IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA
September 5, 2008
KELLY CASTILLO, NICHOLE BROWN, BRENDA ALEXIS DIGIANDOMENICO, VALERIE EVANS, BARBARA ALLEN, STANLEY OZAROWSKI, AND DONNA SANTI, INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED, PLAINTIFFS,
GENERAL MOTORS CORPORATION, DEFENDANT.
MEMORANDUM AND ORDER RE: MOTION TO AMEND AND MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT
Plaintiffs Kelly Castillo, Nichole Brown, Brenda Alexis Digiandomenico, Valerie Evans, Barbara Allen, Stanley Ozarowski, and Donna Santi brought this matter seeking a class action lawsuit against defendant General Motors Corporation. Plaintiffs allege that defendant concealed design and manufacturing defects regarding the transmission installed in certain models of defendant's 2002 through 2005 line of Saturn vehicles. Presently before the court is the parties' joint motion for preliminary approval of the class action settlement.
I. Factual and Procedural Background
Between 2002 and 2005, defendant manufactured, sold, and distributed 4-cylinder Saturn Vues and Saturn Ions ("Saturn vehicles") containing the Saturn Vti transmission. (Proposed Second Am. Compl. ("SAC") ¶ 18.)*fn1 "Unlike a conventional automatic transmission, which uses traditional gears to shift at a few fixed points," the Vti transmission is a "continuously variable" transmission that utilizes a belt and pulley system to shift between gears. (Id. at ¶¶ 14, 15.) The alleged defective design of the belt and pulley system purportedly makes the Vti transmission exceptionally prone to premature failure. (Id. at ¶ 15.)
On October 10, 2007, three of the named plaintiffs--all owners of a Saturn vehicle with Vti transmission--filed a putative Class Action Complaint alleging (1) state statutory consumer fraud, (2) breach of express warranties, (3) breach of implied warranty of merchantability,*fn2 and (4) unjust enrichment.
After plaintiffs amended their initial Complaint as a matter of course on January 14, 2008, Fed. R. Civ. P. 15(a)(1), defendant filed a motion to dismiss plaintiffs' First Amended Complaint on February 4, 2008. (Docket Nos. 20, 27-29.) Before the court could hear this motion, however, the parties engaged in settlement discussions and early mediation that resulted in an agreement on the settlement terms. (Docket No. 48.) As a result, the parties now seek preliminary approval of their Stipulation of Settlement.
The Ninth Circuit has declared that a strong judicial policy favors settlement of class actions. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir. 1992). Nevertheless, where, as here, "parties reach a settlement agreement prior to class certification, courts must peruse the proposed compromise to ratify both  the propriety of the certification and  the fairness of the settlement." Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003).
In conducting the first part of its inquiry, the court "must pay 'undiluted, even heightened, attention' to class certification requirements" because, unlike in a fully litigated class action suit, the court will not have future opportunities "to adjust the class, informed by the proceedings as they unfold." Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 620 (1997); accord Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). The parties cannot "agree to certify a class that clearly leaves any one requirement unfulfilled," and consequently the court cannot blindly rely on the fact that the parties have stipulated that a class exists for purposes of settlement. Berry v. Baca, No. 01-02069, 2005 WL 1030248, at *7 (C.D. Cal. May 2, 2005); see also Amchem, 521 U.S. at 622 (observing that nowhere does Rule 23 say that certification is proper simply because the settlement appears fair). In conducting the second part of its inquiry, the "court must carefully consider 'whether a proposed settlement is fundamentally fair, adequate, and reasonable,' recognizing that '[i]t is the settlement taken as a whole, rather than the individual component parts, that must be examined for overall fairness . . . .'" Staton, 327 F.3d at 952 (quoting Hanlon, 150 F.3d at 1026); see also Fed. R. Civ. P. 23(e) (outlining class action settlement procedures).
