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A Rare Win For ConsumersSteven J. Greenfogel

Last week, the Ninth Circuit, en banc reinstated a class settlement in the Hyundai/Kia Fuel Economy Litigation. The Court upended sitting a ruling by a three-judge panel that had upheld objections to the proposed settlement. Several important concepts regarding settlement classes were reaffirmed in this ruling.

This litigation dates back to 2012, when Hyundai and Kia both admitted overstating, on the required EPA stickers, the average miles per gallon that their cars might achieve in highway and city driving. Plaintiffs brought a nationwide class action alleging consumer fraud under various state statutes.

In analyzing the propriety of the class settlement, the en banc court cited the 1997 Supreme Court of the United States’ ruling in Amchem Products, Inc. v. Windsor for the proposition that it is appropriate to consider a settlement in the context of deciding whether to certify a settlement class. They also found that consumer fraud cases are extremely appropriate in meeting the predominance requirement of Rule 23(b)(3) in that the class had allegedly been subjected to a series of uniform misrepresentations and damages that would have been in a fairly narrow range.

In rejecting the rationale for certain objections, the en banc court found that the inclusion in the class of used car purchasers with new car purchasers was appropriate given that the misrepresentations were not only placed on new car stickers but were also the subject of nationwide advertising campaigns. The court went on to say that, even were there to be different damage calculations for new and used car buyers, disparate damages should not outweigh the common questions of liability in assessing predominance.

Most importantly, the Ninth Circuit recognized the ability of a District Court to treat a case such as this through the application of a single state’s consumer protection laws rather than having to sift through variations that might exist on a state by state basis. In this case, that was California law, and the court said “By default, California courts apply California law ‘unless a party litigant timely invokes the law of a foreign state’ in which case it is ‘the foreign law proponent’ who must ‘shoulder the burden of demonstrating that foreign law, rather than California law, should apply to class claims.” The court went on to set forth the test that an objector must meet to force a state by state law analysis rather than using a single state law: “1) the law of the foreign state materially differs from the law of California; 2) a true conflict exists, meaning that each state has an interest in the application of its own law to the circumstances of the particular case; and 3) the foreign state’s interest would be more impaired than California’s interest if California law were applied.”

The opinion then discussed, and reject objections to, the adequacy of plaintiffs and class counsel as well as the sufficiency of notice to the class and the burdensomeness of the claim form. The Court also found that there was absolutely no evidence that the settlement was the result of collusion between the counsel for the class and defendants. Finally, the court approved the attorneys’ fees awarded by the District Court to class counsel and rejected any award to objector counsel.

In sum, the opinion is a ringing endorsement for the use of Rule 23 in dealing with consumer fraud litigation both in the settlement and litigation context. It rejects the efforts of certain courts and the professional objectors bar to write Rule 23 out of the arsenal of tools utilized to simplify and resolve litigation.