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In re Hyundai and Kia Fuel Economy Litigation

United States Court of Appeals, Ninth Circuit

January 23, 2018

In re Hyundai and Kia Fuel Economy Litigation, Kehlie R. Espinosa; Nicole Marie Hunter; Jeremy Wilton; Kaylene P. Brady; Gunther Krauth; Eric Graewingholt; Reece Philip Thomson; Alex Maturani; Nilufar Rezai; Jack Rottner; Lydia Kievit; Rebecca Sanders; Bobby Brandon Armstrong; Sergio Torres; Richard Woodruff; Marshall Lawrence Gordon; Joel A. Lipman; James Gudgalis; Mary P. Hoessler; Stephen M. Hayes; Brian Reeves; Sam Hammond; Mark Leggett; Edwin Naythons; Michael Washburn; Ira D. Dunst; Brian Weber; Kamneel Maharaj; Kim Iocovozzi; Herbert J. Young; Linda Hasper; Leslie Bayard; Tricia Fellers; Orlando Elliott; James Bonsignore; Margaret Setser; Guillermo Quiroz; Douglas Kurash; Andres Carullo; Laura S. Sutta; Georgia L. Thomas;Eric J. Olson; Jennifer Myers; Tom Woodward; Jerold Terhost; Cameron John Cestaro; Donald Brown; Maria Figueroa; Constance Martyn; Thomas Ganim; Daniel Baldeschi; Lillian E. Levoff; Giuseppina Roberto; Robert Trader; Sean Goldsberry; Cynthia Navarro; Owen Chapman; Michael Brein; Travis Brissey; Ronald Burkard; Adam Cloutier; Steven Craig; John J. Dixson; Erin L. Fanthorpe; Eric Hadesh; Michael P. Keeth; John Kirk MacDonald; Michael Mandahl; Nicholas McDaniel; Mary J. Moran-Spicuzza; Gary Pincas; Brandon Potter; Thomas Purdy; Rocco Renghini; Michelle Singlteon; Ken Smiley; Gregory M. Sonstein; Roman Starno; Gayle A. Stephenson; Andres Villicana; Richard Williams; Bradford L. Hirsch; Ashley Cephas; David E. Hill; Chad McKinney; Mordechai Schiffer; Lisa Sands; Donald Kendig; Kevin Gobel; Eric Larson; Lin McKinney; Ryan Cross; Phillip Hoffman; Debra Simmons; Abelardo Morales; Peter Blumer; Carolyn Hammond; Melissa Leggett; Kelly Moffett; Evan Grogan; Carlos Medina; Alberto Dominguez; Catherine Bernard; Michael Breien; Laura Gill; Thomas Schille; Judith Stanton; Randy Rickert; Bryan Zirkel; James Kundrat; Robert Smith; Maria Kotova; Josipa Casey; Luan Snyder; Ben Baker; Brian Nguyen; Hattie Williams; Bill Holvey; Lourdes Vargas; Kendall Snyder; Nomer Medina; Sameria Goff; Ursula Pyland; Marcell Chapman; Kaye Kurash; Holly Amromin; John Chapman; Mary D'Angelo; George Rudy; Ayman Mousa; Shelly Henderson; Jeffrey Hathaway; Dennis J. Murphy; Douglas A. Patterson; John Gentry; Linda Ruth Scott; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs-Appellees, Greg Direnzo, Petitioner-Appellee, Hyundai Motor America; Kia Motors America; Kia Motors Corporation; Grossinger Autoplex, Inc., FKA Grossinger Hyundai; John Krafcik; Hyundai Motor Company; Sarah Kundrat, Defendants-Appellees,
v.
Caitlin Ahearn; Andrew York, Objectors-Appellants. In re Hyundai and Kia Fuel Economy Litigation, In Re, Kehlie R. Espinosa; Nicole Marie Hunter; Jeremy Wilton; Kaylene P. Brady; Gunther Krauth; Eric Graewingholt; Reece Philip Thomson; Alex Maturani; Nilufar Rezai; Jack Rottner; Lydia Kievit; Rebecca Sanders; Bobby Brandon Armstrong; Sergio Torres; Richard Woodruff; Marshall Lawrence Gordon; Joel A. Lipman; James Gudgalis; Mary P. Hoessler; Stephen M. Hayes; Brian Reeves; Sam Hammond; Mark Leggett; Edwin Naythons; Michael Washburn; Ira D. Dunst; Brian Weber; Kamneel Maharaj; Kim Iocovozzi; Herbert J. Young; Linda Hasper; Leslie Bayard; Tricia Fellers; Orlando Elliott; James Bonsignore; Margaret Setser; Guillermo Quiroz; Douglas Kurash; Andres Carullo; Laura S. Sutta; Georgia L. Thomas; Eric J. Olson; Jennifer Myers; Tom Woodward; Jerold Terhost; Cameron John Cestaro; Donald Brown; Maria Figueroa; Constance Martyn; Thomas Ganim; Daniel Baldeschi; Lillian E. Levoff; Giuseppina Roberto; Robert Trader; Sean Goldsberry; Cynthia Navarro; Owen Chapman; Michael Brein; Travis Brissey; Ronald Burkard; Adam Cloutier; Steven Craig; John J. Dixson; Erin L. Fanthorpe; Eric Hadesh; Michael P. Keeth; John Kirk MacDonald; Michael Mandahl; Nicholas McDaniel; Mary J. Moran-Spicuzza; Gary Pincas; Brandon Potter; Thomas Purdy; Rocco Renghini; Michelle Singlteon; Ken Smiley; Gregory M. Sonstein; Roman Starno; Gayle A. Stephenson; Andres Villicana; Richard Williams; Bradford L. Hirsch; Ashley Cephas; David E. Hill; Chad McKinney; Mordechai Schiffer; Lisa Sands; Donald Kendig; Kevin Gobel; Eric Larson; Lin McKinney; Ryan Cross; Phillip Hoffman; Debra Simmons; Abelardo Morales; Peter