On June 6, 2019, the Ninth Circuit Court of Appeals affirmed the Central District of California’s decision to certify a nationwide settlement class in In re Hyundai & Kia Fuel Econ. Litig. No. 15-56014, 2019 WL 2376831 (9th Cir. June 6, 2019). In so doing, the Ninth Circuit found that variations in state law do not defeat the predominance requirement of Federal Rule of Civil Procedure 23, reversing its previous ruling on the issue.
In January 2012, a putative nationwide class action was filed against Hyundai, alleging that the company misled consumers by advertising inflated fuel economy standards for some of its vehicles based on inaccurate estimates that Hyundai provided to the Environmental Protection Agency. The plaintiffs brought claims under California consumer protection statutes and based on theories of common law fraud and negligent misrepresentation. In November 2012, Hyundai and Kia announced downward adjustments to the fuel economy estimates for certain vehicles and created a compensation program for the owners and lessees of those vehicles tied to the higher fuel costs associated with the revised fuel economy estimates. This announcement fueled the filing of numerous class actions in federal and state courts around the country, asserting similar legal theories and seeking similar relief. The federal cases were consolidated into a single multidistrict litigation in the Central District of California.
In February 2013, the parties reached a proposed nationwide settlement. Subsequently, the district court set a course for confirmatory discovery, which ultimately lasted eight months and produced 300,000 pages of documents and under-oath interviews. After the settling parties sought preliminary approval of the nationwide class settlement in December 2013, the district court ordered several rounds of briefing concerning the fairness, reasonableness, and adequacy of the settlement and whether a settlement class should be certified. This resulted in four hearings and two rounds of revisions to the settlement agreement and notice provisions.
The district court then granted preliminary approval of the settlement and certified a settlement class on August 29, 2014. After four more hearings and additional revisions related to the settlement, the district court granted final approval of the class settlement on June 11, 2015. Various objectors challenged, amongst other findings, the district court’s findings regarding the predominance of common factual or legal issues. On January 23, 2018, a divided three-judge panel of the Ninth Circuit vacated the district court’s ruling on class certification. The majority held that the district court failed to conduct a rigorous predominance analysis to determine whether variations in state consumer protection laws precluded class certification.
The Ninth Circuit, sitting en banc, reversed the panel’s decision and affirmed the district court’s order certifying the nationwide settlement class, finding that variations in state law do not defeat predominance. In reaching its decision, the Ninth Circuit made clear that litigation classes and settlement classes necessitate a different application of the class certification criteria. Specifically, manageability at trial is a key consideration for a court when deciding whether to certify a class for litigation purposes. That consideration is mooted when a court is deciding whether to certify a settlement class. Instead, when deciding whether to certify a settlement class, a court must give increased attention to the class and subclass definitions because there will not be an adversarial trial to test the definitions and allow for the court to make necessary adjustments.
To this end, the predominance requirement of Rule 23 is designed to test whether the cohesiveness of the proposed classes is adequate to warrant adjudication by representation. The inquiry focuses on whether the common questions rise to the level of comprising a significant aspect of the action and can be resolved for all class members in a single determination. As the Ninth Circuit discussed, the action may be considered appropriate under Rule 23(b)(3) so long as even one common question predominates. The court recognized that predominance is readily met in consumer fraud cases, such as the Hyundai case, where the heart of each consumer’s claim is that a company misrepresented its product to all consumers through its common marketing efforts.
The Ninth Circuit’s decision restores clarity on class action settlements and reestablishes the standard for certifying consumer fraud-type class settlements. If the panel’s initial decision stood, it would have become much harder to obtain nationwide class settlements. Such difficulty in obtaining nationwide class settlements would have thwarted the goals of attorneys on both sides of the class action bar—plaintiffs’ counsels’ goal of generating a larger contingency fee and defense counsels’ goal of achieving global peace for their clients. Instead, the Ninth Circuit’s en banc decision highlights that variations in state laws in consumer fraud cases bares on manageability, a predominance consideration that is mooted in the settlement context. The Hyundai decision obviates the need to engage in an intensive fifty-state survey of consumer protection laws when attempting to certify a nationwide settlement class.