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En Banc Ninth Circuit Reinstates and Clarifies Standard for Nationwide Class Action Settlement

Last month, the Ninth Circuit sitting en banc affirmed, by an 8–3 vote, a nationwide class settlement of a multidistrict litigation against automakers Kia and Hyundai over alleged misrepresentations regarding certain vehicles’ fuel efficiency. In re Hyundai and Kia Fuel Economy Litigation, 15-56014 (9th Cir. 2019). The en bancdecision overturned the controversial decision last year by a split Ninth Circuit panel invalidating the settlement based on potential variations in state consumer protection laws. The panel decision cast serious doubt on the viability of nationwide settlements of class action suits filed within the Ninth Circuit.

This lawsuit was first filed in 2012 in the Central District of California, and subsequently was consolidated with a number of similar complaints into a single multidistrict litigation. In 2013, the parties reached a class-wide settlement agreement, and the district court certified for settlement purposes a nationwide class of all current owners and lessees who bought or leased the vehicles in question before the defendants announced downward adjustments of fuel efficiency estimates. The district court then granted final approval of the class settlement, which included an award of attorneys’ fees to class counsel. A number of objectors appealed the settlement class certification decision to the Ninth Circuit and, in 2018, a divided three-judge panel vacated the certification of a nationwide class and remanded to the district court.

The three-judge panel’s 2018 opinion held that in certifying a nationwide settlement class, the district court was required to analyze all applicable state laws to determine whether variations in the 50 state laws defeated predominance. In short, the panel required that the parties establish the predominance element in the same way as a plaintiff would need to do to certify a nationwide litigation class in a contested class certification motion. Because the district court did not conduct such an inquiry for the settlement class here, the panel concluded that the certification decision was in error. The Ninth Circuit’s 2018 opinion caused widespread consternation among counsel for both class action plaintiffs and defendants, because it raised the prospect that any certification of a nationwide settlement class in a case pending within the Ninth Circuit would have to be preceded by a burdensome and expensive analysis of variations in state law, threatening the viability of nationwide class action settlements in the Ninth Circuit.

In reversing the panel decision, the en banc court noted that no objectors had met their burden of establishing that the law of any state other than California applied. Moreover, and more importantly, the en banc court held that a district court need not conduct the same rigorous analysis of trial manageability when certifying a settlement class, noting that “a class that is certifiable for settlement may not be certifiable for litigation if the settlement obviates the need to litigate individualized issues that would make a trial unmanageable.” As a result, differences in available rights and remedies under the various laws of the 50 states no longer warrant denial of certification for settlement purposes in federal courts in California (where more class actions are brought than in any other state) or in the other states of the Ninth Circuit.

The In re Hyundai and Kia en banc decision provides an important clarification of the standards for certification of settlement classes as compared to litigation classes, and revives the viability of nationwide class settlements in the Ninth Circuit. The en banc court’s decision also brings the Ninth Circuit in line with the Third and Seventh Circuits, which both have held that variations in the laws of different states do not defeat predominance in the context of a settlement class. Watch this space for further developments.

© 2019 Proskauer Rose LLP.

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About this Author

Lawrence I Weinstein, False Advertising and Trademark Copywright Law, Proskauer
Partner

Larry Weinstein is a Partner in Proskauer's Litigation Department. He is co-head of the firm’s Intellectual Property Litigation Group, and also co-head of the firm’s False Advertising & Trademark Practice. Larry is both a distinguished trial lawyer and counselor, whose practice covers a broad spectrum of intellectual property law, including Lanham Act false advertising and trademark cases, consumer class action cases, NAD and FTC proceedings, and trade secret and copyright litigations, as well as sports, art and other complex commercial cases.

212-969-3240
Jennifer Yang, Litigation Law, Proskauer Law Firm
Associate

Jennifer Yang is an associate in the Litigation Department. She is a commercial litigator with a particular emphasis on false advertising and other intellectual property disputes, including Lanham Act and consumer class action false advertising litigation, advertising challenges before the National Advertising Division, as well as trademark, trade secret and copyright litigation. She has experience representing clients in a variety of industries, including medical device companies, consumer products companies, fashion retailers and art foundations.

212-969-3394
Carl Mazurek Litigation Law Clerk
Law Clerk

Carl Mazurek is a law clerk in the Litigation Department. His area of concentration in the firm is litigation law. Carl Mazuerk is a contributing author for the firm's blog content. 

Education 

  • New York University School of Law, J.D., 2017
  • University of Cambridge, Ph.D., 2014
  • University of Cambridge, M.Phil., 2009
  • McGill University, B.A., 2007
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