Ninth Circuit Decertifies Hyundai Class Action Settlement

By Michael Fuller

On January 23, 2018, a divided panel of the U.S. Ninth Circuit Court of Appeals issued an opinion that may present difficulties for parties hoping to certify national class action settlements in the future.

The opinion, in In re Hyundai and Kia Fuel Economy Litigation, held that where plaintiffs bring a nationwide class action, Federal Rule of Civil Procedure 23(b)(3) requires courts to consider the impact of potentially varying state laws.

The opinion involved consumer complaints about misstatements made by Hyundai and Kia about the fuel efficiency of their vehicles. After the district court certified a $395 million settlement among the parties, a group of objectors filed an appeal to the Ninth Circuit. The objectors argued (among other things) that the district court erroneously failed to consider variations in each applicable state’s consumer protection laws.

Under Rule 23(a), a class action may proceed only if

“(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.”

The Ninth Circuit ruled that after Rule 23(a)’s prerequisites are met, plaintiffs seeking class certification must then satisfy Rule 23(b)(3), which says that “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy[.]”

The panel reasoned that while variations “in state law do not necessarily preclude a 23(b)(3) action,” “a court must consider the impact of potentially varying state laws.” The panel cited to a 2012 Ninth Circuit opinion called Mazza v. Am. Honda Motor Co., which laid out several steps district courts must follow to determine whether predominance is defeated by variations in state law under rule 23(b)(3).

Under Mazza v. Am. Honda Motor Co., plaintiffs must first establish that the forum state’s consumer protection laws may be constitutionally applied to the claims of the nationwide class. Then courts must use the forum state’s choice of law rules to decide whether to use the forum state’s consumer protection laws, or whether to use the laws of multiple states to decide the claims at issue. If courts ultimately decide that class claims “will require adjudication under the laws of multiple states,” they must then “determine whether common questions will predominate over individual issues and whether litigation of a nationwide class may be managed fairly and efficiently.”

​​The Hyundai opinion made no decision about whether or not to ultimately approve the parties’ proposed settlement under Rule 23(b)(3). Instead, the district court’s class certification was vacated, and the case was remanded for further proceedings consistent with the panel’s ruling.

 

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