August 29, 2018 Practice Points

Ninth Circuit Court to Review Hyundai & Kia MDL Settlement En Banc

By Heather Lonian

On July 27, 2018, the U.S. Court of Appeals for the Ninth Circuit Court granted petitions for en banc review of the three-judge panel's January 23, 2018, ruling vacating certification of a $210 million multistate class settlement in the In re Hyundai & Kia Fuel Econ. Litig. MDL. Espinosa v. Ahearn (In re Hyundai & Kia Fuel Econ. Litig.), 2018 U.S. App. LEXIS 20906 (9th Cir. July 27, 2018). The en banc court will hear oral argument on September 27, 2018. Both consumer and business advocates had expressed concern that the panel's 2-1 majority holding that a district court reviewing a nationwide class settlement of state-law claims must conduct the same rigorous choice of law and Rule 23(b)(3) predominance analysis that it would in a litigation context significantly limits the ability of parties to enter into those settlements.

Multiple class complaints were filed against Hyundai and Kia in 2012 alleging that the automakers misstated the fuel economy of certain vehicles in violation of various state consumer protection laws. These cases were transferred to an MDL proceeding before Judge George H. Wu of the U.S. District Court for the Central District of California in 2013. Later in 2013, the parties entered into a proposed nationwide class settlement. In their motion for certification of the settlement class, the plaintiffs identified violations of California's consumer protection laws as the purported common issues. Espinosa, 881 F.3d at 697. A group of Virginia plaintiffs objected to the proposed settlement on the grounds, inter alia, that an application of California's choice of law rules required that Virginia law be applied to their claims. Ruling that a choice of law analysis was not necessary in the context of a settlement class, the district court approved the settlement. The objectors appealed.

In the panel's majority ruling, written by Judge Sandra S. Ikuta, the majority held that the district court committed legal error by applying California's substantive law to the claims of the settlement class without first engaging in a rigorous choice of law and predominance analysis. The court held that the district court should not have applied California's substantive law in the face of "material differences" between the law of California and the laws of the other states, and further held that the district court:

erred by failing to make a final ruling as to whether the material variations in state law defeated predominance under Rule 23(b)(3). . . .The district court's reasoning that the settlement context relieved it of its obligation to undertake a choice of law analysis and to ensure that a class meets all of the prerequisites of Rule 23, is wrong as a matter of law.

Espinosa, 881 F.3d at 702.

The majority further held that, even if the class had consisted solely of California residents, the parties presented insufficient evidence to support a presumption of reliance as to used car owners, and that, as a result, Rule 23(b)(3) predominance was not satisfied as to these class members. Espinosa, at 703-04. The panel majority, however, did not foreclose the possibility that some iteration of the class could ultimately be certified, and remanded the case for further proceedings.

In her dissent, Judge Hong-Ngoc Thi Nguyen stated that the majority erred in "shift[ing] the burden of proving whether foreign law governs class claims from the foreign law proponent—here, the objectors—to the district court or class counsel.” Espinosa, 881 F.3d at 708. She also opined that the objectors failed to satisfy their burden of demonstrating that Virginia's law should be applied. The majority, she wrote, "deal[t] a major blow to multistate class actions." Id.

Business and consumer advocates shared this concern. Citing the drain of party and judicial resources that would result if every nationwide class settlement arising under state law required a 50-state choice of law analysis, a diverse array of organizations ranging from the American Tort Reform Association to the Impact Fund submitted amici briefs in support of the petitions for en banc review submitted by the plaintiffs and automaker defendants. Both sides of the class action bar should continue to monitor the case in order to determine what level of choice of law analysis is necessary in order to achieve global peace in the Ninth Circuit Court.


Heather Lonian is a member of Stone Pigman in New Orleans, Louisiana.

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