On June 6, 2019, the Ninth Circuit (sitting en banc) affirmed certification of a nationwide settlement class and held that certification criteria are applied less stringently in the settlement context. In re Hyundai and Kia Fuel Economy Litig., 2019 WL 2376831 (June 6, 2019) (Hyundai II). The decision reviewed and reversed a three-judge panel decision (Hyundai I) that raised a collective squawk from both sides of the class-action bar when it held that a choice-of-law analysis must be conducted when determining predominance under Rule 23, raising concerns about whether a nationwide settlement class could ever be certified.
En banc, the Ninth Circuit reversed the three-judge panel (with the lone dissenter in Hyundai I eventually writing the majority en banc opinion) and held that district courts must consider Rule 23(b)(3)’s predominance factors in light of the purpose for which certification is sought. More specifically, the Ninth Circuit recognized the common-sense differences between settlement classes and contested class-certification motions. Hyundai II preserves the traditional analysis for disputed classes while acknowledging the fact that a “settlement obviates the need to litigate individualized issues that would make a trial unmanageable.” By treating predominance as a manageability issue, Hyundai II allows district courts to set aside, or at least relax, their predominance inquiries in the settlement-class context. See Amchen Prods. Inc. v. Windsor, 521 U.S. 591 (1997) (district courts do not have to consider manageability issues when approving settlement classes).
Among other things, the Ninth Circuit also dealt a blow to class-settlement objectors, who frequently threaten to opt out of a settlement class on behalf of an entire subclass to extract further concessions from defendants. Hyundai II rejected the argument that an objector may opt out of a settlement class on behalf of an alleged subclass, finding that objectors have “no right to [opt out] on behalf of anyone else.”
Hyundai II hopefully marks a sea change in the Ninth Circuit, which, over the past decade in particular, has tended to be skeptical of class-action settlements and in favor of heightened judicial scrutiny. Plaintiffs, defendants, and practitioners should be cautiously optimistic that, as a result of this decision, class-action litigation in the Ninth Circuit may be settled more easily, with more finality, and on terms that benefit all of the parties involved.
Brandon Rainey is a senior litigation associate in Baker McKenzie’s San Francisco, California, office.