United States: Ninth Circuit Vacates Final Approval Of National Settlement Class Action Certification

Last month, the Ninth Circuit vacated the certification of a nationwide class for settlement in the In re Hyundai & Kia Fuel Economy Litigation, No. 15-56014, 881 F.3d 679 (9th Cir. Jan. 23, 2018). The Ninth Circuit concluded that the district court abused its discretion because it failed to "conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23," specifically, whether variations in state law undermined the predominance requirement. Id. at 690. Parties involved in class actions, whether on a contested or a settlement basis, should carefully scrutinize Hyundai & Kia Fuel.

This case was originally brought in California state court. In January 2012, plaintiffs filed a putative nationwide class action in state court in Los Angeles County. See Espinosa v. Hyundai Motor Am., No. BC 476445 (Cal. Super. Ct. filed Jan. 6, 2012). These consumers sought relief pursuant to California consumer protection law and common law on the grounds that Hyundai and Kia had falsely advertised their vehicles' fuel efficiencies.

Hyundai and Kia removed the case to federal court pursuant to the Class Action Fairness Act, where it was then consolidated with actions filed across the country, including in Virginia, by an MDL panel. Hyundai and Kia first opposed class certification, arguing that the variations in state consumer protection laws precluded a finding of predominance under Rule 23(b)(3). The parties later reached a settlement on a nationwide basis, agreeing that the district court should certify a nationwide class of all current and former owners and lessees of Hyundai and Kia vehicles within the relevant time frame.

But a group of Virginia consumers opposed class certification and sought remand of their action to the Western District of Virginia, arguing that California's choice-of-law rules did not allow certification of the class and that the California district court granted class certification without ever addressing variations in state law to ensure that the class met all the prerequisites of Rule 23.

A group of consumers appealed to the Ninth Circuit, which vacated and remanded the settlement class to the California district court. The Ninth Circuit noted that a "rigorous analysis" is required and a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23. Id. at 690, 705 (quoting Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013)). The Court stated that the burden is on the plaintiff seeking class certification to demonstrate that all the requirements of Rule 23 have been met.

The Ninth Circuit conducted a review of Mazza v. American Honda Motor Co.to determine the steps required for an analysis of whether California law may be used on a nationwide basis. 666 F.3d 581, 590 (9th Cir. 2012). In applying Mazza to the Hyundai & Kia Fuel settlement, the Ninth Circuit held that the district court should have considered the variations in state consumer protection laws. These variations "will require adjudication under the laws of multiple states," and plaintiffs had failed to show that common questions would predominate over individual issues. In re Hyundai & Kia Fuel Econ. Litig., 881 F.3d at 693 (internal citations omitted). The Ninth Circuit remanded, and explained that a nationwide class may still be certified, but only after a "rigorous" Rule 23 analysis. Id. at 705.

This decision was not unanimous. The strong dissenting opinion argued that the majority's predominance analysis applied the incorrect burden of proof under California law for the choice-of-law analysis by requiring the proponent to prove that California law should be applied to all class members' claims, rather than requiring the proponent of foreign law to carry the burden. The dissent argued that this violated the Erie doctrine and conflicted with California law. Id. at 711–13.

The parties in the Ninth Circuit and elsewhere will now need to consider Mazza and Hyundai & Kia Fuel and how they affect proposed nationwide settlement classes. In particular, parties looking to certify classes, even on a settlement basis, should examine whether variations in state law for a cause of action may undermine certification, and examine whether settlement under other causes of action, which may be more uniform, is more amenable to certification.

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