FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

GARY YOKOYAMA, ATTORNEY IN 

FACT FOR LEATRICE C. YOKOYAMA,

INDIVIDUALLY AND ON BEHALF OF A

CLASS OF SIMILARLY SITUATED No. 07-16825

PERSONS, CATHERINE THORSON; D.C. No.

EDNA YAMANE,  CV-05-00303-JMS

Plaintiffs-Appellants,

ORDER AND

v. OPINION

MIDLAND NATIONAL LIFE INSURANCE

COMPANY,

Defendant-Appellee. 

Appeal from the United States District Court

for the District of Hawaii

J. Michael Seabright, District Judge, Presiding

Argued and Submitted

November 20, 2008—Honolulu, Hawaii

Filed February 8, 2010

Before: Mary M. Schroeder, Richard A. Paez and

N. Randy Smith, Circuit Judges.

Opinion by Judge Schroeder

2127
COUNSEL

James J. Bickerton, Honolulu, Hawaii, for plaintiff-appellant,

Gary Yokoyama, et al.

Robert D. Phillips, Oakland, California, for defendantappellee, Midland National Life Insurance Co.

ORDER

The opinion filed on August 28, 2009, is hereby withdrawn.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:

Defendant Midland 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. Plaintiff Gary 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. See Haw. 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

2130 YOKOYAMA v. MIDLAND NATIONAL LIFE
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. See Yokoyama 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., 141 P.3d 427, 435 (Haw. 2006). “[A]ctual deception

need not be shown, the capacity to deceive is sufficient.” State

of Bronster v. U.S. Steel Corp., 919 P.2d 294, 313 (Haw.

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 factfinder 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,

YOKOYAMA v. MIDLAND NATIONAL LIFE 2131
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); accord

Smilow 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 nonguaranteed 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,

2132 YOKOYAMA v. MIDLAND NATIONAL LIFE
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

[1] 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.1 Rule 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

1At issue in this case are Rule 23(b)(3)’s predominance and superiority

requirements. Rule 23(b)(3) requires that: 

questions of law or fact common to class members predominate

over any questions affecting only individual members, and that a

class action is superior to other available methods for fairly and

efficiently adjudicating the controversy. The matters pertinent to

these findings include: 

(A) the class members’ interest in individually controlling

the prosecution or defense of separate actions; 

(B) the extent and nature of any litigation concerning the

controversy already begun by or against class members; 

(C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and 

(D) the likely difficulties in managing a class action. 

YOKOYAMA v. MIDLAND NATIONAL LIFE 2133
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. 

[2] 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

2134 YOKOYAMA v. MIDLAND NATIONAL LIFE
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. See Knight, 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 errs as a matter of law in imposing sanctions, the

legal error automatically becomes an abuse of discretion.

Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110

S.Ct. 2447, 110 L.Ed.2d 359 (1990) (“A district court would

necessarily abuse its discretion if it based its ruling on an

erroneous view of the law . . . .”).

Our court’s method in Zinser and Knight is also consistent

with the practices of other circuits. For example, in Miles v.

Merrill Lynch & Co., the Second Circuit held that the standard for appellate review of the Rule 23 requirements “is

whether discretion has been exceeded (or abused). . . . Of

course, this leeway, with all matters of discretion, is not

boundless. To the extent that the ruling on a Rule 23 requirement . . . involves an issue of law, review is de novo.” 471

F.3d 24, 40-41 (2d Cir. 2006). See also Andrews v. Chevy

YOKOYAMA v. MIDLAND NATIONAL LIFE 2135
Chase Bank, 545 F.3d 570, 573 (7th Cir. 2008) (“We generally review a grant of class certification for abuse of discretion, but ‘purely legal’ determinations made in support of that

decision are reviewed de novo.”); In re Hydrogen Peroxide

Antitrust Litig., 552 F.3d 305, 312 (3d Cir. 2009) (“We

review a class certification order for abuse of discretion . . .

. . Whether an incorrect legal standard has been used in an

issue of law to be reviewed de novo.”) (internal quotations

omitted). 

