Yokoyama v. Midland Nat. Life Ins. Co.

• Decision Date: 08 February 2010
• Docket Number: No. 07-16825.,07-16825.
• Citation: 594 F.3d 1087
• Parties: Gary YOKOYAMA, Attorney in fact for Leatrice C. Yokoyama, Individually and On Behalf of a Class of similarly situated Persons, Catherine Thorson; Edna Yamane, Plaintiffs-Appellants, v. MIDLAND NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

594 F.3d 1087

Gary YOKOYAMA, Attorneyin fact for Leatrice C. Yokoyama, Individually and On Behalf of a Class of similarly situated Persons, Catherine Thorson; Edna Yamane, Plaintiffs-Appellants, v.MIDLAND NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 07-16825.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 20, 2008.

Filed February 8, 2010.

James J. Bickerton, Honolulu, HI, for plaintiff-appellant, Gary Yokoyama, et al.

Robert D. Phillips, Oakland, CA, for defendant-appellee, Midland National Life Insurance Co.

Appeal from the United States District Court for the District of Hawaii, J. Michael Seabright, District Judge, Presiding.D.C.No. CV-05-00303-JMS.

Before: MARY M. SCHROEDER, RICHARD A. PAEZ and N. RANDY SMITH, Circuit Judges.

ORDER AND OPINIONORDER

The opinion filed on August 28, 2009, is hereby withdrawn.The petition for rehearing is denied.An opinion is being filed concurrently with this order.

OPINION

SCHROEDER, Circuit Judge:

DefendantMidland National Life Insurance Company marketed annuities to senior citizens in Hawaii.At issue in this case are Midland annuities that were sold by independent brokers between 2001 and 2005.PlaintiffGary Yokoyama purchased one of those annuities through an independent broker and filed this class action claiming that Midland marketed the annuities through deceptive practices, in violation of Hawaii's Deceptive Practices Act.SeeHaw.Rev.Stat. § 480-2.The complaint specifically targets representations made in Midland's brochures, which promoted the annuities as appropriate for seniors.This action has been exempted from multi-district litigation against Midland pending in the Central District of California, because this action has been narrowly tailored to rely only on Hawaii law.

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.SeeYokoyama v. Midland Nat'l Life Ins. Co.,243 F.R.D. 400(D.Haw.2007).Principally for that reason, the district court held that the plaintiffs could not satisfy Federal Rule of Civil Procedure 23(b)(3)'s requirements that common issues predominate over individual issues and that a class action is a superior method of adjudication.The dispositive issue is thus an issue of Hawaii state law, namely whether Hawaii's Deceptive Practices Act requires a showing of individualized reliance.

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."Courbat v. Dahana Ranch, Inc.,111 Hawai'i 254, 141 P.3d 427, 435(2006)."[A]ctual deception need not be shown, the capacity to deceive is sufficient."State of Bronster v. U.S. Steel Corp.,82 Hawai'i 32, 919 P.2d 294, 313(1996)(citation omitted).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.

In the event the plaintiffs succeed under this standard in establishing liability under the Hawaii Act, there will then, in all likelihood, be individualized issues of damages.The potential existence of individualized damage assessments, however, does not detract from the action's suitability for class certification.Our court long ago observed that "[t]he amount of damages is invariably an individual question and does not defeat class action treatment."Blackie v. Barrack,524 F.2d 891, 905(9th Cir.1975)(citations omitted);accordSmilow v. SW. Bell Mobile Sys., Inc.,323 F.3d 32, 40(1st Cir.2003).Because there are no individualized issues of subjective reliance under Hawaii law, we hold that the district court erred when it denied class certification.

BACKGROUND

Three consumer senior citizens, all residents of Hawaii, initiated this action.Each purchased Midland's annuities from an independent broker.Each signed Midland's sales and disclosure forms.Midland obligates its brokers, with respect to each sale, to provide certain documentation to consumers, to obtain consumers' signatures on various forms, and to certify that nothing was said that is inconsistent with Midland's brochures and disclosure forms.In particular, Midland requires its brokers to sign the following certification:

I certify that the Company disclosure material has been presented to the applicant.I have made no statements which differ in any significant manner from this material.I have not made any promises or guarantees about the future value of any non-guaranteed elements.

