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HYUNDAI FUTURENET CO., LTD

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Hyundai HCN : Ninth Circuit Confirms No Choice-of-Law Analysis Necessary To Certify Settlement Class

08/15/2020 | 06:11am EDT

The Ninth Circuit recently issued an opinion holding that district courts usually need not engage in rigorous analysis under the predominance inquiry of Rule 23(b)(3) before certifying a settlement class. In Jabbari v. Farmer,1 the Ninth Circuit affirmed the district court's certification of a settlement class that asserted both a federal claim and state law claims, rejecting objectors' protests that differences in state law claims precluded certification. The Ninth Circuit's decision clarifies what the court recognized was a "blurred" standard under its prior decisions and confirms that a more relaxed predominance analysis applies when certifying a settlement class.

Case Background

Shahriar Jabbari alleged that Wells Fargo's pattern of setting unachievably high sales quotas induced its employees to open multiple accounts in his and others' names without their consent. The account then allegedly incurred fees, which were charged to the customers. The complaint alleged that because customers were unaware the new accounts existed, they did not pay the fees, resulting in calls from debt collectors seeking to collect on the unpaid fees. The nonpayment allegedly harmed the customers' credit.

Jabbari sued Wells Fargo in the Northern District of California in a putative class action, alleging violations of the federal Fair Credit Reporting Act (FCRA) and Electronic Fund Transfer Act; California statutory law; Arizona statutory law; and common law. The parties reached a class action settlement after a motion to dismiss was filed in the district court. But a group of objectors entered the fray, arguing that the court should not certify a settlement class due to differences in various state law claims asserted in the complaint. The district court certified the settlement class, however, and rejected the objectors' arguments, remarking that because FCRA claim was "equally applicable in all states," any differences among state laws did not preclude certification of the settlement class. Several objectors to the class settlement appealed to the Ninth Circuit.

Ninth Circuit's Decision

The Ninth Circuit affirmed the district court's certification of the settlement class. The court noted that although variations in state law can "complicate" the predominance analysis under Rule 23(b)(3), the Circuit's previous decisions drew distinctions between the predominance inquiry required when certifying a class for trial and certifying a settlement class. For example, in Hanlon v. Chrysler Corp., the court affirmed certification of a settlement class that involved different states' consumer protection laws without a choice-of-law analysis.2 But another Circuit decision seemingly took a different tack. In Mazza v. Am. Honda Motor Co.,3 the Ninth Circuit reversed a district court's certification of a trial class in because the district court had applied California law despite material differences with the laws of other states.

Recognizing that the line between Hanlon and Mazza was "blurred," the Ninth Circuit sought to clarify the settlement-class predominance inquiry using its en banc decision in Hyundai. There, the district court had certified a class for settlement, finding that common questions predominated regarding the accuracy of Hyundai's fuel-economy statements for its cars. A three-judge panel of the Ninth Circuit initially reversed, faulting the lack of a proper choice-of-law analysis and conflicting state laws. But the en banc Court of Appeals reversed, holding that for a settlement class, the district court "need not inquire whether the case, if tried, would present intractable management problems." In addition, the full Ninth Circuit held that, despite any variance in state law, the common questions that the district court identified were sufficient to satisfy the predominance requirement for a settlement class.

Applying Hyundai, the Ninth Circuit in Jabbari found that the district court did not abuse its discretion in certifying a settlement class. The court held that foregoing a choice-of-law analysis-already approved in this context in Hyundai-"applie[d] with even greater force" where the class was unified by a claim under federal law. In particular, the court reasoned that the FCRA claim was subject to collective proof, such as by showing Wells Fargo systematically and willfully obtained consumer reports unlawfully. Finally, the court held that the district court did not commit reversible error in finding that the FCRA claim would best drive the case to resolution, stating that district courts need not assess in a predominance inquiry the importance of every claim a class might assert.

Key Takeaways

The Jabbari decision confirms that, for settlement classes, courts can conduct a less stringent predominance inquiry and that settling parties now have one less theory favored by professional objectors to worry about. Would-be objectors will now have less fodder for attacking a district court's predominance analysis. In particular, where a federal claim unifies the class, the existence of other possible state-law claims (even those subject to material differences) will likely not undermine certification for settlement, provided that the unifying claim can drive the resolution of the litigation. This makes sense given the judicial preference for settling cases, following a general trend across the circuits of narrowing the paths to object to (and in some cases, improperly thwart)4 class action settlements.

Footnotes

1 2020 WL 4046029 (9th Cir. Jul. 30, 2020).

2 150 F.3d 1011 (9th Cir. 1998).

3 666 F.3d 581 (9th Cir. 2012).

4 See, e.g., Pearson v. Target Corp., No. 19-3095, 2020 WL 4519053 (7th Cir. Aug. 6, 2020) (prohibiting private payments to settle objections to a class action settlement, what the court deemed colloquial "objector blackmail," and ordering disgorgement of such payments).

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

Ms Claudia Vetesi
Morrison & Foerster LLP
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© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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