Blumer; Carolyn Hammond; Melissa Leggett; Kelly Moffett; Evan Grogan; Carlos Medina; Alberto Dominguez; Catherine Bernard; Michael Breien; Laura Gill; Thomas Schille; Judith Stanton; Randy Rickert; Bryan Zirkel; James Kundrat; Robert Smith; Maria Kotova; Josipa Casey; Luan Snyder; Ben Baker; Brian Nguyen; Hattie Williams; Bill Holvey; Lourdes Vargas; Kendall Snyder; Nomer Medina; Sameria Goff; Ursula Pyland; Marcell Chapman; Kaye Kurash; Holly Amromin; John Chapman; Mary D'angelo; George Rudy; Ayman Mousa; Shelly Henderson; Jeffrey Hathaway; Dennis J. Murphy; Douglas A. Patterson; John Gentry; Linda Ruth Scott; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs-Appellees, Hyundai Motor America; Kia Motors America; Kia Motors Corporation; Grossinger Autoplex, Inc., FKA Grossinger Hyundai; John Krafcik; Hyundai Motor Company; Sarah Kundrat, Defendants-Appellees,
v.
Antonio Sberna, Objector-Appellant, In re Hyundai and Kia Fuel Economy Litigation Kehlie R. Espinosa; Nicole Marie Hunter; Jeremy Wilton; Kaylene P. Brady; Gunther Krauth; Eric Graewingholt; Reece Philip Thomson; Alex Maturani; Nilufar Rezai; Jack Rottner; Lydia Kievit; Rebecca Sanders; Bobby Brandon Armstrong; Sergio Torres; Richard Woodruff; Marshall Lawrence Gordon; Joel A. Lipman; James Gudgalis; Mary P. Hoessler; Stephen M. Hayes; Brian Reeves; Sam Hammond; Mark Leggett; Edwin Naythons; Michael Washburn; Ira D. Dunst; Brian Weber; Kamneel Maharaj; Kim Iocovozzi; Herbert J. Young; Linda Hasper; Leslie Bayard; Tricia Fellers; Orlando Elliott; James Bonsignore; Margaret Setser; Guillermo Quiroz; Douglas Kurash; Andres Carullo; Laura S. Sutta; Georgia L. Thomas; Eric J. Olson; Jennifer Myers; Tom Woodward; Jerold Terhost; Cameron John Cestaro; Donald Brown; Maria Figueroa; Constance Martyn; Thomas Ganim; Daniel Baldeschi; Lillian E. Levoff; Giuseppina Roberto; Robert Trader; Sean Goldsberry; Cynthia Navarro; Owen Chapman; Michael Brein; Travis Brissey; Ronald Burkard; Adam Cloutier; Steven Craig; John J. Dixson; Erin L. Fanthorpe; Eric Hadesh; Michael P. Keeth; John Kirk MacDonald; Michael Mandahl; Nicholas McDaniel; Mary J. Moran-Spicuzza; Gary Pincas; Brandon Potter; Thomas Purdy; Rocco Renghini; Michelle Singlteon; Ken Smiley; Gregory M. Sonstein; Roman Starno; Gayle A. Stephenson; Andres Villicana; Richard Williams; Bradford L. Hirsch; Ashley Cephas; David E. Hill; Chad McKinney; Mordechai Schiffer; Lisa Sands; Donald Kendig; Kevin Gobel; Eric Larson; Lin McKinney; Ryan Cross; Phillip Hoffman; Debra Simmons; Abelardo Morales; Peter Blumer; Carolyn Hammond; Melissa Leggett; Kelly Moffett; Evan Grogan; Carlos Medina; Alberto Dominguez; Catherine Bernard; Michael Breien; Laura Gill; Thomas Schille; Judith Stanton; Randy Rickert; Bryan Zirkel; James Kundrat; Robert Smith; Maria Kotova; Josipa Casey; Luan Snyder; Ben Baker; Brian Nguyen; Hattie Williams; Bill Holvey; Lourdes Vargas; Kendall Snyder; Nomer Medina; Sameria Goff; Ursula Pyland; Marcell Chapman; Kaye Kurash; Holly Amromin; John Chapman; Mary D'angelo; George Rudy; Ayman Mousa; Shelly Henderson; Jeffrey Hathaway; Dennis J. Murphy; Douglas A. Patterson; John Gentry; Linda Ruth Scott; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs-Appellees, Greg Direnzo, Petitioner-Appellee, Hyundai Motor America; Kia Motors America; Kia Motors Corporation; Grossinger Autoplex, Inc., FKA Grossinger Hyundai; John Krafcik; Hyundai Motor Company; Sarah Kundrat, Defendants-Appellees,
v.
Peri Fetsch, Objector-Appellant. In re Hyundai and Kia Fuel Economy Litigation Kehlie R. Espinosa; Nicole Marie Hunter; Jeremy Wilton; Kaylene P. Brady; Gunther Krauth; Eric Graewingholt; Reece Philip Thomson; Alex Maturani; Nilufar Rezai; Jack Rottner; Lydia Kievit; Rebecca Sanders; Bobby Brandon Armstrong; Sergio Torres; Richard Woodruff; Marshall Lawrence Gordon; Joel A. Lipman; James Gudgalis; Mary P. Hoessler; Stephen M. Hayes; Brian Reeves; Sam Hammond; Mark Leggett; Edwin Naythons; Michael Washburn; Ira D. Dunst; Brian Weber; Kamneel Maharaj; Kim Iocovozzi; Herbert J. Young; Linda Hasper; Leslie Bayard; Tricia Fellers; Orlando Elliott; James Bonsignore; Margaret Setser; Guillermo Quiroz; Douglas Kurash; Andres Carullo; Laura S. Sutta; Georgia L. Thomas; Eric J. Olson; Jennifer Myers; Tom Woodward; Jerold Terhost; Cameron John Cestaro; Donald Brown; Maria Figueroa; Constance Martyn; Thomas Ganim; Daniel Baldeschi; Lillian