February 18, 2022 - This Week at the Ninth

This Week at The Ninth: Class Settlement and Certification

This week, the Court addresses objectors’ challenges to the approval of a settlement of class and California Labor Code Private Attorney General claims, and considers the propriety of certifying a class with parties who experienced variable injuries.

PECK v. SWIFT TRANSPORTATION COMPANY OF ARIZONA, LLC

The Court holds that a non-party employee cannot appeal the settlement of a California PAGA claim but vacates the district court’s order applying a presumption of reasonableness in approving a class settlement.

The panel: Judges M. Smith, Ikuta, and Steele (M.D. Fla.), with Judge M. Smith writing the opinion.

Key highlight: “The district court not only applied the same presumption that we reversed in Roes, but it actually cited the very language from the district court’s order in Roes that we criticized. Having had not only the benefit of our decision in Roes, but also the cases preceding it applying the heightened standard, the district court should not have applied that presumption.”

Background: Various plaintiffs—drivers for Swift, a trucking company—sued Swift, alleging that it had violated California Labor Code provisions requiring it to fully indemnify its employees. The plaintiffs advanced claims both as a putative class action and under California’s Labor Code Private Attorney General Act (PAGA). A class was never certified. Eventually, the parties reached a $7.75 million settlement agreement, with $7.25 million going to the class claims and the remainder to the PAGA claim.

Two Swift drivers, Lawrence Peck and Sadashiv Mares, objected to the settlement agreement. The district court rejected the objections and approved the settlement agreement, and both Peck and Mares appealed.

Result: The Court dismissed in part and vacated in part. First, the Court addressed the challenge to the PAGA settlement, holding that because Peck was not a party to the PAGA litigation he could not appeal from the settlement of that litigation. As the Court explained, a PAGA action is distinct from a class action: whereas a class action is a collection of individual claims, a PAGA action is a representative action brought on behalf of the state. And “[b]ecause they have no comparable individual stake, objectors to a PAGA settlement are not ‘parties’ to a PAGA suit in the same sense that absent class members are ‘parties’ to a class action.” That was the case even if Peck might ultimately receive some portion of the PAGA settlement, and even if he had brought his own parallel PAGA action—neither made him a party to this particular PAGA litigation, as was required for him to appeal.

Second, the Court addressed the settlement of the class claims, holding that the district court had applied the wrong legal standard in approving it. The Court rejected Swift’s argument that Mares had waived this objection by failing to raise it in the district court, explaining that “an objector need not be an oracle and predict issues that will arise for the first time in the district court’s final order.” In that final order, the district court had stated that because the settlement agreement was reached through arms-length, non-collusive negotiations, it was “presumptively” reasonable. But the Ninth Circuit had specifically disapproved this “presumption” in circumstances where there has never been a class certified—circumstances that require “a more searching legal standard.” The Court concluded it could not deem the invocation of this standard harmless, as the district court “overlayed its entire discussion of the settlement agreement with the erroneous presumption.” Thus, the Court vacated the district court’s approval and remanded for it to apply the correct legal standard.

LARA v. FIRST NAT’L INS. CO. OF AMERICA

The Court holds that the district court did not abuse its discretion in concluding that factual variations among putative class members in a suit challenging auto insurance practices precluded class certification.

Panel: Judges Gould, Bennett, and R. Nelson, with Judge R. Nelson writing the opinion.

Key highlight: “[F]iguring out whether each individual putative class member was harmed would involve an inquiry specific to that person. More particularly, it would involve looking into the actual preaccident value of the car and then comparing that with what each person was offered, to see if the offer was less than the actual value. Because this would be an involved inquiry for each person, common questions do not predominate.”

Background: Plaintiffs Leeana Lara and Cameron Lindquist totaled their vehicles, then filed insurance claims with Liberty Mutual. For totaled vehicles—meaning cars so damaged that fixing them does not make sense—Liberty attempts to determine the car’s value before the accident. To do that, Liberty works with another company, CCC Intelligence Solutions, which prepares a valuation report. CCC surveys comparable vehicles at dealerships across the country, then adjusts its estimates based on the actual pre-accident condition of the totaled car; CCC may adjust its estimate upward or downward. After receiving CCC’s report, Liberty makes an offer to the insured. In preparing offers for Lara and Lindquist, Liberty relied on CCC’s report and valued their vehicles in part with a downward adjustment.

Plaintiffs sued both Liberty and CCC for damages, alleging that Liberty breached the insurance contract and that both companies violated Washington’s unfair trade practices law. After the district court denied Liberty’s motion to dismiss, Plaintiffs asked the court to certify a class of all people whose valuations included the disputed adjustment. The district court denied the certification request, finding that there was no predominance or superiority.

Results: The Ninth Circuit affirmed. First, the Court held that the district court did not abuse its discretion in finding that common questions do not predominate. It reasoned that both breach of contract and trade practices claims require showing an injury, and that the injury analysis required an individualized determination for each plaintiff depending on their unique experience with Liberty’s vehicle evaluation process. Plaintiffs argued that the district court erred in interpreting Washington’s insurance regulations, but the Ninth Circuit rejected that argument as irrelevant. As the Court explained, only the Washington insurance commissioner can prosecute regulatory violations, and violations without proof of injuries are insufficient to claim breach of contract. Second, for much the same reason, the panel held that the district court likewise had nor abused its discretion in finding that Plaintiffs could not satisfy the superiority requirement, either.