The Ripple Effect: How One Case Almost Ruined Class Actions Involving Multiple States

Nearly seven years ago, lawsuits were filed claiming that Hyundai and Kia were misstating the fuel efficiency of their vehicles. The case seemed simple enough—until settlement talks led to settlement objections, and settlement objections led to a controversial ruling that could have changed the future of multi-state class actions as we know it.

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Suddenly, all eyes were on the Hyundai/Kia case, a lawsuit that was not only poised to leave a lasting effect on future litigation, but that also threatened to end several completely unrelated cases before they could have their chance at a final settlement. So, how did a lawsuit involving the auto industry almost derail cases over coconut oil and security systems – along with the class action system itself?

About the Case

Hyundai and Kia were facing a flood of lawsuits after making a joint announcement in 2012 that they would be restating the fuel efficiency estimates for several vehicle models after apparently deviating from the proper U.S. Environmental Protection Agency fuel economy testing protocol. Due to the volume of cases, an order was issued to consolidate the suits into a multidistrict litigation (MDL) in California to handle everything as a whole under the guidance of one judge.

In 2014, Hyundai and Kia proposed a $255 million settlement to put the cases to rest, and several months later, the deal was given final approval by a California federal judge. It looked like that would be the end of it—until the settlement was appealed and later tossed in 2018.

The Appeal

Those who objected to the deal claimed it was unfair and violated the rights of consumers outside of California. Specifically, the automakers were looking to apply California law to the proposed nationwide settlement class, but because of the differences in state consumer protection laws, residents of other states may have been able to get better deals if the laws in their own states had been applied instead. Virginia residents, in particular, said that their rights would have been “thwarted, frustrated and destroyed,” and that their settlement proceeds would have been reduced.  

The Ninth Circuit agreed with the objectors and threw out the settlement, arguing that the court should have considered the differences in state laws before certifying a nationwide class—but, some feared that the decision, as it stood, would be “a major blow to multistate class actions,” according to one judge.

Basically, if the decision stood, attorneys and courts alike would have needed to consider each state’s laws before deciding on a nationwide class. From then on, nationwide settlement classes would be nearly impossible because of the burden to perform a 50-state analysis of relevant state laws on top of the federal laws already being considered—and this would need to be done for every case that made it to settlement talks. Currently, this type of vetting is only done when a case is being litigated and not when a settlement is on the table.

In effect, the Ninth Circuit’s decision would have established a standard that if there is going to be a settlement in a class action lawsuit, only states that have no differences in their laws would be able to participate. Instead of resulting in separate state subclasses and having the settlement terms change for each of these subclasses, this decision would have led to cases either failing outright or proceeding with a mere shell of the potential number of class members – simply because some live in states with different laws.  

A brief filed by consumer interest groups stated it plainly:

In practice, eviscerating nationwide settlements will not result in 50-plus customized settlements tailored to the laws of each state and district, but rather, will operate to prevent settlements at all.”

In the fuel efficiency litigation, plaintiffs, defense attorneys, automakers, and business and consumer advocates all filed briefs urging the Ninth Circuit to take a second look at the decision because of the effect it would have had on the entire legal landscape. The Ninth Circuit revisited the ruling, and after some deliberation, reinstated the settlement before a new precedent was made for all cases going forward.  

The Power of the Precedent

Not everything that gets decided in the court is based on word-for-word text from different laws. If the Fair Debt Collection Practices Act (FDCPA) were to cover every feasible scenario in which debt collection is involved, it would be thousands upon thousands of pages long—so in cases not specifically outlined, the law serves as more of a guideline than a hard-and-fast set of rules. In many instances, courts and judges often have to interpret the law to best fit the case before them.

Take, for example, Spokeo, Inc. v. Robins and the 2016 decision that laid the groundwork for how all cases after it must be handled. The suit was filed by Thomas Robins, who claimed that a profile on Spokeo’s website in 2010 included false information about him that may have harmed his job prospects. The crux of the issue lay with that one little word—may. In the end, the court found that Robins needed to show concrete proof that he was negatively affected by Spokeo’s conduct.

A decision like Spokeo, Inc. v. Robins sets a precedent (or template, if you will) for other courts to follow when they come across a similar case. The precedent set here made it so that a case can’t proceed unless there’s solid proof of harm—for instance, loss of a job directly caused by false information posted about an applicant online. In essence, laws as they are written aren’t changing, but the interpretations of them are.

What Other Cases Could Have Been Affected by the Hyundai/Kia Litigation?

If the Hyundai and Kia settlement were axed, it would have affected every class action moving forward that involved more than one state. But, there were a handful of suits that were directly threatened by the decision—and actually put on hold to await the result of the fuel efficiency case. Among the cases, we have:

And those are just the ones that we know of. Part of the reason why the decision to axe the settlement was reversed was because of the wide-reaching effect it would have on the legal landscape—and how it had the potential to make cases involving more than one state nearly impossible.

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