E. Levoff; Giuseppina Roberto; Robert Trader; Sean Goldsberry; Cynthia Navarro; Owen Chapman; Michael Brein; Travis Brissey; Ronald Burkard; Adam Cloutier; Steven Craig; John J. Dixson; Erin L. Fanthorpe; Eric Hadesh; Michael P. Keeth; John Kirk MacDonald; Michael Mandahl; Nicholas McDaniel; Mary J. Moran-spicuzza; Gary Pincas; Brandon Potter; Thomas Purdy; Rocco Renghini; Michelle Singlteon; Ken Smiley; Gregory M. Sonstein; Roman Starno; Gayle A. Stephenson; Andres Villicana; Richard Williams; Bradford L. Hirsch; Ashley Cephas; David E. Hill; Chad McKinney; Mordechai Schiffer; Lisa Sands; Donald Kendig; Kevin Gobel; Eric Larson; Lin Mckinney; Ryan Cross; Phillip Hoffman; Debra Simmons; Abelardo Morales; Peter Blumer; Carolyn Hammond; Melissa Leggett; Kelly Moffett; Evan Grogan; Carlos Medina; Alberto Dominguez; Catherine Bernard; Michael Breien; Laura Gill; Thomas Schille; Judith Stanton; Randy Rickert; Bryan Zirkel; James Kundrat; Robert Smith; Maria Kotova; Josipa Casey; Luan Snyder; Ben Baker; Brian Nguyen; Hattie Williams; Bill Holvey; Lourdes Vargas; Kendall Snyder; Nomer Medina; Sameria Goff; Ursula Pyland; Marcell Chapman; Kaye Kurash; Holly Amromin; John Chapman; Mary D'angelo; George Rudy; Ayman Mousa; Shelly Henderson; Jeffrey Hathaway; Dennis J. Murphy; Douglas A. Patterson; John Gentry; Linda Ruth Scott; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs-Appellees, Greg Direnzo, Petitioner-Appellee, Hyundai Motor America; Kia Motors America; Kia Motors Corporation; Grossinger Autoplex, Inc., FKA Grossinger Hyundai; John Krafcik; Hyundai Motor Company; Sarah Kundrat, Defendants-Appellees,
v.
Dana Roland, Objector-Appellant. In re Hyundai and Kia Fuel Economy Litigation, Kehlie R. Espinosa; Nicole Marie Hunter; Jeremy Wilton; Kaylene P. Brady; Gunther Krauth; Eric Graewingholt; Reece Philip Thomson; Alex Maturani; Nilufar Rezai; Jack Rottner; Lydia Kievit; Rebecca Sanders; Bobby Brandon Armstrong; Sergio Torres; Richard Woodruff; Marshall Lawrence Gordon; Joel A. Lipman; James Gudgalis; Mary P. Hoessler; Stephen M. Hayes; Brian Reeves; Sam Hammond; Mark Leggett; Edwin Naythons; Michael Washburn; Ira D. Dunst; Brian Weber; Kamneel Maharaj; Kim Iocovozzi; Herbert J. Young; Linda Hasper; Leslie Bayard; Tricia Fellers; Orlando Elliott; James Bonsignore; Margaret Setser; Guillermo Quiroz; Douglas Kurash; Andres Carullo; Laura S. Sutta; Georgia L. Thomas; Eric J. Olson; Jennifer Myers; Tom Woodward; Jerold Terhost; Cameron John Cestaro; Donald Brown; Maria Figueroa; Constance Martyn; Thomas Ganim; Daniel Baldeschi; Lillian E. Levoff; Giuseppina Roberto; Robert Trader; Sean Goldsberry; Cynthia Navarro; Owen Chapman; Michael Brein; Travis Brissey; Ronald Burkard; Adam Cloutier; Steven Craig; John J. Dixson; Erin L. Fanthorpe; Eric Hadesh; Michael P. Keeth; John Kirk MacDonald; Michael Mandahl; Nicholas McDaniel; MARY J. Moran-Spicuzza; Gary Pincas; Brandon Potter; Thomas Purdy; Rocco Renghini; Michelle Singlteon; Ken Smiley; Gregory M. Sonstein; Roman Starno; Gayle A. Stephenson; Andres Villicana; Richard Williams; Bradford L. Hirsch; Ashley Cephas; David E. Hill; Chad McKinney; Mordechai Schiffer; Lisa Sands; Donald Kendig; Kevin Gobel; Eric Larson; Lin McKinney; Ryan Cross; Phillip Hoffman; Debra Simmons; Abelardo Morales; Peter Blumer; Carolyn Hammond; Melissa Leggett; Kelly Moffett; Evan Grogan; Carlos Medina; Alberto Dominguez; Catherine Bernard; Michael Breien; Laura Gill; Thomas Schille; Judith Stanton; Randy Rickert; Bryan Zirkel; James Kundrat; Robert Smith; Maria Kotova; Josipa Casey; Luan Snyder; Ben Baker; Brian Nguyen; Hattie Williams; Bill Holvey; Lourdes Vargas; Kendall Snyder; Nomer Medina; Sameria Goff; Ursula Pyland; Marcell Chapman; Kaye Kurash; Holly Amromin; John Chapman; Mary D'angelo; George Rudy; Ayman Mousa; Shelly Henderson; Jeffrey Hathaway; Dennis J. Murphy; Douglas A. Patterson; John Gentry; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs-Appellees, Greg Direnzo, Petitioner-Appellee, Hyundai Motor America; Kia Motors America; Kia Motors Corporation; Grossinger Autoplex, Inc., FKA Grossinger Hyundai; John Krafcik; Hyundai Motor Company; Sarah Kundrat, Defendants-Appellees.
v.
Linda Ruth Scott, Objector-Appellant. In re Hyundai and Kia Fuel Economy Litigation John Gentry; Linda Ruth Scott; Danielle Kay Gilleland; Joseph Bowe; Michael Desouto, Plaintiffs, and James Ben Feinman, Appellant, v.

