Court Opinion

ID: 3065055
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:28:34.520047+00
Date Added: 2024-06-11T11:49:43.206633
License: Public Domain

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;
EDNA YAMANE,
              Plaintiffs-Appellants,
                                              D.C. No.
                                           CV-05-00303-JMS
                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 August 28, 2009

      Before: Mary M. Schroeder, Richard A. Paez and
              N. Randy Smith, Circuit Judges.

               Opinion by Judge Schroeder;
             Concurrence by Judge N.R. Smith

                            12055
12058        YOKOYAMA v. MIDLAND NATIONAL LIFE

                         COUNSEL

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

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

                         OPINION

SCHROEDER, Circuit Judge:

   Defendant Midland National Life Insurance Company mar-
keted annuities to senior citizens in Hawaii. At issue in this
case are Midland annuities that were sold by independent bro-
kers between 2001 and 2005. Plaintiff Gary Yokoyama pur-
chased 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 Mid-
land’s brochures, which promoted the annuities as appropriate
             YOKOYAMA v. MIDLAND NATIONAL LIFE             12059
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 pur-
chase of the annuity. See Yokoyama v. Midland Nat’l Life Ins.
Co., 243 F.R.D. 400 (D. Haw. 2007). For that reason, the dis-
trict court held that the plaintiffs could not satisfy Federal
Rule of Civil Procedure 23’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 indi-
vidualized 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 rea-
sonably 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 there-
fore actual reliance need not be established. Accordingly,
there is no reason to look at the circumstances of each indi-
vidual purchase in this case, because the allegations of the
complaint are narrowly focused on allegedly deceptive provi-
sions 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
12060         YOKOYAMA v. MIDLAND NATIONAL LIFE
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); accord
Smilow v. SW. Bell Mobile Sys, Inc., 323 F.3d 32, 40 (1st Cir.
2003). Because there are no individualized issues of subjec-
tive 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, ini-
tiated this action. Each purchased Midland’s annuities from
an independent broker. Each signed Midland’s sales and dis-
closure 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 bro-
chures 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 docu-
mentation facts necessary to inform prospective purchasers of
the true risks, possible detriments, and unsuitability of Mid-
land’s long-term annuities for seniors. The plaintiffs’ com-
plaint therefore makes clear that plaintiffs’ claims rest on
                     YOKOYAMA v. MIDLAND NATIONAL LIFE                      12061
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 bro-
kers; 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 pursu-
ant 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 prereq-
uisite 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 litiga-
tion 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 deter-
     1
   At 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 con-
         troversy already begun by or against class members;
            (C) the desirability or undesirability of concentrating the litiga-
         tion of the claims in the particular forum; and
           (D) the likely difficulties in managing a class action.
12062        YOKOYAMA v. MIDLAND NATIONAL LIFE
mination also generally contains an element of discretion, as
do most of the Rule’s requirements, particularly the prerequi-
sites of numerosity, typicality, and adequacy of representa-
tion. 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.

   [2] 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 addi-
tion, when any particular underlying Rule 23 determination
involving a discretionary determination is appealed, our stan-
dard of review must be for abuse of discretion. Indeed, we
have said in rather sweeping terms that we review all class
action certifications for abuse of discretion, thus suggesting
that even where the underlying determination to be reviewed
presents a pure question of law, our review in the class action
context must be for abuse of discretion. Zinser v. Accufix
Research Inst., Inc., 253 F.3d 1180, 1199 n.4 (9th Cir. 2001).
Yet if this were literally so, we would conflict with the now
bedrock United States Supreme Court precedent that all issues
of law, state and federal, must be reviewed de novo, and not,
as lower courts had previously held, for abuse of discretion.
Salve Regina Coll. v. Russell, 499 U.S. 225, 231 (1991).

