Recent years have seen federal courts applying increased scrutiny to proposed “multistate” class actions that invoke a hodgepodge of state consumer-protection laws. The main reason: The variations among these state laws are not only extensive but often case-determinative, preventing class representatives from proving their claims on a classwide basis.
These decisions have, in turn, raised another question that has divided judges, commentators, and practitioners: Does the same high bar apply to the certification of nationwide classes that are purely vehicles for settlement—meaning that the court will never have to address the practical and legal difficulties of managing an actual classwide trial involving fifty (or more) state laws? In late January the Ninth Circuit weighed in to answer that it does, in a potentially seminal opinion that could, in the words of one dissenting judge, strike a “major blow” to multistate class action settlements.
In its January 23, 2018 decision in In re Hyundai and Kia Fuel Economy Litigation, the Ninth Circuit ruled, 2-1, that trial courts may not relax the standard for certifying a nationwide or multistate class merely because the plaintiffs have reached a settlement and do not intend to try their class claims. Federal courts have a “heightened” duty, in fact, to “consider the impact of potentially varying state laws” when deciding whether to certify multistate classes for settlement purposes. Finding that the district court had not fulfilled this duty, the Ninth Circuit reversed the trial judge’s approval of a classwide settlement that would have resolved, in one fell swoop, 56 class actions against Hyundai and its affiliate Kia.
The Hyundai/Kia litigation involved a series of false-advertising class actions filed against Hyundai and Kia in jurisdictions across the country. Invoking a wide array of state laws, the plaintiffs alleged that the companies had miscalculated the fuel-efficiency measures for many of their vehicles—and so misled thousands of car buyers and lessees. After the cases were consolidated in multi-district litigation, the plaintiffs reached a nationwide-class settlement with the defendants and moved for judicial approval. In certifying the nationwide class and approving the settlement, the district court declined to analyze which states’ laws applied to the class claims, reasoning that the plaintiffs were not taking the case to trial.
Writing for the majority, Judge Sandra Ikuta declared this approach “wrong as a matter of law.” The “settlement context” did not “relieve” the district court of its obligation to undertake a “rigorous” choice of law analysis; if anything, it required “heightened attention,” as the court was bound to ensure that the settlement bargain struck was “fair” to the unnamed class members scattered across the country. By refusing to take a “close look” at whether the class claims would “require adjudication under the laws of multiple states,” the trial court had not done enough to determine whether “variations in state law” would “swamp common issues and defeat predominance.”
The district court had also erred, the majority continued, by certifying an overly broad class comprising consumers who may never have even seen the advertisements at issue. Absent “the kind of massive advertising campaign at issue” in, say, tobacco litigation, “the relevant class must be defined in such a way as to include only members who were exposed to [the] advertising that is alleged to be materially misleading.” Without any “evidence in the record that used car owners were uniformly exposed” to the fuel-efficiency statements at issue, the court had failed to define the settlement class to include only consumers who had a viable claim.
Writing in dissent, Judge Jacqueline Nguyen cautioned that the decision had improperly shifted the burden onto “our overloaded district courts” to “survey all 50 states’ laws” before deciding whether to certify multistate or nationwide classes. Whether or not Judge Nguyen is correct that this holding will “deal a major blow to multistate class actions,” at least one takeaway is clear: Both plaintiffs and defendants attempting to settle multistate class actions must now give careful consideration to the conflicts among the applicable state laws before seeking court approval in the Ninth Circuit.