Class Action

Class Action Defense Cases–Yokoyama v. Midland National Life: Ninth Circuit Reverses Denial Of Class Action Certification Holding Individualized Reliance Not Required Under Hawaii Deceptive Practices Act

By Michael J. Hassen

District Court Erred in Denying Class Action Certification Motion in Class Action Alleging Violations of Hawaii’s Deceptive Practice Act because Hawaii Case Law Establishes that Individualized Reliance need not be Shown so Common Questions Predominated over Individual Questions Ninth Circuit Holds

Plaintiff filed a putative class action against Midland National Life Insurance Company alleging violations of Hawaii’s Deceptive Practices Act; specifically, the class action complaint alleged that the brochures prepared by Midland to market annuities to senior citizens violated Hawaii law. Yokoyama v. Midland National Life Ins. Co., ___ F.3d ___ (9th Cir. February 8, 2010) [Slip Opn., at 2127, 2130]. (Similar class actions had been filed against Midland, but this class action was exempted by the order of the Judicial Panel on Multidistrict Litigation which centralized the other class actions in the Central District of California “, because this action has been narrowly tailored to rely only on Hawaii law.” Id., at 2130-31.) Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment on the ground, inter alia, that plaintiff failed to establish the predominance and superiority requirements for a Rule 23(b)(3) class. Id., at 2131. “The district court denied class certification, holding that in order to succeed under the Hawaii Act, each plaintiff would have to show subjective, individualized reliance on deceptive practices within the circumstances of each plaintiff’s purchase of the annuity.” Id. (citing Yokoyama v. Midland Nat’l Life Ins. Co., 243 F.R.D. 400 (D. Haw. 2007)). Plaintiffs appealed the denial of class action certification, id. The Ninth Circuit reversed.

The Ninth Circuit began its analysis with the following observation: “The dispositive issue is…whether Hawaii’s Deceptive Practices Act requires a showing of individualized reliance.” Yokoyama, at 2131. The district court concluded that common issues did not predominate because of the individual inquiries inherent in determining reliance: “The district court refused to certify a class in this case because it determined that Hawaii’s consumer protection laws require individualized reliance showings. Believing that the plaintiffs’ claims would ‘require inspection of whether the class members individually relied on Midland’s misstatements,’ the district court concluded that class issues do not predominate over issues affecting individual members.” See id., at 2138. In so ruling, the district court misinterpreted Hawaii law. The Ninth Circuit explained that, under Hawaii law, individual proof of reliance was unnecessary. “The Hawaii Supreme Court has considered the issue of whether the statute requires actual, i.e., subjective reliance. It has said that the dispositive issue is whether the allegedly deceptive practice is “likely to mislead consumers acting reasonably under the circumstances.” [Citation.] “[A]ctual deception need not be shown, the capacity to deceive is sufficient.” [Citation.] This is an objective test, and therefore actual reliance need not be established. Accordingly, there is no reason to look at the circumstances of each individual purchase in this case, because the allegations of the complaint are narrowly focused on allegedly deceptive provisions of Midland’s own marketing brochures, and the fact-finder need only determine whether those brochures were capable of misleading a reasonable consumer.” Id., at 2131. See also, id., at 2136-38. More specifically, the Circuit Court explained, “These plaintiffs base their lawsuit only on what Midland did not disclose to them in its forms. The jury will not have to determine whether each plaintiff subjectively relied on the omissions, but will instead have to determine only whether those omissions were likely to deceive a reasonable person. This does not involve an individualized inquiry.” Id., at 2138-39. The Ninth Circuit held, therefore, that the district court abused its discretion in denying class action treatment because its decision was premised on a legal error. Id.

Full post as published by Class Action Defense Blog on March 02, 2010 (boomark / email).