September 17, 2019

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Ninth Circuit Fuels More Efficient Nationwide Class Settlement

Reversing itself in a 7-4 en banc decision, the Ninth Circuit reinstated a $210 million settlement in multidistrict class action litigation over the advertised fuel efficiency of Hyundai and Kia vehicles, making approval of nationwide class action settlements easier. In re Hyundai and Kia Fuel Economy Litigation, 2019 U.S. App. LEXIS 17047 at *5 (9th Cir. 2019). In its decision, the Ninth Circuit applied a lower standard to Rule 23(b)(3) predominance analysis in the settlement context—as opposed to a contested class certification motion—for issues of choice-of-law and reliance under state consumer protection statutes. Judge Ikuta argues in dissent that this may not be consistent with controlling Supreme Court precedent, Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997).

The en banc opinion reverses the earlier ruling of a three-judge panel holding that courts must engage in the same “rigorous predominance analysis” in both settlement and litigation contexts. In re Hyundai and Kia Fuel Econ. Litig., 881 F.3d 679, 693 (9th Cir. 2018) rv’d 2019 U.S. App. LEXIS 17047 (9th Cir. 2019). The three-judge panel had vacated certification of a nationwide settlement class, relying heavily on Amchem, which held that district courts must give “heightened attention in the settlement context” to the definition of the class or subclass. The panel held that the district court erred by certifying a class without engaging in a detailed choice-of-law analysis under the laws of multiple states to determine the predominance of a common question of law. In re Hyundai and Kia Fuel Econ. Litig., 881 F.3d 679, 703 (9th Cir. 2018). The panel also held that that the district court erred by not requiring individualized evidence of reliance to establish that each class member was actually exposed to the advertisements at issue. Id. at 704.

Distinguishing Amchem, the en banc panel affirmed Central District of California Judge George H. Wu’s 2015 final settlement approval order, disagreeing with the earlier panel decision in two key respects.

First, the en banc panel applied a lower threshold for proof of class exposure sufficient to establish reliance on allegedly misleading advertising in the settlement context. As part of predominance analysis, a class can only be certified if the relevant class is limited to members who were exposed to, and relied on, such advertising. Mazza v. American Honda Motor Co., 666 F.3d 581, 596 (9th Cir. 2012). The en banc decision seemingly limits the settlement applicability of Mazza, reasoning that Hyundai’s and Kia’s uniform alleged misrepresentations in nationwide advertising were sufficient to establish reliance, and did not require individualized proof. According to the en banc panel, the predominance inquiry is mainly concerned with “the balance between individual and common issues” and potential individual questions of reliance did not predominate because they primarily concerned trial manageability issues. In re Hyundai and Kia Fuel Econ. Litig., 2019 U.S. App. LEXIS 17047 at *24-25 (9th Cir. 2019).

Second, the en banc panel determined that variations in state law did not defeat predominance. In Mazza, the court had held that district courts cannot sidestep a full choice-of-law analysis in nationwide class actions. 666 F.3d 581, 590-91. The en banc panel here sidestepped Mazza, holding that California law applied by default because objectors challenging the class settlement had failed to present an adequate choice-of-law analysis or explain how, under California’s choice-of-law principles, application of foreign law was required. In re Hyundai and Kia Fuel Econ. Litig., 2019 U.S. App. LEXIS 17047 at *27 (9th Cir. 2019). Again noting the absence of trial manageability concerns, the en banc panel determined that common questions of law and fact predominated notwithstanding any differences in state law, because the claims revolved around a “common nucleus of facts,”—Hyundai’s and Kia’s fuel economy representations—and “differing [state law] remedies do not preclude class certification.” Id. at *30 (9th Cir. 2019). The en banc panel’s decision seems to revive the less stringent, pre-Amchem view of class certification in the settlement context, at least as to predominance analysis. Whether this view will withstand Supreme Court scrutiny is yet unclear.

* Kathryn Kafka, a law student at the University of Southern California’s Gould School of Law, is a summer associate in the firm’s San Francisco office.

Copyright © 2019, Sheppard Mullin Richter & Hampton LLP.

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About this Author

Anna McLean, Legal Specialist, Sheppard Mullin, Business Trial, defense
Partner

Ms. McLean is a partner in the Business Trial practice group in the firm's San Francisco office.

Areas of Practice

Ms. McLean’s practice focuses on the defense of complex class actions, with particular emphasis on consumer finance and product liability. She represents auto finance companies and other financial institutions, insurance companies, and other providers of consumer products and services with regard to alleged unfair business practices, consumer disclosure issues, and mortgage and auto lending claims. She also represents major manufacturers in the...

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