(Reuters) - Both sides of the class action bar have big problems with the 9th U.S. Circuit Court of Appeals’ Jan. 23 opinion in In re Hyundai and Kia Fuel Economy Litigation, which held that judges must analyze and compare state laws before approving nationwide class action settlements. Lawyers for both the class of Hyundai and Kia owners, as well as lawyers for the car makers, have asked for an en banc rehearing of the three-judge panel’s split decision, arguing that if the ruling stands, it will be much harder to strike nationwide deals. Even the American Tort Reform Association, generally not a fan of class actions, filed an amicus brief calling for en banc reconsideration of Hyundai on the grounds that choice-of-law analysis will cost defendants extra time and money.
But Hyundai is not universally despised! The 9th Circuit asked class action objectors – who, after all, brought the appeal that led to the panel’s controversial decision – to submit briefs responding to the calls for en banc reconsideration. Two firms representing Hyundai objectors, The Gibson Law Firm and James B. Feinman & Associates filed briefs last week arguing that the three-judge panel followed U.S. Supreme Court and 9th Circuit precedent and reached the right conclusion when it rejected the $200 million nationwide Hyundai settlement.
Both of the Hyundai defenders insisted that the panel correctly interpreted the Supreme Court’s 1997 ruling in Amchem v. Windsor, which struck down a global asbestos settlement because it purported to resolve claims of future asbestos plaintiffs. Amchem made clear that the court has to consider predominance in certifying settlement classes as well as litigation classes, wrote Dennis Gibson. It also said that differences in state law are part of the predominance inquiry.
“The reason for that conclusion is obvious: A question cannot even be common, let alone predominate, if its resolution is not relevant to the legal claims of all of the members of the class,” Gibson argued. “Determining the relevant legal standards, and what facts are relevant under those standards, is therefore an essential first step in assessing predominance. By completely ignoring the differences in state law in this case which had been briefed and which the district court had found to be material, the panel majority correctly found that the court below abused its discretion.”
The 9th Circuit’s own rulings lead to the same result, Gibson and Feinman said. They argued that 2012’s Mazza v. American Honda, in which the appeals court vacated certification of a class of Honda owners because of material differences in state consumer laws governing class members’ claims, applies in the context of class action settlements as well as contested class certification motions.
They also asserted that Hyundai haters were putting the wrong spin on 1998’s Hanlon v. Chrysler. In Hanlon, the 9th Circuit affirmed approval of a nationwide settlement over objections by Georgia consumers who wanted to proceed in state court – an outcome that should have led to the same result in the Hyundai case, according to class counsel, Hyundai and Kia. Gibson and Feinman said, however, that the Hanlon court focused on the classwide “common nucleus of facts and potential legal remedies” that superseded differences in applicable state laws. Feinman emphasized that the named plaintiffs in the Hanlon case included residents of every state in which class members lived. By contrast, he said, no Virginians led the Hyundai case, even though Virginia law offers more potential damages than California law.
Finally, the objectors’ briefs discounted arguments that the panel’s Hyundai decision conflicts with rulings by the 3rd and 7th Circuits. Both Gibson and Feinman said the 7th Circuit’s 2011 opinion in In the Matter of Mexico Money Transfer Litigation was based on class members’ federal claims, not various state consumer laws. Admittedly, the 3rd Circuit’s en banc 2011 opinion in Sullivan v. DB Investments upheld approval of a class settlement implicating varying state antitrust laws. But Gibson called the 3rd Circuit ruling an “outlier” that does not bind the 9th Circuit.
“The 3rd Circuit’s opinion in Sullivan is in direct conflict with Amchem and Hanlon’s language that the test for predominance is at least the same, if not heightened, with a settlement class,” Gibson said.
The Competitive Enterprise Institute is not involved in the Hyundai appeal so did not submit a brief responding to calls for en banc review. But to understand the arguments against certification of nationwide settlement classes implicating different state laws, check out CEI’s 9th Circuit brief in In re: Lithium Ion Batteries Antitrust Litigation. In that case, battery makers agreed to a $45 million settlement covering all indirect purchasers – even though half of the class resides in states whose antitrust laws don’t provide a cause of action for indirect purchasers. The CEI brief, filed on behalf of a class member from a state that does permit recovery, said the nationwide settlement doesn’t acknowledge that his claims were stronger than those of class members from states with no protection for indirect purchasers. As you would expect, the filing includes many of the same cases that figure prominently in the Hyundai en banc briefing.
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