Judge Sandra Segal Ikuta, of the U.S. Court of Appeals for the Ninth Circuit, speaking during a panel discussion at the Federalist Society's 2018 National Lawyers Convention, held at The Mayflower Hotel in Washington, D.C.. Judge Sandra Segal Ikuta, of the U.S. Court of Appeals for the Ninth Circuit, speaking during a panel discussion at the Federalist Society's 2018 National Lawyers Convention, held at The Mayflower Hotel in Washington, D.C., on Nov. 16, 2018.

An en banc panel reversed a court of appeals decision that lawyers on both sides had feared would make it nearly impossible to get approval of nationwide class action settlements.

Thursday's split decision by the U.S. Court of Appeals for the Ninth Circuit reversed a 2018 opinion that had decertified a nationwide class action settlement with Hyundai Motor America Inc. and Kia Motors America Inc. after concluding the district judge had failed to analyze the consumer laws of several states. In re Hyundai and Kia Fuel Economy Litigation caused alarm for lawyers in both parties, and the decision has appeared in high-profile settlements.

Circuit Judge Jacqueline Nguyen, writing for the majority, is the same judge who wrote the dissent in the original 2-1 opinion insisting that such a strict set of requirements “deals a major blow to multistate class actions.”

In the en banc decision, Nguyen wrote that there was no requirement, absent sufficient showing from an objector, that the judge or lawyers had to analyze variances in state laws at the settlement stage.

“The criteria for class certification are applied differently in litigation classes and settlement classes,” Nguyen wrote. “In deciding whether to certify a litigation class, a district court must be concerned with manageability at trial. However, such manageability is not a concern in certifying a settlement class where, by definition, there will be no trial.”

In a dissent, Circuit Judge Sandra Ikuta, who was author of the original opinion, cautioned that courts should not “accept on faith” the assertions from lawyers that there were no differences in state laws.

“The district court must identify the law that applies to plaintiffs' claims regardless of whether the court is certifying a litigation class or a settlement class,” she wrote. “In this action, the district court failed to discharge its threshold responsibility to determine what substantive body of law applied to the plaintiffs' claims before it certified the class.”

Steve Berman of Seattle's Hagens Berman Sobol Shapiro, who argued the en banc appeal for the plaintiffs, praised the decision.

“This was a big win for us for the case but, at a broader level, it resets the law on approval of class action[] settlements to where it had been before,” he wrote in an emailed statement. “This will give a lot of guidance to the district courts that had been struggling on what to do with settlements based on the panel decision.”

Hyundai attorney Shon Morgan of Quinn Emanuel Urquhart & Sullivan in Los Angeles, declined to comment.

“The en banc court's decision helps promote reasonably compromise in the future between class action plaintiffs and defendants,” said an attorney for Kia, James Azadian of Dykema Gossett in Los Angeles and Washington, D.C. “The en banc court correctly decided the case and realigned Ninth Circuit precedent with Supreme Court precedent and the precedents from the circuits across the country.”

 

James Feinman, of Lynchburg, Virginia, who argued on behalf of the objector, provided a statement.

“We would never have pursued this litigation but for our confidence that Virginia law in this case allows a superior recovery for Virginia consumers,” he wrote. “The California class action lawyers, instead of joining with us to hold Hyundai accountable under the law, fought to maintain their $365 average recovery for each Virginian, while collecting $9,000,000 in fees. We do not think this is correct under the law.”

In 2012, Hyundai and Kia lowered their fuel efficiency estimates for about 900,000 vehicles and set up a reimbursement program for consumers. On the heels of the announcement, dozens of class actions were filed across the country. U.S. District Judge George Wu of the Central District of California had tentatively rejected certification of one of the cases after concluding there were differences among the various state consumer laws. But before he could issue a final ruling, the U.S. Judicial Panel on Multidistrict Litigation in 2013 transferred 56 class actions to his courtroom.

Objectors brought five appeals to the Ninth Circuit. Among them was an objector, represented by Feinman, purporting to represent 19,000 residents of Virginia, where the consumer law, he alleged, would have allowed more damages than would California's.

Wu granted final approval of the settlement in 2015, prompting several objectors to appeal on numerous grounds.

The key issue behind the original decision was the finding that Wu had failed to conduct an analysis over whether consumer laws in several states were so different from one another as to defeat the common claims of class members. That so-called predominance analysis is required under Rule 23, the class action law under the Federal Rules of Civil Procedure, although many debate whether it is essential at the settlement stage, when everyone's goal is to wrap up the litigation, as opposed to class certification.

Lawyers on both sides of the case, citing a circuit split, petitioned the Ninth Circuit to review the case en banc. They argued that the ruling conflicted with a host of other decisions, including the Ninth Circuit's own opinion in Hanlon v. Chrysler, which found in 1998 that “idiosyncratic differences between state consumer protection laws are not sufficiently substantive to predominate over the shared claims.”

They also argued that the ruling incorrectly relied on the Ninth Circuit's 2012 holding in Mazza v. American Honda Motor, which decertified a nationwide class under California law after finding that each of the 44 states involved had a “strong interest in applying its own consumer protection laws.” That ruling, they argued, involved a certification motion, not approval of a settlement.

Several amici, including the American Tort Reform Association and Public Justice, sided with reversal.

Following oral arguments last year, the en banc panel agreed that there was a difference between class certification and settlement. That was true even with the U.S. Supreme Court's 1997 decision in Amchem Products v. Windsor, which instructed that courts give “undiluted, even heightened, attention” to Rule 23's requirements in order to protect the rights of absent class members, Nguyen wrote.

But, unlike Amchem, which involved a settlement of asbestos claims for myriad types of health injuries, consumer fraud cases involved common claims such as the company's marketing efforts or misrepresentations about its products—in this case, Hyundai's advertisements about a vehicle's fuel efficiency.

“This cohesive group of individuals suffered the same harm in the same way because of the automakers' alleged conduct,” Nguyen wrote. “We have held that these types of common issues, which turn on a common course of conduct by the defendant, can establish predominance in nationwide class actions.”

Ikuta, in the dissent, said the majority's analysis was a “mischaracterization and inappropriate narrowing” of Amchem. And Wu, she wrote, failed to heed Amchem's “clear direction.”

“Our court, like many others, leans toward approving class certifications and class settlements, which benefit both defendants (who are relieved of significant liability in a single stroke) and class counsel (who are amply rewarded for their efforts),” she wrote. “The majority's failure to correct these errors may be beneficial for the class action bar, but it detracts from compliance with Supreme Court precedent.”

Objectors raised additional issues, such as the $9 million in attorney fees awarded in the case. Lawyers had pegged the settlement's value at between $44 million and $210 million, but Wu never came up with an estimate.

The majority upheld the fees, but Ikuta, in the dissent, reversed on that ground, concluding that “the district court did not have the information necessary for determining whether the attorneys' fees awards were proportionate to the benefit obtained for the class.”