By Tina Bellon and Jonathan Stempel
NEW YORK (Reuters) - A U.S. appeals court on Tuesday overturned a lower court's decision to grant class certification to car owners who settled with Hyundai Motors (KS:005380) and its Kia affiliate over the fuel efficiency of its vehicles.
In their 2-1 order, the judges of the U.S. Court of Appeals for the 9th Circuit said the lower judge had erred in concluding that common questions existed to justify a class action status.
The companies in 2013 agreed to pay $395 million to resolve claims from vehicle owners who had sued the company over misrepresenting its vehicles' average mileage claims.
The lawsuits were filed after an investigation by the U.S. Environmental Protection Agency, which found that the companies used improper test procedures to develop their fuel efficiency data.
A 2012 restatement by Hyundai and Kia reduced the automakers' fleetwide average fuel economy from 27 miles to 26 miles per gallon for the 2012 model year.
Vehicles included the Hyundai Accent, Elantra, Veloster and Santa Fe and the Kia Rio and Soul.
Hyundai did not immediately respond to a request for comment on the decision. Lawyers representing the car owners did not immediately respond to a request for comment.
A U.S. District Court judge in 2015 gave the final approval of the class settlement, but the companies appealed, saying the agreement was not fair and adequate and that the attorney fees were unreasonable in proportion to the payout the class members would receive.
The majority of the appeals court judges on Tuesday agreed with those arguments, finding that the lower court had failed to define a relevant class by also including owners of used cars who were not exposed to misleading advertising.
But the circuit judges added that the lower court, on reconsideration, could decide to certify a class again, but must first determine what value is created by a settlement.
Lawyers representing the car owners had been awarded roughly $9 million in attorneys fees and costs.