En Banc Ninth Circuit Rules That Varying State Laws Do Not Preclude Certification of Nationwide Settlement Class

King & Spalding

On June 6, 2019, the en banc Ninth Circuit affirmed a nationwide class action settlement, holding that the district court did not err by failing to apply the law of each class member’s state before approving the settlement.

  • The settlement resolves claims against Hyundai and Kia alleging that the automakers misrepresented the fuel economy ratings of various vehicles.
  • The en banc decision overturns a January 2018 panel decision, which reversed the district court’s final approval order. The panel had concluded that the district court erred by not conducting a choice-of-law analysis that considered whether California law could apply to all members of the nationwide class, or whether the court had to apply the law of each state (and if so, whether variations in state law defeated predominance).
  • According to the en banc court, the district court properly considered the differences identified in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), when certifying a settlement class versus certifying a litigation class.
    • When certifying a class for settlement purposes, manageability of trying the class’s claims is not an issue, because there will be no trial. For instance, class settlement obviates the need for the court to instruct juries on the differences between various states’ laws.
    • Moreover, in certifying a class for settlement purposes, the primary focus of the predominance inquiry is not whether there are some differences in state laws, but instead whether the class members’ claims all hinge upon a “common nucleus of facts,” i.e., whether the class members were exposed to a “common course of conduct.”
  • The en banc court also rejected the argument that the inclusion of used-car purchasers in the class defeated predominance. Because the fuel economy misrepresentations were contained on Monroney stickers that only new cars are required to display, the panel reasoned that used-car buyers could not establish uniform exposure to and reliance upon the alleged misrepresentations. The en banc court held, however, that predominance is “readily met” in cases alleging consumer fraud and “potential individual questions of reliance for used-car purchasers do not predominate in the context of this proposed settlement class.”
  • The dissenting opinion stated that the district court’s failure to consider state-law variances violated Amchem’s rule that predominance questions “preexist any settlement.” Moreover, it criticized the majority for its failure to apply the holding in Mazza v. American Honda Motor Company, 666 F.3d 581 (9th Cir. 2012), that there are “material differences between consumer protection laws in California and other states.”
  • The en banc opinion removes what many practitioners and commentators perceived to be a significant impediment to settling class actions on a nationwide basis in the Ninth Circuit. At the same time, however, the opinion includes certain troubling dicta that may have implications for the defense of litigation classes, including language plaintiffs may argue weakens existing precedent, e.g., Mazza v. American Honda, and otherwise loosens the requirements for class certification.
  • Read the Ninth Circuit’s opinion here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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