          Argued and Submitted February 10, 2017

         Appeal from the United States District Court for the Central District of California No. 2:13-ml-02424-GW-FFM George H. Wu, District Judge, Presiding

          James B. Feinman (argued), James B. Feinman & Associates, Lynchburg, Virginia, for Appellants James Ben Feinman, John Gentry, Linda Ruth Scott, Danielle Kay Gilleland, Joseph Bowe, Michael Desouto.

          Edward W. Cochran (argued), Shaker Heights, Ohio; George W. Cochran, Streetsboro, Ohio; John J. Pentz, Sudbury, Massachusetts; for Appellants Caitlin Ahearn and Andrew York.

          Steve A. Miller, Steve A. Miller P.C., Denver, Colorado, for Appellant Antonio Sberna. Matthew Kurilich, Tustin, California, for Appellant Peri Fetsch. Dennis Gibson, Dallas, Texas, for Appellant Dana Roland.

          Elaine S. Kusel (argued), Basking Ridge; Richard D. McCune, McCuneWright LLP, Redlands, California; for Appellees Kehlie R. Espinosa, Lilian E. Levoff, Thomas Ganim, and Daniel Baldeschi.

          Benjamin W. Jeffers and Dommond E. Lonnie, Dykema Gossett PLLC, Los Angeles, California, for Appellees Kia Motors America Inc. and Kia Motors Corp.

          Shon Morgan (argued) and Joseph R. Ashby, Quinn Emanuel Urquhart & Sullivan LLP, Los Angeles, California; Karin Kramer, Quinn Emanuel Urquhart & Sullivan LLP, San Francisco, California; Dean Hansell, Hogan Lovells LLP, Los Angeles, California; for Appellees Hyundai Motor America and Hyundai Motor Co.

          Robert B. Carey and John M. DeStefano, Hagens Berman Sobol Shapiro LLP, Phoenix, Arizona, for Appellees Kaylene P. Brady and Nicole Marie Hunter.

          Before: Andrew J. Kleinfeld, Sandra S. Ikuta, and Jacqueline H. Nguyen, Circuit Judges.

          SUMMARY [*]

         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 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 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.

          OPINION

          IKUTA, Circuit Judge

         This appeal involves a nationwide class action settlement arising out of misstatements by defendants Hyundai Motor America, Inc. (Hyundai) and its affiliate, Kia Motors America, Inc. (Kia)[1] regarding the fuel efficiency of their vehicles. The district court had jurisdiction under the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), because the matter in controversy exceeded $5, 000, 000, the putative class comprised at least 100 plaintiffs, and at least one plaintiff class member was a citizen of a state different from that of at least one defendant. We have jurisdiction pursuant to 28 U.S.C. § 1291. We hold that the district court abused its discretion in concluding that common questions predominate and certifying this settlement class under Rule 23(b)(3) of the Federal Rules of Civil Procedure, and we remand to the district court for further proceedings consistent with this opinion. Because the district court may still certify a class on remand, we briefly clarify some principles of attorneys' fees awards in the class action context for the district court on remand.