[3] In light of the above, in reviewing this case, we must

first determine whether the law of Hawaii requires a finding

of individual reliance in the application of its consumer protection statutes. As a federal court sitting in diversity, we

answer this question of state law de novo. Salve Regina, 499

U.S. at 231. Our conclusion of whether or not the district

court erred in interpreting Hawaii law will then inform our

abuse of discretion review of the district court’s denial of

class certification. 

II. The District Court Erred as a Matter of Law When

It Found that Hawaii’s Consumer Protection Law

Required Individualized Showings of Reliance

The Hawaii Supreme Court has described the state’s consumer protection laws as having been “constructed in broad

language in order to constitute a flexible tool to stop and prevent fraudulent, unfair or deceptive business practices for the

protection of both consumers and honest businessmen.” Ai v.

Frank Huff Agency, Ltd., 607 P.2d 1304, 1311 (Haw. 1980),

overruled on other grounds by Robert’s Haw. Sch. Bus, Inc.

v. Laupahoehoe Transp. Co., Inc., 982 P.2d 853 (Haw. 1999).

Although “deceptive” practices violate Hawaii’s Hawaii

Revised Statute § 480-2, chapter 480 provides no definition of

“deceptive.” Courbat, 141 P.3d at 434. Section 480-2 provides, in pertinent part, as follows: 

2136 YOKOYAMA v. MIDLAND NATIONAL LIFE
(a) Unfair methods of competition and unfair or

deceptive acts or practices in the conduct of any

trade or commerce are unlawful. 

(b) In construing this section, the courts and the

office of consumer protection shall give due consideration to the rules, regulations, and decisions of the

Federal Trade Commission and the federal courts

interpreting section 5(a)(1) of the Federal Trade

Commission Act (15 U.S.C. 45(a)(1)), as from time

to time amended. 

Haw. Rev. Stat. § 480-2.

[4] Hawaii courts have interpreted the word “deceptive” to

include those acts that mislead “consumers acting reasonably

under the circumstances.” Courbat, 141 P.3d at 435. Hawaii

courts have held that deceptive practices are those “tend[ing]

to mislead or deceive.” Bronster, 919 P.2d at 312. A deceptive act or practice is “(1) a representation, omission, or practice[ ] that (2) is likely to mislead consumers acting

reasonably under the circumstances [where] (3) [ ] the representation, omission, or practice is material.” Courbat, 141

P.3d at 435 (alterations in original) (citation omitted). The

representation, omission, or practice is material if it is likely

to affect a consumer’s choice. Id. Whether information is

likely to affect a consumer’s choice is an objective inquiry,

“turning on whether the act or omission is ‘likely to mislead

consumers’ as to information ‘important to consumers’ in

making a decision regarding the product or service.” Id.

(internal citations and footnote omitted). Therefore, Hawaii’s

consumer protection laws look to a reasonable consumer, not

the particular consumer. 

[5] Hawaii’s consumer protection laws expressly consider

class actions to be appropriate enforcement mechanisms.

Haw. Rev. Stat. § 480-13(c) (“The remedies provided in subsections (a) and (b) shall be applied in class action and de

YOKOYAMA v. MIDLAND NATIONAL LIFE 2137
facto class action lawsuits or proceedings, including actions

brought on behalf of direct or indirect purchasers . . . .”).

Hawaii’s courts recognize that its consumer protection laws

can be enforced through class actions. See Fuller v. Pac. Med.

Collections, Inc., 891 P.2d 300, 309 (Haw. App. 1995).

Retaining the class action feature likely helps bolster the

“flexibility” of the consumer protection laws. See Ai, 607 P.2d

at 1311.

III. The District Court’s Denial of Class Certification

Was a Per Se Abuse of Discretion Because It Was

Premised on Legal Error

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. 

[6] The district court’s premise was contrary to the Hawaii

Supreme Court’s interpretation of Hawaii state law, because

the Hawaii Supreme Court has made it clear that reliance is

judged by an “objective ‘reasonable person’ standard.” Courbat, 141 P.3d at 436. Hawaii’s Supreme Court has said as

much: “[A]ctual deception need not be shown; the capacity to

deceive is sufficient.” Bronster, 919 P.2d at 313. Because

Hawaii uses an objective test to effectuate its remedial consumer protection statute, the district court erred in holding

that individual reliance issues make this case inappropriate for

class certification. 