Procedurally, the approval of a class action settlement takes place in two stages. "In the first stage of the approval process, 'the court preliminarily approve[s] the Settlement pending a fairness hearing, temporarily certifie[s] the Class . . . , and authorize[s] notice to be given to the Class.'" Alberto v. GMRI, Inc., No. 07-1895, 2008 WL 2561106, at *2 (E.D. Cal. June 24, 2008) (citation omitted). In this Order, therefore, the court will only "determine whether a proposed class action settlement deserves preliminary approval" and lay the ground work for a future fairness hearing. Nat'l Rural Telecomms. Coop. v. DIRECTV, Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004). At the fairness hearing, after notice is given to putative class members, the court will entertain any of their objections to (1) the treatment of this litigation as a class action and/or (2) the terms of the settlement. See Diaz v. Trust Territory of Pac. Islands, 876 F.2d 1401, 1408 (9th Cir. 1989) (holding that prior to approving the dismissal or compromise of claims containing class allegations, district courts must, pursuant to Rule 23(e), hold a hearing to "inquire into the terms and circumstances of any dismissal or compromise to ensure that it is not collusive or prejudicial").*fn3 Following the fairness hearing, the court will make a final determination as to whether the parties should be allowed to settle the class action pursuant to the terms agreed upon. DIRECTV, Inc., 221 F.R.D. at 525.
A. Certification of the Class
A class action will only be certified if it meets the four prerequisites identified in Federal Rule of Civil Procedure 23(a) and additionally fits within one of the three subdivisions of Federal Rule of Civil Procedure 23(b). Although a district court has discretion in determining whether the moving party has satisfied each Rule 23 requirement, Califano v. Yamasaki, 442 U.S. 682, 701 (1979); Montgomery v. Rumsfeld, 572 F.2d 250, 255 (9th Cir. 1978), the court must conduct a rigorous inquiry before certifying a class. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 161 (1982); E. Tex. Motor Freight Sys. v. Rodriguez, 431 U.S. 395, 403-05 (1977).
1. Rule 23(a)
Rule 23(a) restricts class actions to cases where (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). These requirements are more commonly referred to as numerosity, commonality, typicality, and adequacy of representation, respectively. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998).
While courts have not established a precise threshold for determining numerosity, Gen. Tel. Co. v. E.E.O.C., 446 U.S. 318, 330 (1980), a class consisting of one thousand members "clearly satisfies the numerosity requirement." Sullivan v. Chase Inv. Servs., Inc., 79 F.R.D. 246, 257 (N.D. Cal. 1978). The SAC significantly increases the Settlement Class size, expanding the scope from putative members in only thirteen states to putative members in all fifty states.*fn4 (SAC ¶ 53.)
Plaintiffs maintain that defendant sold over 90,000 Saturn vehicles outfitted with Vti transmissions, suggesting that the actual class size could easily number in the tens of thousands.*fn5
(Id. at ¶ 64.) Plaintiffs thus assert that this, in addition to the geographical dispersion of putative members, makes joinder of all class members in a single action impracticable. (Id.)
When, as here, plaintiffs have not provided the court with any official documents or explicit calculations in support of their estimation regarding numerosity,*fn6 a court may rely on common sense assumptions to support findings of numerosity. Manual for Complex Litigation (Fourth) § 23.22(3) (2008); see Sherman v. Griepentrog, 775 F. Supp. 1383, 1389 (D. Nev. 1991) (finding that a court may draw reasonable inferences of class size from facts before it); cf. Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975) (satisfying burden of Rule 23(a) requirements can be met by providing court with sufficient basis for forming a "reasonable judgment" on each requirement). Even if plaintiffs have significantly overestimated the class size, it is reasonable to assume that the actual size will surpass previous Ninth Circuit thresholds. See, e.g., Gay v. Waiter's & Dairy Lunchmen's Union, 549 F.2d 1330 (9th Cir. 1997) (finding numerosity requirement to be met with approximately 110 potential class members); Leyva v. Buley, 125 F.R.D. 512, 515 (E.D. Wash. 1989) (allowing certification of a fifty-member class).
Rule 23(a) also requires that "questions of law or fact [be] common to the class." Fed. R. Civ. P. 23(a)(2). Because "[t]he Ninth Circuit construes commonality liberally," "it is not necessary that all questions of law and fact be common." West, 2006 WL 1652598, at *3 (citing Hanlon, 150 F.3d at 1019). "The existence of shared legal issues with divergent factual predicates is sufficient, as is a common core of salient facts coupled with disparate legal remedies within the class." Hanlon, 150 F.3d at 1019.
Plaintiffs identify several questions of law and fact that would have been common to all class members had their respective cases gone to trial, including whether: (1) Saturn vehicles containing the Vti transmission are defective; (2) defendant knew of the defect and its potentially dangerous nature; (3) defendant misrepresented the characteristics of Vti-equipped Saturn vehicles; (4) defendant made promises regarding the Vti transmissions that created an express warranty between buyer and seller; (5) the Vti-equipped vehicles conformed to defendant's express warranties; (6) the Vti-equipped vehicles are merchantable; (7) the Vti-equipped vehicles have the value represented by defendant; (8) defendant's active concealment of the Vti transmission's defective nature constituted fraud or misrepresentation; and (9) plaintiffs entitlement, if any, to compensatory damages. (SAC ¶ 66.)