         I

         "The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (internal quotation marks omitted). "To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23." Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (internal quotation marks omitted). "Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23." Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001) (internal quotation marks omitted). A district court's certification "must be supported by sufficient findings to be afforded the traditional deference given to such a determination." Molski v. Gleich, 318 F.3d 937, 946-47 (9th Cir. 2003) (internal quotation marks omitted). "When a district court, as here, certifies for class action settlement only, the moment of certification requires heightened attention[.]" Ortiz v. Fibreboard Corp., 527 U.S. 815, 848-49 (1999) (internal quotation marks and citation omitted).

         We review the district court's decision to certify a class for an abuse of discretion. Parra v. Bashas', Inc., 536 F.3d 975, 977 (9th Cir. 2008). A district court abuses its discretion when it makes an error of law or when its "application of the correct legal standard was (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record." United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc) (internal quotations omitted). "We reverse if the district court's certification is premised on legal error." Molski, 318 F.3d at 947.

         Rule 23 "does not set forth a mere pleading standard." Comcast, 569 U.S. at 33. The plaintiff seeking class certification bears the burden of demonstrating that all the requirements of Rule 23 have been met. See Zinser, 253 F.3d at 1188. This requirement means that the plaintiff must first demonstrate through evidentiary proof that the class meets the prerequisites of Rule 23(a), which provides that class certification is proper only if: "(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class." Fed.R.Civ.P. 23(a); see also Comcast, 569 U.S. at 33. The Rule 23(a) prerequisites "effectively limit the class claims to those fairly encompassed by the named plaintiff's claims." Dukes, 564 U.S. at 349 (internal quotation marks omitted). To meet the commonality requirement of Rule 23(a)(2), the plaintiffs' claims "must depend upon a common contention" that is "of such a nature that it is capable of classwide resolution-which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Id. at 350.

         After carrying its burden of satisfying Rule 23(a)'s prerequisites, the plaintiff must establish that the class meets the prerequisites of at least one of the three types of class actions set forth in Rule 23(b). Fed.R.Civ.P. 23(b); Comcast, 569 U.S. at 33. Here, the district court certified the class under Rule 23(b)(3), which provides that a class action may be maintained only if "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy, " and which lists a number of matters "pertinent to these findings." Fed.R.Civ.P. 23(b)(3).[2]

         The Rule 23(b)(3) predominance inquiry is "far more demanding" than Rule 23(a)'s commonality requirement. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 624 (1997). The "presence of commonality alone is not sufficient to fulfill Rule 23(b)(3)." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. 1998). Rather, a court has a "duty to take a close look at whether common questions predominate over individual ones, " and ensure that individual questions do not "overwhelm questions common to the class." Comcast, 569 U.S. at 34 (internal quotation marks omitted). In short, "[t]he main concern of the predominance inquiry under Rule 23(b)(3) is the balance between individual and common issues." Wang v. Chinese Daily News, Inc., 737 F.3d 538, 545-46 (9th Cir. 2013) (internal quotation marks omitted).

         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, because "[i]n a multi-state class action, variations in state law may swamp any common issues and defeat predominance." Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996). "Variations in state law do not necessarily preclude a 23(b)(3) action." Hanlon, 150 F.3d at 1022. For instance, even when some class members "possess slightly differing remedies based on state statute or common law, " there may still be "sufficient common issues to warrant a class action." Id. at 1022-23; see also Sullivan v. DB Investments, Inc., 667 F.3d 273, 301-02 (3d Cir. 2011) (discussing the "pragmatic response to certifications of common claims arising under varying state laws, " and citing a case that affirmed "the district court's decision to subsume the relatively minor differences in state law within a single class" as illustrative) (citing In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 315 (3d Cir. 1998)); In re Mex. Money Transfer Litig., 267 F.3d 743, 747 (7th Cir. 2001) (noting that even though "state laws may differ in ways that could prevent class treatment if they supplied the principal theories of recovery, " class representatives in that case met the predominance requirement in part by limiting "their theories to federal law plus aspects of state law that are uniform"). On the other hand, where "the consumer-protection laws of the affected States vary in material ways, no common legal issues favor a class-action approach to resolving [a] dispute." Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 947 (6th Cir. 2011).

         In determining whether predominance is defeated by variations in state law, we proceed through several steps. See Mazza v. Am. Honda Motor Co., 666 F.3d 581, 590 (9th Cir. 2012). First, the class action proponent must establish that the forum state's substantive law may be constitutionally applied to the claims of a nationwide class. Id. at 589-90.[3]If the forum state's law meets this requirement, the district court must use the forum state's choice of law rules to determine whether the forum state's law or the law of multiple states apply to the claims. Id. at 590. "[I]f the forum state's choice-of-law rules require the application of only one state's laws to the entire class, then the representation of multiple states within the class does not pose a barrier to class certification." Johnson v. Nextel Commc'ns Inc., 780 F.3d 128, 141 (2d Cir. 2015). But if class claims "will require adjudication under the laws of multiple states, " Wash. Mut. Bank, FA v. Superior Court, 24 Cal.4th 906, 922 (2001), then the court must determine whether common questions will predominate over individual issues and whether litigation of a nationwide class may be managed fairly and efficiently. Id. As with any other requirement of Rule 23, plaintiffs seeking class certification bear the burden of demonstrating through evidentiary proof that the laws of the affected states do not vary in material ways that preclude a finding that common legal issues predominate. See Castano, 84 F.3d at 741 (indicating that class action proponents must show that variations in state laws will not affect predominance; "[a] court cannot accept such an assertion on faith.") (quoting Walsh v. Ford Motor Co., 807 F.2d 1000, 1016 (D.C. Cir. 1986) (Ruth Bader Ginsburg, J.)).

