they keep secret.

This is an absurd claim for several reasons. For example, it is logically flawed to say that aftermarket parts cannot be better than OEM parts simply because the OEMs keep their specifications secret. That would be like saying Pepsi cannot be as good as Coke because Pepsi does not know Coke's secret formula.

Regardless of whether aftermarket competitors know the exact specifications of the OEMs, they can still make parts that are as good as or better than OEM parts. Indeed, it is well known that some aftermarket and OEM parts come off the same assembly line with the only difference being the brand name. Furthermore, OEM parts are not without their problems --witness the numerous recalls that have become a staple of modern life.

The law of California recognizes the merits of aftermarket parts and also recognizes that it is important for consumers to have a choice between aftermarket and OEM parts so that consumers are not subject to OEM monopolies. Therefore the law of California quite reasonably provides that equivalent aftermarket parts may be used in insurance-funded repairs with the consent of the insured. Use of such parts enables insurance companies to keep costs (and premiums) down.

Since the $1.2 billion verdict against State Farm last fall, the other major issuers of auto insurance have also been sued. After the verdict, State Farm stopped purchasing and using aftermarket auto parts. Other insurance companies have done the same thing.

Because insurance companies are the biggest purchasers of auto parts, this loss of customers has been devastating to sellers of aftermarket parts such as Collision Parts Network. That company, which had been very successful, has declined drastically since the Avery verdict.

Collision Parts Network then consulted legal counsel about this problem. Mr. Hansen was at a loss to explain how a court in Illinois could make a decision drastically affecting his business in California contrary to California law.
As a result of the consultations, Collision Parts Network has now filed suit against Mr. Avery in California Superior Court in Fresno, California, seeking a declaration that California - not Illinois - law applies to the purchase of aftermarket parts in California. Other lawsuits by other aftermarket competitors in other states may well follow.

The problem addressed by this lawsuit is not class actions in general or nationwide class actions in particular. The lawsuit specifically addresses the absurdity of the Avery class action.

Our elected representatives have authorized class actions as a way for people with claims too small to bring to court to aggregate their claims so that justice can be done. It is just and efficient to have state courts manage nationwide class actions if the laws of the states involved are similar. When, as in the Avery case, the courts of one state try to control activity in another state with different laws, then a problem occurs.

Collision Parts Network is a law-abiding company. As a California company, however, it has a right to be guided by the laws of that state, not Illinois.