9th Circuit Restores and Clarifies Standards for Certification of Settlement Classes

The Ninth Circuit’s recent en banc decision in In re Hyundai and Kia Fuel Economy Litigation, — F.3d —, 2019 WL 2376831 (9th Cir. Jun. 6, 2019), restored some much-needed balance to the class action universe. The court reversed the controversial 2018 panel decision that overturned a nationwide class settlement in a multidistrict litigation over car manufacturers’ fuel economy misrepresentations. The panel decision addressed the impact of potential variations in state law, holding the district court abused its discretion in approving the settlement and certifying a settlement class without conducting a rigorous choice-of-law analysis to determine whether the variations defeated predominance under FRCP 23(b)(3).

In reversing, the Ninth Circuit recognized that prudential considerations involved in initiating litigation and settling litigation are logically distinct. Consequently, the standards for class certification must necessarily be applied differently in certifying a class for litigation versus a class for settlement.

Chief among these differences are trial management issues under FRCP 23(b)(3)(D). As the Ninth Circuit explained, trial “manageability is not a concern in certifying a settlement class where, by definition, there will be no trial.” Accordingly, non-common issues that “primarily implicate” trial manageability—e.g., variations in state law, damages calculations, and individual questions only applicable to a subset of the class—should not influence a predominance analysis for purposes of certifying a settlement class. Rather, the primary question in the settlement context is whether the settlement is fair and administrable—that is, whether the class definitions and notices are reasonable and whether there is evidence of collusion.

As to variations in state law, the Ninth Circuit explained that potential applicability of the laws of multiple states to a nationwide class is a matter of trial manageability and should not ordinarily defeat predominance for a nationwide settlement class.

The court also clarified that in certifying a multistate or nationwide class, the law of the forum state applies presumptively, and it is the burden of the objecting party to show that (1) the laws of multiple states apply to the class claims and (2) variations in those laws are material. In a litigation class, the court must consider whether the specific differences compromise trial manageability. That inquiry is unnecessary, however, when the class is not being certified for a potential trial but for settlement.

In sum, the Ninth Circuit’s en banc decision clarifies that certification decisions must be tailored to the context, the purpose of the requested certification. This flexibility aligns with the reality that differences in substantive law do not significantly affect parties who do not plan to litigate. As a practical matter, the decision advances public policy and the sound administration of justice by safeguarding due process in certifying litigation classes while removing unnecessary and unwise obstacles to class-wide settlements.