   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 the conflict by holding that
when a district court errs as a matter of law in imposing sanc-
tions, the legal error automatically becomes an abuse of dis-
cretion. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405
(1990) (“A district court would necessarily abuse its discre-
tion if it based its ruling on an erroneous view of the law
. . . .”). In other words, in such cases, we do not reach any
separate issue of abuse of discretion, but review de novo the
underlying ruling on an issue of law.
             YOKOYAMA v. MIDLAND NATIONAL LIFE             12063
   [3] Our court has never specifically addressed the standard
of review of a class certification ruling where the underlying
issue is purely an issue of law. That is the situation in this
case, however, where the issues on appeal relate to whether
the district court correctly ruled on the proper interpretation
of Hawaii state law. Both parties assert that this court should
review the district court’s decision to deny class certification
for abuse of discretion, but the plaintiffs correctly recognize
that the discretionary element gives way when this court
reviews the district court’s interpretation of state law. Consis-
tent with Salve Regina and Cooter & Gell, that review must
be de novo.

   The Seventh Circuit has directly addressed this issue and
has explicitly held that the standard of review for legal deter-
minations is de novo. In the words of that circuit, “We gener-
ally review a grant of class certification for abuse of
discretion, but ‘purely legal’ determinations made in support
of that decision are reviewed de novo.” Andrews v. Chevy
Chase Bank, 545 F.3d 570, 573 (7th Cir. 2008) (citing Mace
v. Van Ru Credit Corp., 109 F.3d 338, 340 (7th Cir. 1997)).
The Mace case cited in Andrews is even more explicit. “Ordi-
narily a denial of class certification is reviewable for abuse of
discretion. But here the district court has determined that the
FDCPA [Fair Debt Collection Practices Act] bars serial class
action suits. This determination is purely legal, and we review
de novo.” Mace, 109 F.3d at 340 (internal citations omitted);
see also id. at 342 (“Class certification, involving as it does
a variety of factors, is ordinarily a matter for the discretion of
the district court. Here, however, the district court decided to
deny certification, not based on a factual problem raised by
the class definition, but on the legal ground that the FDCPA’s
limitation of damages impliedly precludes certification lim-
ited to a state.”) (footnote omitted).

   We agree with the Seventh Circuit’s explanation of the
appropriate standard of review. The underlying rulings on
issues of law must be reviewed de novo even when they are
12064        YOKOYAMA v. MIDLAND NATIONAL LIFE
made in the course of determining whether or not to certify
a class. If we were to hold otherwise in this case, we would
violate the very core of the Salve Regina holding that issues
of state law must be reviewed de novo. After concluding that
“a court of appeals should review de novo a district court’s
determination of state law,” the Supreme Court explained in
Salve Regina that courts of appeals “are structurally suited to
the collaborative judicial process that promotes decisional
accuracy.” 499 U.S. at 232. We would also be in fundamental
conflict with Cooter & Gell’s mandate that an erroneous
interpretation of the law is an abuse of discretion. 496 U.S. at
405.

   [4] Our respected dissenting colleague believes that we
must go en banc in order to say that district courts lack discre-
tion to make an error of law. His view highlights the ambigu-
ity inherent in the oft repeated phrase “an error of law is an
abuse of discretion.” He is correct that the phrase, standing
alone, is ambiguous. He is not correct to suggest that the
phrase was ever intended to mean that a district court has dis-
cretion to err on a legal issue. Indeed, it was intended to mean
the opposite. Since Salve Regina, no federal court has ever
held a district court has discretion to err as a matter of law,
in the class action context, or in any other. The Seventh Cir-
cuit has explained why. Because we are following the
Supreme Court’s decisions in Salve Regina and Cooter &
Gell, there is no need to go en banc. See Miller v. Gammie,
335 F.3d 889, 893 (9th Cir. 2003) (en banc).

  In this case, the issues presented relate to whether the law
of Hawaii requires a finding of individual reliance in the
application of its consumer protection statutes. Because this is
a class certification ruling, any error of law is automatically
an abuse of discretion. There are issues of law, and our stan-
dard of review of those determinations is therefore de novo.
              YOKOYAMA v. MIDLAND NATIONAL LIFE            12065
II.   An Objective Reliance Standard Furthers the
      Legislature’s Intended Use of Class Actions to
      Enforce Hawaii’s Consumer Protection Laws

   The Hawaii Supreme Court has described the state’s con-
sumer protection laws as having been “constructed in broad
language in order to constitute a flexible tool to stop and pre-
vent 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 pro-
vides, in pertinent part, as follows:

      (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 consid-
      eration 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.

