United States: Ninth Circuit Rules That Varying State Laws Do Not Defeat Predominance Requirement In Class Action Settlement Context

Seyfarth Synopsis: Satisfying Rule 23(b)(3)'s predominance requirement is undoubtedly a challenge when it comes to a nationwide class. Among the many issues that arise is the extent to which varying state laws can impact whether questions of law or fact common to class members predominate over any questions affecting only individual members. In In Re Hyundai & Kia Fuel Econ. Litig., No. 15-56014, 2019 WL 2376831 (9th Cir. June 6, 2019), after an en banc rehearing, the Ninth Circuit ruled that a district court did not abuse its discretion by failing to address varying state laws when granting class certification for settlement purposes. Drawing a distinction between class certification for litigation purposes and class certification for settlement purposes, the Ninth Circuit held that the variations in state law across the nationwide class did not defeat predominance.

In many respects, this decision – which rescinds the panel's previous and controversial ruling that courts must address varying state consumer laws when certifying a settlement class – restores the standard for approval of class action settlements to what it has historically been in federal courts. Employers facing nationwide class claims in the Ninth Circuit now have an easier path to settlement, as it is less likely that varying state law will be an obstacle to satisfying predominance.

Background

In Re Hyundai arises out of an EPA investigation into Hyundai and Kia's representations regarding the fuel efficiency of certain car models. After the EPA began its investigation, a number of plaintiffs filed a class action in California state court, seeking to represent a nationwide class of car purchasers who were allegedly misled by defendants' fuel efficiency marketing.

Follow-on class action lawsuits were filed across the country and the MDL panel consolidated the cases in the Central District of California. Eventually, the parties informed the district court that they had reached a class settlement on a nationwide basis.

After winding through the approval process, the district court granted final approval of the nationwide class settlement, but did so over objections to the settlement. The objectors appealed, and a divided Ninth Circuit panel reversed, holding that by failing to analyze the variations in state law, the district court abused its discretion in certifying the settlement class. The Ninth Circuit voted to rehear the case en banc.

The Decision

The key issue on appeal was the extent to which a district court must address varying state laws when certifying a nationwide class for settlement purposes and, to what extent those varying laws impact the predominance analysis under Rule 23(b)(3). The predominance inquiry tests whether proposed classes are sufficiently cohesive and focuses on whether common questions present a significant aspect of the case that can be resolved for all members of the class in a single adjudication.

Quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997), the Ninth Circuit noted that the predominance inquiry is different depending on whether certification is for litigation or settlement purposes. "[I]n deciding whether to certify a settlement-only class," the Ninth Circuit explained, '"a district court need not inquire whether the case, if tried, would present intractable management problems.'" Id. (citation omitted).

Against this backdrop, the Ninth Circuit rejected the objectors' argument that the district court was required to address variations in state law. The Ninth Circuit began by explaining that "[s]ubject to constitutional limitations and the forum state's choice-of-law rules, a court adjudicating a multistate class action is free to apply the substantive law of a single state to the entire class." Id. at *9. Because no party argued that California's' choice-of-law rule should not apply or that differences in consumer protection laws precluded certification, the Ninth Circuit concluded that the district court was not required to address these issues.

In further support of this conclusion, the Ninth Circuit cited its decision Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). There, in rejecting the objectors' argument that "the idiosyncratic differences between state consumer protection laws" defeated predominance, the Ninth Circuit reasoned that the claims revolved around a "common nucleus of facts" and applied the longstanding rule that "differing remedies" do not preclude class certification. Id. at 1022–23.

Based on this reasoning, the Ninth Circuit ultimately concluded that the district court did not abuse its discretion in finding that common issues predominated, notwithstanding varying state consumer protection laws.

Implications for Employers

In Re Hyundai highlights the potential challenges posed by nationwide classes given the Rule 23(b)(3) predominance requirement for certification, even in the context of a settlement class. By ruling that the district court is not required to analyze varying state laws when certifying a settlement class, the Ninth Circuit created an easier path to settlements involving nationwide classes. But employers should keep in mind this result was driven by, in part, the objectors' failure to demonstrate that California law should not apply. In other words, the issue of varying state laws is not wholly irrelevant to the predominance inquiry and employers should nevertheless be prepared to address such arguments if objectors adequately raise them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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