         We undertook this predominance inquiry in Mazza v. American Honda Motor Co., which is closely analogous to our case. Mazza considered a car manufacturer's challenge to a district court's decision to certify a nationwide class of consumers claiming that Honda had misrepresented material information regarding Acura RLs. Honda contended that the district court erred in certifying this class under Rule 23(b)(3), because "California's consumer protection statutes may not be applied to a nationwide class with members in 44 jurisdictions, " Mazza, 666 F.3d at 589, and therefore plaintiffs had not demonstrated "that the questions of law or fact common to class members predominate over any questions affecting only individual members." Fed. R. Civ. Pro. 23(b)(3).

         Mazza addressed this argument by undertaking the following analysis. The plaintiffs first established that defendants had adequate contacts to the forum state, and therefore the court should apply California's choice of law rules. 666 F.3d at 590.[4] Under these rules, the foreign law proponent had the burden of showing that the law of multiple states, rather than California law, applied to class claims. Id. Mazza therefore walked through the three parts of California's governmental interest test. First, we determined that Honda showed there were material differences between the plaintiffs' California misrepresentation claims and the laws of other states. Id. at 591. Second, we determined that each of the 44 different states where the car sales took place "has a strong interest in applying its own consumer protection laws to those transactions." Id. at 592. Turning to the third step of the test, we determined that "if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce." Id. at 593. Therefore, we held that "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place." Id. at 594.

         Our conclusion that the plaintiffs' class claims "will require adjudication under the laws of multiple states, " Wash. Mut. Bank, 24 Cal.4th at 922, led to the next question: whether this conclusion defeated predominance. Although Mazza did not expressly address the predominance question, its vacatur of the district court's class certification order established that plaintiffs had failed to show that common questions would predominate over individual issues.[5]

         Because the Rule 23(b)(3) predominance inquiry focuses on "questions that preexist any settlement, " namely, "the legal or factual questions that qualify each class member's case as a genuine controversy, " Amchem, 521 U.S. at 623, a district court may not relax its "rigorous" predominance inquiry when it considers certification of a settlement class, Zinser, 253 F.3d at 1186. To be sure, when "[c]onfronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, for the proposal is that there be no trial." Amchem, 521 U.S. at 620 (citation omitted). But "other specifications of the Rule-those designed to protect absentees by blocking unwarranted or overbroad class definitions-demand undiluted, even heightened, attention in the settlement context." Id.

         "Heightened" attention is necessary in part because a court asked to certify a settlement class "will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold." Id. Indeed, in Amchem itself, the court determined that both factual differences among class members and differences in the state laws applicable to class members' claims defeated predominance for a single nationwide settlement class. Id. at 624.

         A court may not justify its decision to certify a settlement class on the ground that the proposed settlement is fair to all putative class members.[6] Indeed, federal courts "lack authority to substitute for Rule 23's certification criteria a standard never adopted-that if a settlement is fair, then certification is proper." Id. at 622; see also Ortiz, 527 U.S. at 849 (holding that "a fairness hearing under Rule 23(e) is no substitute for rigorous adherence to those provisions of the Rule designed to protect absentees[.]") (internal quotation marks omitted)). This prohibition makes sense: "[i]f a common interest in a fair compromise could satisfy the predominance requirement of Rule 23(b)(3), that vital prescription would be stripped of any meaning in the settlement context, " and the safeguards provided by the Rule, which "serve to inhibit appraisals of the chancellor's foot kind-class certifications dependent upon the court's gestalt judgment or overarching impression of the settlement's fairness, " would be eviscerated. Amchem, 521 U.S. at 621, 623.

         II

         We now turn to the facts of this case. Under the Clean Air Act, all new vehicles sold in the United States must be covered by an Environmental Protection Agency (EPA) certificate of conformity demonstrating compliance with fuel efficiency and greenhouse gas emission standards. See 42 U.S.C. § 7522(a)(1). To obtain such a certificate, a vehicle manufacturer must submit an application to the EPA with information about the fuel efficiency for each model year. Id. § 7525(a)(1). In November 2011, a consumer advocacy group sent a letter to the EPA regarding complaints that Hyundai and Kia had overstated the fuel efficiency of a number of their vehicles and asked the EPA to audit the manufacturers. In response, the EPA initiated an investigation into Hyundai's and Kia's fuel efficiency test procedures. About a year later, in November 2012, the EPA investigation confirmed that Hyundai and Kia used improper test procedures to develop the fuel efficiency information submitted for certain 2011, 2012, and 2013 models.[7] These improper procedures resulted in overstated fuel efficiency estimates.