[7] 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

2138 YOKOYAMA v. MIDLAND NATIONAL LIFE
whether those omissions were likely to deceive a reasonable

person. This does not involve an individualized inquiry. 

[8] The district court also determined that the plaintiffs’

claims “involve separate questions of fact as to what information the independent brokers selling the [annuities] conveyed.” The plaintiffs’ allegations, however, are that the

deceptive acts or practices are omissions or misstatements in

Midland’s own brochures. More specifically, their Fourth

Amended Complaint alleges that the deception was perpetrated by Midland through its “fail[ure] to disclose to Plaintiffs and Class Members material information concerning the

benefits/detriments from, and suitability and impact of” the

annuities. The plaintiffs have thus crafted their lawsuit so as

to avoid individual variance among the class members. Plaintiffs’ case will not require the fact-finder to parse what oral

representations each broker made to each plaintiff. Instead,

the fact-finder will focus on the standardized written materials

given to all plaintiffs and determine whether those materials

are “likely to mislead consumers acting reasonably under the

circumstances.” Courbat, 141 P.3d at 435. 

Perhaps in part because the district court interpreted Hawaii

law to require subjective reliance, it concluded that the damages calculation involved highly individualized and factspecific determinations. The District Court explained that 

the amount of damage sustained by a single class

member would depend on factors such as the financial circumstances and objectives of each class member; their ages; the IAP selected; any changes in the

fixed interest rate for that particular IAP; the performance of the selected index; any changes in the

index margin for that particular IAP; any cap on the

indexed interest; the length of the surrender periods;

whether the individual had undertaken or wanted to

undertake an early withdrawal of funds; any benefit

the individual policy holder derived from the form of

YOKOYAMA v. MIDLAND NATIONAL LIFE 2139
the annuity itself, including the tax-deferral of credited interest; and the actual rate of return on the IAP.

[9] Damage calculations will doubtless have to be made

under Hawaii’s consumer protection laws. See Flores v. Rawlings Co., LLC, 177 P.3d 341, 355 (Haw. 2008); Balthazar v.

Verizon Haw. Inc., 123 P.3d 194 (Haw. 2005). In this circuit,

however, damage calculations alone cannot defeat certification. We have said that “[t]he amount of damages is invariably an individual question and does not defeat class action

treatment.” Blackie, 524 F.2d at 905. Thus, because there are

no individualized issues sufficient to render class certification

inappropriate under Rule 23, class issues predominate.

The same erroneous interpretation of Hawaii’s consumer

protection law undermines the district court’s determination

that a class action was not a “superior” means to adjudicate

the case. The principal reason that the district court found that

a class action was not “superior” was the many “individual

determinations that must be made,” a rationale premised on

the district court’s misinterpretation of Hawaii law and this

circuit’s precedent regarding the significance of individualized damages calculations in the context of class certification.

While the district court also reasoned that there was an incentive to pursue individual claims because the average purchase

price exceeded $50,000, the parties do not dispute that average actual damages would be only about 20-30 percent of the

purchase price. Lastly, while the court said that individual

claims against brokers could not be adjudicated within the

class action framework, the existence of individual claims

against other parties, such as brokers, does not necessarily

defeat the availability of a class action against the company

under a statute aimed at protecting reasonable consumers

from deceptive business practices. See Courbat, 141 P.3d at

434-35; Ai, 607 P.2d at 1311. Therefore, since it is clear that

the district court’s overriding but erroneous concern was that

a need for individualized determinations of both reliance and

2140 YOKOYAMA v. MIDLAND NATIONAL LIFE
damages defeated class treatment, we also reverse the district

court’s superiority determination.

CONCLUSION 

[10] Because the proper inquiry under Hawaii law considers the effect upon a reasonable consumer, not a particular

consumer, there are no individualized issues of reliance under

Rule 23. Moreover, Hawaii’s state courts have made clear that

Hawaii’s consumer protection laws are flexible and may be

enforced through the class action mechanism. We express no

opinion on the merits of the claims.

REVERSED and REMANDED for FURTHER PROCEEDINGS.

YOKOYAMA v. MIDLAND NATIONAL LIFE 2141