By Perry Cooper
A new federal appeals court ruling overturning a $210 million consumer settlement with Hyundai Motor Co. and Kia Motors Corp. sounds like it is written with a concern for fairness to plaintiffs, but don’t be fooled, a prominent professor tracking class actions told Bloomberg Law.
“It is a gift to corporate defendants,” Professor Brooke D. Coleman told Bloomberg Law about the 2-1 ruling by the U.S. Court of Appeals for the Ninth Circuit that unwound the deal because of a faulty state-by-state analysis of consumer protection laws.
“I am hard pressed to see how this decision helps the plaintiffs here,” Coleman, who teaches civil procedure at Seattle University School of Law, said. “If this class cannot be certified and settled on a nationwide basis, it means that state-by-state class actions or individual cases have to be filed.”
Both scenarios put the power in defendants’ hands, she said.
But that doesn’t mean the ruling is a complete defense win. If it stands, defendants also will have to fight multiple state class actions or individual suits, Coleman said.
Defense attorney Andrew J. Trask downplayed the ruling’s impact. He called it a “straightforward application” of the 20-year-old U.S. Supreme Court decision in Amchem Prods. Inc. v. Windsor, which held that a court must make an affirmative finding that common issues predominate, even for settlement classes.
Regardless, the full Ninth Circuit is likely to rehear the case, he said.
Nationwide class actions are already under the microscope as lower courts decide whether the Supreme Court’s recent Bristol-Myers Squibb Co. v. Superior Court limitations on where suits can be filed applies to class actions.
This suit could add to that squeeze on nationwide class actions, Howard Erichson, who studies complex litigation at Fordham University School of Law in New York, told Bloomberg Law.
The settlement resolved the claims of 56 cases consolidated in multidistrict litigation. Car owners alleged Hyundai Motor America and Kia Motors America overstated the fuel efficiency of a number of their vehicles.
The lower court approved the deal, under which Hyundai and Kia would put up $210 million. Class counsel would receive $9 million in fees and costs.
The Ninth Circuit majority rejected the deal Jan. 23, saying the class shouldn’t have been certified for settlement purposes. Class status isn’t appropriate for nationwide cases, like this one, involving variations in state law, Judge Sandra S. Ikuta wrote for the appeals court.
Judge Ikuta said variations in state law are a predominance inquiry at class certification, so they can’t be ignored in class settlements, Trask, of McGuire Woods in Los Angeles, said. “She’s technically right, but treading on 20 years of practice in the other direction.”
Most lawyers and judges have treated such variations as a manageability problem that isn’t an issue at settlement, Trask said.
But the problem differences in state law pose for predominance has been around for years, Erichson said.
“The state-law-variation problem is why smart plaintiffs’ lawyers try to show that choice-of-law rules can point to application of a single state’s law to the entire class, but as this case shows, such efforts do not always succeed,” he said.
It still should be possible to certify classes for settlement on state law claims, Erichson said.
“In some cases, there’s a sound basis for applying a single state’s law,” he said. “In other cases, even if the law of multiple states applies, the variations may be insignificant or easily grouped into manageable categories.”
“The majority professes to have the same concern for these plaintiffs as Justice (Ruth Bader) Ginsburg had for the Amchem plaintiffs,” Coleman said.
Ginsburg worried defendants might have an advantage at settlement if everyone knew the case couldn’t be litigated as a class action, she said.
But, “The Amchem concern for plaintiffs and their settlement power was questionable when Amchem was decided,” Coleman said. “It seems entirely misplaced in this case.”
Plaintiffs are already concerned the Bristol-Myers decision will hinder nationwide class actions, and some courts have already come down against them.
Under Bristol-Myers, there must be a link between the defendant’s conduct in a state and the plaintiff’s alleged injury for suit to be brought in the state. It’s not clear whether the decision applies to national class actions.
That means “a nationwide class action might will have to be filed in the defendant’s home court, which either gives the defendant a great advantage and/or dis-incentivizes attorneys and their clients from bringing those cases,” Coleman said. “The Ninth Circuit’s strict reading of Amchem in this case certainly adds to that hindrance.”
But Erichson stressed this case addresses a different issue.
“Unlike the BMS issue about personal jurisdiction over defendants for claims unrelated to the forum state, which is a new issue (and it remains to be seen how it will play out in class actions), the state-law-variation problem is an old one,” he said.
Trask noted that Ikuta dissented to certification of a discrimination class when the Ninth Circuit heard Dukes v. Wal-Mart Stores Inc. en banc, before it was reversed by the Supreme Court.
“She is not your typical Ninth Circuit judge when it comes to class actions,” Trask said.
“Since Judge Ikuta is a relative outlier and this is a bold statement on settlements, I think there is a strong chance we’ll see an en banc hearing of the issue,” he said.
To contact the reporter on this story: Perry Cooper in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Steven Patrick at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)