   [5] 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 decep-
tive act or practice is “(1) a representation, omission, or prac-
tice[ ] that (2) is likely to mislead consumers acting
12066        YOKOYAMA v. MIDLAND NATIONAL LIFE
reasonably under the circumstances [where] (3) [ ] the repre-
sentation, 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.

   [6] Hawaii’s consumer protection laws expressly consider
class actions to be appropriate enforcement mechanisms.
Haw. Rev. Stat. § 480-13(c) (“The remedies provided in sub-
sections (a) and (b) shall be applied in class action and de
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.

   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 misstate-
ments,” the district court concluded that class issues do not
predominate over issues affecting individual members.

   [7] 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.” Cour-
             YOKOYAMA v. MIDLAND NATIONAL LIFE            12067
bat, 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 con-
sumer protection statute, the district court erred in holding
that individual reliance issues make this case inappropriate for
class certification.

   [8] These plaintiffs base their lawsuit only on what Mid-
land 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.

III.   Plaintiffs’ Liability Claims Rest on the Documenta-
       tion Midland Supplied to All its Brokers, and Indi-
       vidualized Damage Claims Do Not Defeat Rule 23
       Class Certification in This Circuit

   [9] The district court also determined that the plaintiffs’
claims “involve separate questions of fact as to what informa-
tion the independent brokers selling the [annuities] con-
veyed.” 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 perpe-
trated by Midland through its “fail[ure] to disclose to Plain-
tiffs 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. Plain-
tiffs’ 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.
12068        YOKOYAMA v. MIDLAND NATIONAL LIFE
  Perhaps in part because the district court interpreted Hawaii
law to require subjective reliance, it concluded that the dam-
ages calculation involved highly individualized and fact-
specific determinations. The District Court explained that

    the amount of damage sustained by a single class
    member would depend on factors such as the finan-
    cial circumstances and objectives of each class mem-
    ber; their ages; the IAP selected; any changes in the
    fixed interest rate for that particular IAP; the perfor-
    mance 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
    the annuity itself, including the tax-deferral of cred-
    ited interest; and the actual rate of return on the IAP.

   [10] Damage calculations will doubtless have to be made
under Hawaii’s consumer protection laws. See Flores v. Rawl-
ings 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 certifica-
tion. We have said that “[t]he amount of damages is invari-
ably an individual question and does not defeat class action
treatment.” Blackie, 524 F.2d at 905.

                       CONCLUSION

   [11] Because there are no individualized issues sufficient to
render class certification inappropriate under Rule 23, class
issues predominate and a class action is a superior method to
adjudicate this case. Moreover, Hawaii’s state courts have
made clear that Hawaii’s consumer protection laws are flexi-
ble and may be enforced through the class action mechanism.
Accordingly, this class should have been certified. We
express no opinion on the merits of the claims.
              YOKOYAMA v. MIDLAND NATIONAL LIFE             12069
  REVERSED and REMANDED.

N.R. SMITH, Concurring in the Judgment:

   I join the majority in its ultimate conclusion, but not in its
failure to give the district judge discretion when making class
certification decisions. While the majority wants to character-
ize my desire to use the appropriate standard of review as
“confusion,” I only write this concurrence because the major-
ity refuses to use our longstanding and sufficient standard of
review to resolve this case. The majority instead substitutes its
preference for heightened appellate review, when no such
review is needed or available under our precedent.

