In a split panel, the Ninth Circuit Court of Appeals reversed a district court’s certification of a nationwide class action settlement because the lower court failed to conduct a sufficient predominance inquiry under Rule 23(b)(3).
In 2012 Hyundai and Kia were accused of overstating their fuel efficiency estimates in advertisements and car window stickers for certain of their vehicles. A flurry of putative class action litigation ensued across the country, and the MDL judicial panel transferred the cases to the California district court presiding over the lead case. The parties then reached a settlement of a single nationwide class and presented it to the district court for approval under Rule 23(b)(3), which provides a class action may be maintained only if questions of law or fact predominate over questions affecting only individual members. Numerous objectors argued that a nationwide class could not be certified under California choice of law rules because conflicts existed under the various state consumer protection statutes. The district court certified the nationwide settlement class — without ever addressing variations in state law — and approved the settlement. The objectors appealed.
The Ninth Circuit vacated the settlement. The court began by reiterating the Supreme Court’s warning in Amchem that district courts must give “undiluted, even heightened attention” to Rule 23 in the settlement context. 521 U.S. at 620. Here, the district court proceeded on the mistaken assumption that the standard for certification was lessened in the settlement context and that it could avoid the choice of law analysis on the ground that it found the settlement fair. Relying on its prior decision in Mazza, the Ninth Circuit held that the lower court erred by failing to apply California choice of law rules and by failing to rigorously analyze potential differences in state consumer protection laws to determine whether variations in such laws swamp common issues and defeat predominance under Rule 23(b)(3). Further relying on Mazza, the court also held that the district court erred by presuming that used car purchasers, who were class members, relied on Hyundai and Kia’s misleading statements. The court reasoned that there was no evidence as to the extent of defendants’ advertising campaigns for the 76 different car models at issue over several years, and that there was no legal requirement to provide used car purchasers with the offending window stickers. In conclusion, the Ninth Circuit remanded the case for further proceedings consistent with its opinion.
The dissent argued that since Mazza had held a nationwide class could not be certified in a closely analogous case, the majority had championed the cause of a handful of objectors and deprived thousands of consumers from recovering a settlement valued at more than $159 million.