In re Hyundai and Kia Fuel Economy Litigation, No. 15-56014 (9th Cir. 2018)

Court Description: Class Action. The panel vacated the district court’s order granting class certification in a nationwide class action settlement arising out of misstatements by defendants Hyundai Motor America, Inc. and its affiliate, Kia Motors, Inc., regarding the fuel efficiency of their vehicles; and remanded for further proceedings. The district court had jurisdiction under the Class Action Fairness Act (“CAFA”). In June 2015, the district court gave its final approval of the class settlement. Objectors brought five consolidated appeals raising challenges to class certification, approval of the settlement as fair and adequate, and approval of attorneys’ fees as reasonable in proportion to the benefit conferred on the class. The panel held that the district court abused its discretion in concluding that common questions predominated, and in certifying the settlement class under Fed. R. Civ. P. 23(b)(3). The panel noted that Rule 23(b)(3)’s predominance inquiry was far more demanding than Rule 23(a)’s commonality requirement. The panel further noted that where plaintiffs bring a nationwide class action under CAFA and invoke Rule 23(b)(3), a court must consider the impact of potentially varying state laws. Finally, in determining whether predominance was defeated by variations in state law, the 20 IN RE HYUNDAI AND KIA FUEL ECON. LITIG. panel proceeded through several steps as outlined in Mazza v. Am. Honda Motor Co., 666 F.3d 581, 590 (9th Cir. 2012). The panel held that in failing to apply California choice of law rules, the district court committed a legal error. The panel further held that the district court’s reasoning - that the settlement context relieved it of its obligation to undertake a choice of law analysis and to ensure that a class met all of the prerequisites of Rule 23 – was wrong as a matter of law. The panel held that the district court erred in failing to define the relevant class “in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading,” Mazza, 688 F.3d at 596, because the record did not support the presumption that used car owners were exposed to and relied on misleading advertising. Because the district court could determine, after a rigorous Rule 23 analysis, that it would certify a settlement class and approve a settlement, the panel briefly clarified some principles of attorneys’ fee approval for the district court on remand. Judge Nguyen dissented because she believed that the district court committed no error, and she would affirm. Judge Nguyen wrote that in decertifying the class, the majority relied on arguments never raised by the objectors, contravened precedent, and disregarded reasonable factual findings made by the district court after years of extensive litigation. Judge Nguyen further wrote that contrary to Ninth Circuit case law and that of other circuits, the majority shifted the burden of proving whether foreign law governed from the foreign law proponent – here, the objectors – to the district court or class counsel, thereby creating a circuit split and IN RE HYUNDAI AND KIA FUEL ECON. LITIG. 21 violating the doctrine of Erie R.R. v. Tompkins, 304 U.S. 64 (1938). Also, Judge Nguyen wrote that in excluding used car owners from the class, the majority misapplied the rule that consumer claims merely required proof that the public – not any individual – was likely to be deceived. Finally, Judge Nguyen wrote that the majority based its clarification of the district court’s attorneys’ fees award on a flawed reading of the record and a disregard of deferential review. 22 IN RE HYUNDAI AND KIA FUEL ECON. LITIG.

The court issued a subsequent related opinion or order on July 27, 2018.
The court issued a subsequent related opinion or order on June 6, 2019.