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Hanlon v. Chrysler Corp.

United States Court of Appeals for the Ninth Circuit · Civil Procedure

Civil ProcedureClass ActionsSettlement Class CertificationRule 23Class Action SettlementsRule 23(a)Rule 23(b)(3)Rule 23(e)

Facts

After NHTSA investigated rear liftgate latch problems in Chrysler minivans, Chrysler agreed to a voluntary Service Action to replace the latches on 1984-1995 minivans. Meanwhile, plaintiffs' lawyers had already filed several state class actions and engaged in discovery, expert consultation, and motion practice. Those actions were consolidated into a nationwide federal class action, and the parties promptly submitted a settlement that excluded personal injury and wrongful death claims and provided notice to over 3.3 million owners. Objectors challenged the class certification and settlement, largely arguing that the settlement was inadequate in light of Chrysler's prior agreement with NHTSA, and a Georgia plaintiff separately attempted to opt out all Georgia owners through a state class action.

Issue

Whether the district court properly certified a nationwide settlement-only class under Rule 23, approved the settlement as fair, adequate, and reasonable under Rule 23(e), and correctly held that a putative state class representative could opt out only himself rather than all members of a proposed Georgia subclass. The appeal also questioned whether the attorneys' fee award was proper.

Rule

In a settlement-only class action, courts must apply undiluted, heightened scrutiny to Rule 23 and must determine that all Rule 23(a) and Rule 23(b)(3) requirements are satisfied independent of the settlement's existence or terms. For Rule 23(a)(4), adequacy turns on whether named plaintiffs and counsel have conflicts with other class members and whether they will prosecute the action vigorously; under Rule 23(b)(3), common issues must predominate and class treatment must be superior. Under Rule 23(e), a settlement must be fundamentally fair, adequate, and reasonable, and when settlement approval occurs before formal litigation of certification, the district court must scrutinize the settlement with even more care. In a Rule 23(b)(3) class, the opt-out right is individual and may not be exercised en masse by a putative class representative or counsel on behalf of absent class members.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A federal court in San Diego is asked to certify a nationwide settlement-only class against Redwood Motors, alleging that a braking sensor in certain SUVs was defectively designed. The proposed class includes only claims for repair costs and non-personal-injury economic losses, excludes personal injury and wrongful death claims, and offers identical relief to every class member.

Objectors argue that certification must be denied because some owners already paid for repairs while others have not, and state-law remedies vary somewhat. Under the governing approach, what is the best answer?

Explanation. In a settlement-only class, the court must apply undiluted, heightened scrutiny to Rule 23 and determine that Rule 23 is satisfied independent of settlement. Adequacy focuses on conflicts and vigorous prosecution. Where all members share the same core defect problem, personal injury and wrongful death claims are excluded, and all class members receive identical treatment, the kind of structural allocation conflict that defeated certification in asbestos litigation is absent. Minor differences in damages or state remedies do not necessarily defeat adequacy. (Derived from Hanlon v. Chrysler Corp. (n.d.).)