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An appeals court decision on Tuesday sent shock waves throughout the class action bar for potentially threatening the ability of lawyers to get approval of national class action settlements in the Ninth Circuit.

In a 2-1 opinion, the U.S. Court of Appeals for the Ninth Circuit found that a federal judge in Los Angeles failed to consider potential differences in various state consumer laws—a process called a “choice-of-law” analysis—in finding that common issues predominated in a nationwide class action settlement with Hyundai Motor America Inc. and Kia Motors America Inc. in 2015. The majority relied heavily on the 2012 Ninth Circuit decision in Mazza v. American Honda Motor in vacating certification of the settlement class and remanding the case.

“Here, the district court failed to conduct a rigorous inquiry into whether the proposed class could meet the Rule 23 prerequisites on the mistaken assumption that the standard for certification was lessoned in the settlement context,” wrote Judge Sandra Ikuta. “Because our precedent raises grave concerns about the viability of a nationwide class in this context, this certification decision cannot stand.”

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Tuesday’s ruling, if upheld, adds a potentially major hurdle in getting nationwide class action settlements approved for lawyers on both sides. Choice-of-law issues, while common in class actions involving more than one state, come up more often at the class certification stage than in settlements, said some lawyers.

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Amanda Bronstad

Amanda Bronstad is the ALM staff reporter covering class actions and mass torts nationwide. She writes the email dispatch Critical Mass. She is based in Los Angeles.

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