   The modern class action lawsuit derives from an action in
equity: “It is a general rule in equity, that all persons materi-
ally interested, either as plaintiffs or defendants in the subject
matter of the bill ought to be made parties to the suit, however
numerous they may be.” West v. Randall, 29 F. Cas. 718 (R.I.
1820) (No. 17,424) (Story, J., on circuit). From that time, the
district courts have had discretion to determine what parties
should be included in equity. See In re Engelhard & Sons Co.,
231 U.S. 646, 651 (1914). When the Supreme Court adopted
the Federal Rules of Civil Procedure in 1937, merging law
and equity, the former Federal Equity Rule 38 was “substan-
tial[ly] restate[ed]” by the new Rule 23. Fed. R. Civ. P. 23
advisory committee’s note to subdivision (a) (1937 Adop-
tion). The advisory committee clarified that the new Rule 23
“applies to all actions, whether formerly denominated legal or
equitable.” Id. Though law and equity merged with respect to
these decisions, the district court’s discretion to certify a class
did not change: the Supreme Court recognizes that the district
court has “broad power and discretion . . . with respect to mat-
ters involving the certification” of class action lawsuits. Reiter
v. Sonotone Corp., 442 U.S. 330, 345 (1979); see Califano v.
Yamasaki, 442 U.S. 682, 702-03 (1979).
12070           YOKOYAMA v. MIDLAND NATIONAL LIFE
   The Ninth Circuit has also long recognized that class certi-
fication decisions are uniquely difficult to review and that
“the district court is in the best position to consider the most
fair and efficient procedure for conducting any given litiga-
tion.” Price v. Lucky Stores, Inc., 501 F.2d 1177, 1179 (9th
Cir. 1974) (citing City of New York v. Int’l Pipe & Ceramics
Corp., 410 F.2d 295, 298 (2d Cir. 1969)). The class certifica-
tion question “should not be decided in an abstract or aca-
demic manner[,] but rather in a practical and realistic way by
a trial judge who has knowledge of the actual problems pre-
sented in the courtroom by these multi-plaintiff, multi-
defendant cases.” City of New York, 410 F.2d at 298.1 Accord-
ingly, “[s]uch a determination by the [district] court will not
be disturbed on appeal unless the party challenging it can
show an abuse of discretion.” Price, 501 F.2d at 1179. This
standard of review has been successfully cited and used in this
circuit by hundreds of panels in legions of cases in the more
than thirty years since its adoption.

   The abuse of discretion standard controls our inquiry, even
when we are considering whether the district court made an
error of law. Knight v. Kenai Peninsula Borough Sch. Dist.,
131 F.3d 807, 816-17 (9th Cir. 1997). The Ninth Circuit has
consistently held that an error of law is per se an abuse of dis-
cretion. See, e.g., id. (citing Cooter & Gell v. Hartmarx Corp.,
496 U.S. 384, 405 (1990)). The majority suggests, however,
that while “we say that the overall standard of review is for
   1
     The majority’s assault on the district judge’s discretion is not new.
Judge Hays dissented from City of New York, arguing his belief that
“[e]xcessive deference to the district court” will lead courts to “disregard
the provisions and the intent of Rule 23.” City of New York, 410 F.2d at
301 (Hays, C.J., dissenting). This argument is much the same as the
majority makes in its opinion today. Aware of this argument and Judge
Hays’s dissent, however, the Ninth Circuit nevertheless used City of New
York to establish our precedent that we review class certifications for an
abuse of discretion. I see no reason to revert to Judge Hays’s arguments
after some forty years of mostly-successful Rule 23 appellate decisions
under the abuse of discretion standard.
             YOKOYAMA v. MIDLAND NATIONAL LIFE             12071
abuse of discretion,” Maj. Op. at 12062 (emphasis added),
what we really mean is that the review must be de novo,
because we are considering issues of state law, Maj. Op. at
12062. They therefore articulate and proceed under a de novo
standard of review. In so doing, the majority reaches out to
Seventh Circuit law, which holds that appellate judges should
“generally review a grant of class certification for abuse of
discretion, but [review] ‘purely legal’ determinations made in
support of that decision . . . de novo.” Andrews v. Chevy
Chase Bank, 545 F.3d 570, 573 (7th Cir. 2008) (citing Mace
v. Van Ru Credit Corp., 109 F.3d 338, 340 (7th Cir. 1997)).
The majority concludes that this is appropriate given the
Supreme Court’s holding in Salve Regina College v. Russell,
499 U.S. 225, 231 (1991), that “a court of appeals should
review de novo a district court’s determination of state law.”
The majority asserts that, “[s]ince Salve Regina, no federal
court has ever held a district court has discretion to err as a
matter of law, in the class action context, or in any other,”
Maj. Op. at 12064, and that de novo review is therefore
appropriate.

