In Yokoyama v Midland National Life Insurance Company, Aug 28, 2009, the Ninth Circuit narrowed the deferential standard of review that is generally afforded to district court class certification decisions. The plaintiffs’ complaint alleged that the defendant marketed annuities in violation of the Hawaii Deceptive Practices Act. The district court denied class certification based on its conclusion that the Act required a showing of individualized reliance. Because the denial of certification was premised on a purely legal issue, the appellate court employed a de novo review and reversed the district court’s decision, finding that reliance under the Hawaii statute is judged by an objective standard suitable for class certification. The court noted that “the overall standard of review is for abuse of discretion” when class certification is on appeal, but that a literal interpretation of this standard would conflict with the now bedrock U.S. Supreme Court precedent of Salve Regina College v. Russell (1991) that all issues of law must be reviewed de novo. Accordingly, the appellate court held that “underlying rulings on issues of law must be reviewed de novo even when they are made in the course of determining whether or not to certify a class.”
In a concurring opinion, Judge Smith agreed with the result but criticized the majority for its unnecessary departure from the “abuse of discretion” standard. Judge Smith reasoned that the district court’s interpretation of the Hawaii Act was an error of law which “is per se an abuse of discretion.” Thus, in Judge Smith’s view, the abuse of discretion standard was sufficient to resolve the case.