9th Circuit reverses nationwide class certification in Hyundai, Kia mileage case

A 9th U.S. Circuit Court of Appeals panel reversed the approval of a nationwide class action settlement reached between consumers and a group of automakers Tuesday in a 2-1 decision that could send settlement-seeking parties back to square one.

U.S. District Judge George H. Wu had described the settlement reached between automakers Kia Motors America Inc., Hyundai Motor America, Hyundai Motor Co., and the plaintiff class of car buyers in 2015 as “a raging success.”

But the panel, in an opinion written by Judge Sandra Segal Ikuta, found that Wu had not properly defined who belongs to the affected class, among other deficiencies in his ruling aimed at ending a nationwide lawsuit over low mileage claims by the car makers.

During settlement talks, there was concern that certification couldn’t be granted because not all car buyers had been similarly misled. Some may have bought the vehicles because of the promised fuel efficiency, for example, but others may have simply been looking for a reasonably priced used car to purchase.

Lincoln Bandlow, a partner at Fox Rothschild LLP not involved in the case, said there’s no shortage of reasons to buy a car. Thus, he said, there may not be commonality of facts regarding the alleged reliance on statements about fuel economy.

Wu had cited a television ad campaign promoting the fuel efficiency of a Hyundai vehicle to determine commonality and justify class certification in pursuit of a settlement. But the panel found that in doing so, the judge failed to consider the impact of potentially varying state laws.

The appeal was filed by the plaintiffs of another action against Hyundai in the Western District of Virginia, which was identified as a tag-along action and transferred to the Central District of California despite differences in claims between the California and Virginia plaintiffs.

Appellants, including Virginia-based attorney James B. Feinman, objected on the grounds that Virginia law provides “a materially different remedy to Virginia consumers.” In Re Hyundai and Kia Fuel Economy Litigation, 2018 DJDAR 767.

The panel found that “certification of a nationwide class where California law is applied to out-of-state consumers” is foreclosed by a decision in Mazza v. American Honda Motor Co., “a case virtually on all fours with the instant matter.” Mazza v. American Honda Motor Co., 666 F.3rd 581 (9th Cir. 2012).

Harvey Rosenfeld, founder of Consumer Watchdog and an attorney for certain plantiffs, said he was not surprised by the result. Rosenfeld, who had challenged some terms in the settlement but hadn’t filed an appeal, said he’s studying the opinion to determine how to proceed.

“But clearly, this is going to have to start from scratch. We’re going to figure out what we’re going to do to best help consumers who have been waiting a long time,” Rosenfeld said.

He expressed concern that rejecting class certification based on state divisions could be a boon for defendants in consumer class actions looking to divide and conquer.

“There’s a national debate underway as to whether class actions can be certified on a nationwide basis, or whether they have to be broken down in state subclasses. From a defendant’s perspective, that’s a way to limit consumers from joining together to seek justice,” Rosenfeld said.

Judge Andrew Kleinfeld concurred with Ikuta’s opinion. Dissenting, Judge Jacqueline Nguyen said the reversal champions “the cause of a handful of objectors and their attorneys” at the expense of thousands of consumers.

“[T]he majority relies on arguments never raised by the objectors, contravenes precedent, and disregards reasonable factual findings made by the district court after years of extensive litigation,” Nguyen said.

Echoing Rosenfeld’s concern, Nguyen said the result deals a major blow to multistate class actions, contrary to the 9th Circuit’s case law, by shifting the burden of proving whether foreign law governs class claims from the objectors to the district court.

“Rule 23 says nothing about how choice-of-law issues should be resolved, nor does it require class counsel or the district court to make choice-of-law arguments on the objectors’ behalf. We should avoid importing into the class certification process ‘an additional hurdle’ found nowhere in the rule,” Nguyen said.

Bandlow said that the case could serve as a warning to judges eager to facilitate settlement between parties.

“It seems like the district court judge suggested that he wasn’t sure plaintiff would get class certification, but for the purposes of approving a settlement, he certified it. I think that’s problematic,” Bandlow said. “Class certification is the whole ball game. It’s odd for a judge to say, ‘I don’t think you’d get it, but I’ll do it to approve a settlement.’”

Feinman and Shon Morgan, a Quinn Emanuel Urquhart & Sullivan LLP attorney representing Hyundai, declined to comment Tuesday.