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July 01, 2019 Practice Points

Ninth Circuit Resuscitates Nationwide Settlement Classes

En banc panel holds state law variations play no role in settlement approval calculus.

By Jason Kellogg

On June 6, 2019, an en banc panel of the U.S. Court of Appeals for the Ninth Circuit issued its highly anticipated opinion in a case exploring the limits of parties’ ability to settle a nationwide class action. In In re Hyundai and Kia Fuel Economy Litigation, the Ninth Circuit held that courts considering whether to certify a nationwide class for settlement purposes need not consider the manageability factor when analyzing predominance.

Particularly noteworthy was the Ninth Circuit’s holding that variations in state laws governing a nationwide class will not defeat predominance in the settlement context, a decision that allayed concerns of parties on both sides of the bar regarding the continued vitality of nationwide class settlements.

The Hyundai decision arises from a series of class actions filed in federal and state courts following reports that Hyundai and Kia misrepresented the fuel economy standards of certain automobiles. The case ultimately settled on a nationwide basis, and final approval was granted in 2015.

Objectors to the settlement challenged and ultimately appealed the final approval order. A divided Ninth Circuit panel led by Judge Sandra Ikuta vacated the settlement class, holding that the district court abused its discretion by failing to analyze variations in state law before granting certification. The panel held that the district court could not have reasonably determined predominance without identifying the law applicable to the putative class. As a result of the opinion, plaintiffs and defendants were faced with the prospect of no longer being able to settle a nationwide class action, which presented concerns for both sides of the bar.

The Ninth Circuit granted the class plaintiffs’ request for en banc review and affirmed the district court’s final settlement approval order. Citing liberally to Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), Judge Jacqueline Nyguen, writing for the majority, emphasized differences between the certification of a litigation class and a settlement class. She noted that in a settlement class, the predominance prerequisite’s manageability factor plays no role because, by definition, there will be no trial. Judge Nyguen identified other, more “heightened” concerns for a district court to consider when considering the certification of a settlement class—in particular, overbroad class definitions and collusion among the settling parties.

In reaching its holding, the en banc panel rejected the objectors’ argument that the predominance test is identical for settlement and litigation classes, finding that “[a] class that is certifiable for settlement may not be certifiable for litigation if the settlement obviates the need to litigate individualized issues that would make a trial unmanageable.”

The main objectors, seeking to represent Virginians, called for a 50-state survey of consumer protection laws, arguing that Virginia’s consumer statute provided a lower hurdle to recovery than California’s. However, the en banc panel found that the argument had never been raised in the district court, and that “no case law supports th[e] unduly burdensome task” of requiring a district court to conduct such a survey.

The en banc panel also rejected the objectors’ allegations of collusion, finding that the settlement contained no clear sailing provision or kicker clauses, no evidence of reverse auctioning, a high participation rate, and a settlement value of about $159 million.

Judge Ikuta wrote the dissent, revitalizing arguments made in her original opinion. Also relying heavily on Amchem, she emphasized that “a court cannot certify a class if doing so would deprive litigants of the benefit of the appropriate substantive law applicable to their claims, even if a class action ‘would provide the most secure, fair, and efficient means’ of compensating plaintiffs . . . .”

Jason Kellogg is a partner at Levine Kellogg Lehman Schneider + Grossman LLP in Miami, Florida.

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