   I reject this assault on Ninth Circuit precedent. Our stan-
dard of review precedent is sufficient to resolve the issues
presented in this case without intruding upon what we have
long recognized to be a discretionary decision by the district
judge. See, e.g., Clark v. Watchie, 513 F.2d 994, 1000 (9th
Cir. 1975) (citing Price) (establishing the Ninth Circuit’s pre-
cedent that a district court’s Rule 23(b) determination should
be reviewed for an abuse of discretion). Moreover, we have
used this standard of review, and the accompanying dis-
claimer that a district court abuses its discretion when it
makes an error of law, ad infinitum since Salve Regina. See,
e.g., Knight, 131 F.3d at 816-17 (9th Cir. 1997) (“We review
a district court’s denial of class certification for abuse of dis-
cretion,” 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 discre-
12072        YOKOYAMA v. MIDLAND NATIONAL LIFE
tion,” 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). See also, e.g., Valentino
v. Carter-Wallace, Inc., 97 F.3d 1227, 1233-34 (9th Cir.
1996) (class certification issues are reviewed for an abuse of
discretion); Zinser v. Accufix Research Inst., Inc., 253 F.3d
1180, 1186 (9th Cir. 2001), amended by 273 F.3d 1266 (9th
Cir. 2001) (same). Finally, I note that Salve regina is not a
class certification case, but concerns substantial performance
in the breach of contract context. Salve Regina, 499 U.S. at
228.

   There is only one instance when we would review the dis-
trict court’s class certification decision de novo: “when a dis-
trict court’s decision is not supported by findings as to the
applicability of Rule 23 criteria.” Local Joint Executive Bd. of
Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc., 244
F.3d 1152, 1161 (9th Cir. 2001) (internal quotation marks
omitted). Implicit in this ruling is the premise that we must
always give the district court deference, unless the district
court did not explain its reasoning. The district court made
adequate findings here. Under our precedent, traditional dis-
cretionary review is appropriate.

   The district court declined to certify Yokoyama’s proposed
class. It found that, because each plaintiff would have to show
subjective, individualized reliance on deceptive practices
within the circumstances of his or her purchase of a Midland
annuity, Yokoyama could not show that common issues pre-
dominate over individualized issues and that a class action is
a superior method of adjudication. See Yokoyama v. Midland
Nat’l Life Ins. Co., 243 F.R.D. 400 (D. Haw. 2007). Upon
review, we have determined that Hawaii law does not require
individualized reliance. Maj. Op. at 12065-67. Accordingly,
the district court applied an incorrect interpretation of Hawaii
law to its predominance calculus. Maj. Op. at 12068. Relying
on that mistaken interpretation, the district court therefore
             YOKOYAMA v. MIDLAND NATIONAL LIFE             12073
abused its discretion in finding that individualized issues pre-
dominated over common issues and that a class action was not
the superior method of adjudication.

   Because the district court made an error of law, Ninth Cir-
cuit precedent requires us to conclude that the district court
abused its discretion. See Molski, 318 F.3d at 946. I therefore
concur with the majority’s ultimate conclusion that the district
court should be reversed. I do not, however, share its view
that we may review class certification issues de novo. Ninth
Circuit precedent, based on the theory that some decisions are
best made by the trial court, requires abuse of discretion
review. Nor do I agree with its glib contention that, by exam-
ining whether the district court abused its discretion when
making a predominance determination, we allow the district
court discretion to make an error of law. See Maj. Op. at
12064. As our precedent makes clear, an error of law is an
abuse of discretion for class certification purposes. This pre-
cedent is sufficient to resolve this case, and I believe the
majority errs by looking beyond it for a standard it deems
more desirable.

   Lastly, the majority overrules Ninth Circuit precedent by
substituting its preference for de novo review over discretion-
ary review. While one panel may overrule another if interven-
ing Supreme Court authority requires it, a three-judge panel
cannot overrule Circuit precedent just because that panel
desires a different result, or disagrees with the way the Circuit
precedent operates. See Miller v. Gammie, 335 F.3d 889,
899-900 (9th Cir. 2003) (en banc). The majority, however,
seeks to follow Seventh Circuit precedent because it “agree[s]
with the Seventh Circuit’s explanation of the appropriate stan-
dard of review,” Maj. Op. at 12063, not the Ninth Circuit’s.
It is an en banc panel who should make this determination to
depart from longstanding Circuit precedent, not two judges
who would make the standard of review less deferential.