         At the same time as the EPA announced its findings, Hyundai and Kia announced that they would lower their fuel efficiency estimates for approximately 900, 000 Hyundai and Kia vehicles from model years 2011, 2012, and 2013. At the same time, Hyundai and Kia announced the institution of a voluntary Lifetime Reimbursement Program (LRP) to compensate affected vehicle owners and lessees for the additional fuel costs they had incurred and would incur in the future as a result of the overstated fuel efficiency estimates. Under the LRP, anyone who owned or leased an affected Hyundai or Kia vehicle on or before November 2, 2012 was entitled to periodic reimbursements based on the number of miles driven, the difference between the original and revised fuel efficiency estimate, and the average fuel price in the area where the car was driven, plus an extra 15 percent to account for the inconvenience caused by the overstated fuel efficiency estimates. In order to receive these benefits, class members could enroll in the LRP and then periodically visit a Hyundai or Kia dealership to verify their odometer readings. Car owners could register for the LRP until December 31, 2013, although the program would continue for those who registered for as long as they owned or leased their vehicles.[8]

         After the EPA commenced its investigation, but before announcing its results, a number of plaintiffs filed suit against Hyundai and Kia. In January 2012, plaintiffs filed a putative nationwide class action in state court in Los Angeles County. See Espinosa v. Hyundai Motor Am., No. BC 476445 (Cal. Super. Ct. filed Jan. 6, 2012). The complaint raised claims under California's consumer protection laws and common law, alleging that Hyundai had falsely advertised that its 2011 and 2012 Elantra and Sonata vehicles got 40 miles per gallon (MPG) on the highway, when in fact these vehicles got far lower MPG.[9] The plaintiffs sought damages, rescission, restitution, and injunctive relief in the form of corrective advertising on behalf of a putative nationwide class of owners of specified vehicles who purchased or leased their vehicles in the United States.

         After Hyundai removed the Espinosa action to federal court, see No. 2:12-cv-800 (C.D. Cal. filed Jan. 30, 2012), the plaintiffs moved for certification of a nationwide class. In its opposition to class certification, Hyundai argued, among other things, that differences in state consumer protection laws precluded the application of California law to consumers who are not Californians and defeated predominance. Hyundai supported this argument with a thirty-four page "Appendix of Variations in State Laws, " which detailed the numerous differences in the burden of proof, liability, damages, statutes of limitations, and attorneys' fees awards under different state consumer protection laws and common law fraud actions. Hyundai also argued that there were individual questions regarding whether each class member was exposed to or relied on Hyundai's advertising, and that these questions prevented class certification.[10]

          In November 2012, the district court issued a tentative ruling on the motion for class certification in Espinosa. Plaintiffs sought to certify two classes, an Elantra class (including purchasers and lessees of 2011-12 model year Elantras) and a Sonata class (including all purchasers and lessees of 2011-2012 model year Sonatas). The court stated it would likely find that the plaintiffs demonstrated both the Rule 23(a) commonality and Rule 23(b)(3) predominance requirements were met as to statutory, but not common law claims. With respect to the question whether plaintiffs could show individualized reliance on advertising, the court stated that it would likely find that class-wide reliance on the challenged advertising could be presumed due to the "extensive sweep" of Hyundai's marketing efforts.[11]

         Turning to the question whether plaintiffs could certify a nationwide class, despite the fact that their complaint invoked only California law, the district court held it was required to perform a choice of law analysis. The court stated that California had sufficient contacts to support the extraterritorial application of California law to all claims, but "just as in Mazza, the three-part choice of law test . . . comes out in Defendant's favor." In reaching this conclusion, the court relied on three factors. First, Hyundai's submission of its appendix of variations in state law "unquestionably demonstrates that there are material differences as between the various states' laws that would 'make a difference in this litigation.'" (quoting Mazza, 666 F.3d at 590-91, specifically considering the scienter requirements and remedies). Second, the court ruled that as in Mazza, each of the states "has an interest in balancing the range of products and prices offered to consumers with the legal protections afforded to them." Mazza, 666 F.3d at 592. Third, the court determined that "the interests of the other states would be more impaired were California law imposed upon their citizens than California would be impaired were this action limited to a class of only California consumers." In sum, the court found "that certification of a nationwide class where California law is applied to out-of state consumers is foreclosed by the Ninth Circuit's decision in Mazza, a case virtually on all fours with the instant matter."

         Because California law could not be applied to out-of-state class members, the court thought it was obvious that the class could not be certified: "were the laws of the other various states applied to out-of-state purchasers, class certification would be precluded because common questions of law and fact would no longer predominate." The court held that it would consider certifying a class of California consumers, defined to include only those California consumers who actually viewed one of the challenged advertisements or marketing materials. On November 29, 2012, the Court held a hearing on the class certification motion pending in Espinosa, but did not make a final ruling, instead requesting supplemental briefing.

         Immediately following Hyundai's November 2, 2012 announcement of the LRP, and before the Espinosa court could make a final ruling on class certification, plaintiffs across the country filed a flurry of putative class actions alleging that Hyundai and Kia misrepresented the fuel efficiency of their vehicles through advertising and Monroney Stickers.[12] Among other actions, plaintiffs filed Hunter v. Hyundai Motor America, No. 8:12-CV-01909 (C.D. Cal. filed Nov. 2, 2012), and Brady v. Hyundai Motor America, No. 8:12-cv-1930 (C.D. Cal. filed Nov. 6, 2012), in the Central District of California. Both actions claimed violations of California consumer protection laws and common law on behalf of putative nationwide classes of all persons who owned or leased a Hyundai or Kia vehicle that had been identified in the EPA investigation.[13] In December 2012, the district court requested further supplemental briefing on the class certification motion in light of Hyundai's November 2, 2012 announcement.

