Late last month, in In re Hyundai & Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018) (Hyundai), a divided Ninth Circuit panel reversed the district court’s approval of a proposed nationwide class settlement valued at over $200 million. This decision, upending a settlement in multidistrict litigation alleging that Hyundai and Kia misstated the fuel efficiency of their vehicles, held that where plaintiffs bring a nationwide class action under the consumer protection laws of a single state, a district court must consider the impact of potentially varying state laws. See id. at 691 (“[i]n a multi-state class action, variations in state law may swamp any common issues and defeat predominance”) (quoting Castano v. American Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996)).
But the salient element of the court’s decision may be the edict that a district court must be even more rigorous in applying Rule 23 standards to a proposed settlement class than to a proposed litigation class. As a practical matter, this effectively renders it impossible to certify a settlement class after a district court has denied certification. So if a settlement is in the works, the parties should consider postponing the resolution of a class certification motion. If the parties do not secure a stay and the court denies certification, objectors may be able to rely on arguments successfully advanced by the defendant against class certification in support of their objections to a proposed class settlement.
The case began in California state court as a single class action (Espinoza) that was removed to the Central District of California. The Espinoza court issued a tentative ruling on a pending motion for class certification, indicating that the plaintiffs would not be able to pursue a nationwide class under California law.
In doing so, the district court performed the “predominance inquiry” applied by the Ninth Circuit in Mazza v. American Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), which the Hyundai majority described as a “closely analogous” case. 881 F.3d at 692. In Mazza, Honda contended the district court erred in certifying a nationwide class under Rule 23(b)(3), because “California’s consumer protection statutes may not be applied to a nationwide class with members in 44 jurisdictions.” Id. at 692 (quoting Mazza, 666 F.3d at 589). Agreeing with Honda, Mazza reversed the district court based on the three-step analysis required by California’s choice of law (its “governmental interest”) test: (1) whether there were material differences between applicable California law and the analogous laws of other states; (2) whether another state where the car sales at issue took place “has a strong interest in applying its own consumer protection laws to those transactions”; and (3) whether “if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce.” Id. at 693 (quoting Mazza, 666 F.3d at 592-93). Based on this analysis, Mazza concluded that “each class member’s consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place,” and thereby reversed the district court’s certification grant. Id. (quoting Mazza, 666 F.3d at at 594).
Applying this same framework in Espinosa, the district court tentatively ruled it could not certify a class for trial. Defendants’ evidence, according to the district court, “unquestionably demonstrates that there are material differences as between the various states’ laws that would ‘make a difference in this litigation.’” Id. at 696 (quoting Mazza, 666 F.3d at 590–91). The district court also found that (as in Mazza) each of the states “has an interest in balancing the range of products and prices offered to consumers with the legal protections afforded to them.” Id. (quoting Mazza, 666 F.3d at 592). Finally, the district...