Plaintiffs allege that Midland's documentation deceptively represents that its annuities protect its clients from the risks of the stock market and that Midland fails to include in its documentation facts necessary to inform prospective purchasers of the true risks, possible detriments, and unsuitability of Midland's long-term annuities for seniors.The plaintiffs' complaint therefore makes clear that plaintiffs' claims rest on Midland's own sales materials, not any representations made by specific brokers to the individual plaintiffs.Specifically, their allegations do not relate to what they were told by brokers; rather, their allegations relate to what information was absent from Midland's brochures.

ANALYSIS

I.Standard of Review

The prerequisites for maintaining a class action pursuant to Rule 23(a), and the findings necessary under Rule 23(b)(3) to certify the type of class sought in this case, include some determinations that may, depending on the nature of the case, present questions of law, or of fact, or involve issues requiring a discretionary determination.¹Rule 23(a)'s prerequisite that there must be questions of law or fact common to the class, for example, is obviously one where the trial court must look to both the legal and factual contexts of the litigation before it.Fed.R.Civ.P. 23(a)(2).The same is true for Rule 23(b)(3)'s stricture that the court find that "the questions of law or fact common to class members predominate" over individualized issues.Fed.R.Civ.P. 23(b)(3).Such a determination also generally contains an element of discretion, as do most of the Rule's requirements, particularly the prerequisites of numerosity, typicality, and adequacy of representation.The most important determination, i.e., the ultimate decision as to whether or not to certify the class, must, at least in any nonfrivolous putative class action, involve a significant element of discretion.

It is, therefore, unsurprising that when a district court's class action certification is on appeal, we say that the overall standard of review is for abuse of discretion.See, e.g., Parra v. Bashas', Inc.,536 F.3d 975, 977(9th Cir.2008).In addition, when any particular underlying Rule 23 determination involving a discretionary determination is appealed, our standard of review must be for abuse of discretion.

While our review of discretionary class certification decisions is deferential, it is also true that we accord the decisions of district courts no deference when reviewing their determinations of questions of law.Further, this court has oft repeated that an error of law is an abuse of discretion.See, e.g., Knight v. Kenai Peninsula Borough Sch. Dist.,131 F.3d 807, 816-17(9th Cir.1997)("We review a district court's denial of class certification for abuse of discretion," and "a district court abuses its discretion when it makes an error of law.");Hawkins v. Comparet-Cassani,251 F.3d 1230, 1237(9th Cir.2001)("A district court's decision regarding class certification is reviewed for abuse of discretion" and "[a]court abuses its discretion if its certification order is premised on legal error.")(internal citations omitted);Molski v. Gleich,318 F.3d 937, 946(9th Cir.2003)(same, citing Hawkins,251 F.3d at 1237).Indeed, since Salve Regina Coll. v. Russell,499 U.S. 225, 231, 111 S.Ct. 1217, 113 L.Ed.2d 190(1991), no federal court has ever held that a district court's error as to a matter of law is not an abuse of discretion, in the class action context, or in any other.

Thus, when an appellant raises the argument that the district court premised a class certification determination on an error of law, our first task is to evaluate whether such legal error occurred.See, e.g., Zinser v. Accufix Research Inst.,253 F.3d 1180, 1186-88(9th Cir.2001)(reviewing a district court's choice of law determination de novo, and its factual findings for clear error);Knight v. Kenai Peninsula Borough Sch. Dist.,131 F.3d 807, 811-812(9th Cir.1997)(finding an issue of law, regarding a mootness determination, is reviewed without deference to the district court and that an error of law is a per se abuse of discretion).

As Zinser and Knight illustrate, once we have determined the threshold question of whether an error of law has occurred, we review the class certification determination for abuse of discretion.If the district court's determination was premised on a legal error, we will find a per se abuse of discretion.SeeKnight,131 F.3d at 817.If no legal error occurred, we will proceed to review the district court's class certification decision for abuse of discretion as we always have done.

The Supreme Court has addressed this same dichotomy in the sanctions context of Rule 11 of the Federal Rules of Civil Procedure.The Court resolved it by holding that when a district court...