         Plaintiffs in one putative nationwide class action, see Krauth v. Hyundai Motor Am., No. 8:12-cv-01935 (C.D. Cal. filed Nov. 6, 2012), initiated proceedings before the Multidistrict Litigation (MDL) judicial panel pursuant to 28 U.S.C. § 1407, requesting that twelve putative class actions against Hyundai and Kia (including Espinosa, Hunter, and Brady) relating to the marketing and advertising of the fuel efficiency estimates of Hyundai and Kia vehicles be transferred to a single district for coordinated pretrial proceedings. On February 6, 2013, the MDL judicial panel transferred those actions as MDL No. 2424 to the court that was already presiding over the Espinosa action. The MDL judicial panel noted that any other related actions were potential tag-along actions.[14] In total, 56 actions were ultimately transferred to the MDL.

         One week after the MDL judicial panel issued its transfer order, and approximately three months after the announcement of the EPA investigation and LRP, the district court held a status conference in the Espinosa matter. At that status conference, the Espinosa plaintiffs informed the district court that they (along with the plaintiffs in Hunter and Brady) had reached a settlement with Hyundai for a single nationwide class. Shortly thereafter, the parties informed the court that Kia had agreed to the same settlement terms as Hyundai.

         The proposed settlement agreement had the following terms. The parties agreed that the district court should certify a nationwide class of all persons who were current and former owners and lessees of specified Hyundai and Kia vehicles on or before November 2, 2012.[15] Hyundai and Kia would offer class members several alternative methods of compensation. First, class members could opt to receive the cash equivalent of the pre-existing LRP program. Specifically, class members could choose to receive a single lump sum payment rather than the periodic payments offered through the preexisting LRP. The lump sum payment for current owners was calculated based on an average 4.75-year term of ownership, 15, 000 miles driven each year, and gas prices between $3.00 and $3.70.[16] The predicted average total lump sum payment was $353 for class members owning or leasing Hyundais and $667 for class members owning or leasing Kias. A class member who had begun participating in the LRP before the settlement but elected to switch to the lump sum payment option would receive a smaller lump sum, reduced by any amount the class member had already received through the LRP. The class members would receive their lump sum payment in the form of a debit card that would expire one year after it was issued; any unused amount would revert to Hyundai or Kia unless the class member timely deposited the residual amount in a bank account.

         Two other compensation options offered consumers a credit that was nominally larger than the lump sum value of the existing LRP program, but which could be used only for purchasing more services or products from Hyundai or Kia. First, class members could choose to receive a Hyundai or Kia dealer service credit worth 150 percent of the value of the lump sum payment. The credit expired after two years. Alternatively, class members could choose to receive a new car rebate certificate worth 200 percent of the lump sum payment, which could be used toward the purchase of a new Hyundai or Kia vehicle. The certificate would expire after three years.

         Finally, class members who were already participating in the preexisting LRP could choose to forego any of the settlement options and simply remain in the preexisting LRP. The deadline for enrolling in the LRP was extended to July 6, 2015, giving class members who had not enrolled in the LRP by the original December 31, 2013 deadline an additional 18 months to do so. Class members who were current owners or lessees of certain Hyundai vehicles who elected to remain in the LRP could receive an additional $100 for current original owners and $50 for current lessees and fleet owners.[17]

         Used car owners were included in the proposed settlement class, but received only half the amounts available to new car owners. The settling parties justified this settlement amount on the ground that used car owners' "reliance on the Monroney numbers is less clear and potentially individualized" because Monroney stickers are not required for sales of used cars. See 15 U.S.C. §§ 1232-1233.

          The proposed settlement provided a process for class members to opt out of the settlement by mailing a request for exclusion. However, upon the district court's final approval of the settlement agreement, the district court would dismiss "all other lawsuits centralized in the MDL in which the named plaintiffs in such lawsuit(s) did not timely exclude themselves from the settlement."

         In addition to paying the requisite amounts for class members, Hyundai and Kia agreed to pay class counsel reasonable attorneys' fees. The amount of attorneys' fees would be negotiated and awarded separately from the relief provided to class members.

         Following the February 2013 announcement of this proposed settlement, the court ordered discovery in April 2013 to confirm the facts on which the settlement was based and to allow plaintiffs to evaluate the terms of the settlement. Hyundai and Kia produced several hundred thousand pages of documents and allowed plaintiffs to interview 11 employees.

         While this confirmatory discovery was ongoing, a different group of plaintiffs filed another action against Hyundai in the Western District of Virginia. See Gentry v. Hyundai Motor Am., No. 3:13-cv-0030 (W.D. Va. filed Oct. 14, 2013). The Gentry plaintiffs asserted claims under Virginia consumer protection, false advertising, and vehicle warranty laws on behalf of a putative class of all persons who had purchased a model year 2011, 2012, or 2013 Hyundai Elantra in Virginia.[18] Claiming that Hyundai's false advertising was willful, the complaint demanded the greater of treble damages or $1000 for each class member under the Virginia Consumer Protection Act. See Va. Code Ann. ...


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