Steve Berman.

Lawyers on both sides of a high-profile case against Hyundai, citing a circuit split, have asked an en banc appeals panel to upend a ruling that they say threatens the future of nationwide class action settlements.

In dual petitions for rehearing filed on Thursday before the U.S. Court of Appeals for the Ninth Circuit, plaintiffs attorneys and lawyers for defendants Hyundai Motor America and Kia Motors America Inc. both argued that an en banc panel should review a Jan. 23 decision that conflicts with the Third Circuit, and its own precedent. The 2-1 decision, which decertified the nationwide class in their settlement, also is contrary to the U.S. Supreme Court's 1997 decision in Amchem Products v. Windsor, they wrote.

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“Class action litigation resembling this case is commonplace throughout the nation, and the panel majority decision will have broad, negative effects on the way class action litigation is conducted—to the extent that it does not render nationwide class treatment unfeasible altogether,” wrote Hyundai attorney Shon Morgan and James Azadian, who represents Kia. “Whatever one thinks of the class action device, the voluntary, fair and efficient resolution of such actions through nationwide settlements benefits all stakeholders: class members, defendants, as well as state and federal judicial systems. The panel majority's decision severely jeopardizes these salutary outcomes.”

The ruling in In re Hyundai and Kia Fuel Economy Litigation involved a settlement of Hyundai consumers who had sued over misstatements about fuel standards. In a dissent, Ninth Circuit Judge Jacqueline Nguyen said the majority's opinion “deals a major blow” to nationwide class actions.

But the majority found the district judge had failed to conduct an analysis over whether consumer laws in several states were so different from one another as to defeat the common claims of class members. Federal Rule 23 of Civil Procedure allows class actions to be maintained if a judge “finds that the questions of law or fact common to class members predominate over any questions affecting only individual members.”

But being forced to analyze variances in state laws as part of a so-called predominance analysis is not simple or appropriate for class action settlements, wrote plaintiffs attorney Steve Berman of Seattle's Hagens Berman Sobol Shapiro.

“Requiring the parties to engage in detailed choice-of-law and/or multi-state consumer-law analysis as a prerequisite to certification of a nationwide settlement class increases both the burden on the district courts and the expense and uncertainty of nationwide settlements—and makes such settlements less likely,” he wrote.

On Friday, the Ninth Circuit ordered lawyers for objectors, who challenged the settlement on appeal, to file a response within 21 days. Objector attorneys James Feinman of Lynchburg, Virginia, and George Cochran of Streetsboro, Ohio, who argued in the case, did not respond to requests for comment.

The ruling already has been cited in class action settlements involving Remington rifles and data breaches at Target and Anthem.

“The panel majority decision already portends profound impact on class litigation nationwide, threatening to undermine carefully crafted settlement agreements,” defense lawyers wrote.

Morgan, chairman of the national class action practice group at Los Angeles-based Quinn Emanuel Urquhart & Sullivan, and Azadian, West Coast leader of Dykema Gossett's appellate practice, both declined to comment.

Both sides cited the numerous barriers that the ruling would create in attempting to settle nationwide class actions.

Berman said it was “wasteful make-work for litigants” and would “generate extra paperwork.” It also could force plaintiffs lawyers to join “additional class representatives for whom service payments would be sought.”

Lawyers for Hyundai and Kia said the ruling “imposes a new and unworkable requirement on district courts” that will “significantly distort class-action litigation and settlements going forward.”

Both sides focused on the Ninth Circuit's own opinion in Hanlon v. Chrysler, which came out in 1998. That panel found that the “idiosyncratic differences between state consumer protection laws are not sufficiently substantive to predominate over the shared claims.”

Berman called Hyundai “a significant departure from precedent” given that lawyers have relied on Hanlon for more than 20 years.

Neither petition focused much on the Ninth Circuit's 2012 decision in Mazza v. American Honda Motor, on which the Hyundai majority had relied. In that case, the Ninth Circuit de-certified a nationwide class under California law after finding that each of the 44 states involved had a “strong interest in applying its own consumer protection laws.” But that ruling involved a certification motion, not approval of a settlement. Such an analysis is common in class certification arguments but, according to some lawyers, much less so at the settlement stage, when everyone wants to resolve the litigation.

The Hyundai panel also cited the Supreme Court's finding in Amchem that both sides of a class action settlement must make sure to give “undiluted, even heightened, attention” to Rule 23's requirements in order to protect the rights of absent class members.

Both petitions insisted that Hyundai misinterpreted the Supreme Court decision.

And both said Hyundai conflicted with the Third Circuit's en banc decision in Sullivan v. DB Investments in 2011. Defense lawyers also cited the Seventh Circuit's 2001 ruling in In re Mexico Money Transfer Litigation.

Those circuits “treat differences in state law as generally immaterial in the context of a settlement class and thus insufficient to defeat predominance,” defense lawyers wrote.

The burden to analyze conflicts among state laws, they wrote, is on objectors, who can raise those issues before the approval of a settlement—not on plaintiffs and defendants, or even judges, as the Hyundai decision appeared to suggest.

“That has never been the law in this circuit (or in any other),” defense lawyers wrote.