The court agrees that the potential claims of putative class members would arise from a common set of legal and factual conditions similar to that of named plaintiffs. See Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1177-78 (9th Cir. 2007) (stating that the standard in Rule 23(a)(2) is "qualitative rather than quantitative--one significant issue common to the class may be sufficient to warrant certification"). Because it therefore appears that the same alleged conduct of defendant would "form the basis of each of the plaintiff's claims," Acosta v. Equifax Info. Servs., L.L.C., 243 F.R.D. 377, 384 (C.D. Cal. 2007), class relief based on commonality is appropriate. See Califano v. Yamasaki, 442 U.S. 682, 701 (1979) (holding that commonality issues of the class "turn on questions of law applicable in the same manner to each member of the class").
Rule 23(a) further requires that the "claims or defenses of the representative parties [be] typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). Typicality requires that named plaintiffs have claims "reasonably coextensive with those of absent class members," but their claims do not have to be "substantially identical." Hanlon, 150 F.3d at 1020. The test for typicality "'is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.'" Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (citation omitted).
The initial circumstances underlying the named plaintiffs' claims are substantively identical to the class members' claims because the named plaintiffs and class members all purchased Saturn vehicles with Vti transmissions. Even amongst themselves, however, disparity exists between the damages the named plaintiffs allege. Similar to the differences in damages the named plaintiffs seek, their damages also vary from the class members' damages because not all class members experienced problems with their transmissions and, of the class members who did, not all incurred the same amount of damages. Nonetheless, the source of the named plaintiffs' claims is typical of the source of the class members' claims and the settlement's provision for an individualized determination of damages cures the lack of typicality with respect to damages. See Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1185 (9th Cir. 2007) ("Some degree of individuality is to be expected in all cases, but that specificity does not necessarily defeat typicality.").
d. Adequacy of Representation
Finally, Rule 23(a) requires "representative parties [who] will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). To resolve the question of legal adequacy, the court must answer two questions: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) have the named plaintiffs and their counsel vigorously prosecuted the action on behalf of the class? Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). This adequacy inquiry considers a number of factors, including "the qualifications of counsel for the representatives, an absence of antagonism, a sharing of interests between representatives and absentees, and the unlikelihood that the suit is collusive." Brown v. Ticor Title Ins., 982 F.2d 386, 390 (9th Cir. 1992).
The examination of potential conflicts of interest in settlement agreements "has long been an important prerequisite to class certification. That inquiry is especially critical when  a class settlement is tendered along with a motion for class certification." Hanlon, 150 F.3d at 1020. Here, the interests of plaintiffs and their course of legal redress are not ostensibly at variance with those of putative class members. Although the definition of the settlement class encompasses a large number of members, the class itself is narrowly defined: all United States residents who, as of the date of entry of this Order, own or have owned a 2002 through 2005 model year Saturn Vue equipped with Vti transmission or a 2003 through 2004 model year Saturn ION equipped with Vti transmission. This definition effectively minimizes the probability that the certification procedure will overlook legitimate yet dissimilar claims of class members; rather, "the potential for conflicting interests will remain low while the likelihood of shared interests remains high." Alberto v. GMRI, Inc., No. 07-1895, 2008 WL 2561106, at *5 (E.D. Cal. June 24, 2008).
The second prong of the adequacy inquiry examines the vigor with which named plaintiffs and their counsel have pursued the common claims. "Although there are no fixed standards by which 'vigor' can be assayed, considerations include competency of counsel and, in the context of a settlement-only class, an assessment of the rationale for not pursuing further litigation." Hanlon, 150 F.3d at 1021. Based on its representations, plaintiffs' counsel appears to have approached this action with the requisite competency, as it purportedly conducted pre-litigation investigation, consulted with putative class members and industry experts, and negotiated the settlement's mileage and duration limitations. (Pls.' Mem. in Supp. of Mot. for Preliminary Approval of Class Action Settlement 3:13-18.)
Probing plaintiffs and their counsel's rationale for not pursuing further litigation, however, is inherently more complex. "District courts must be skeptical of some settlement agreements put before them because they are presented with a 'bargain proffered for . . . approval without the benefit of an adversarial investigation.'" Hanlon, 150 F.3d at 1022 (quoting Amchem, 521 U.S. at 620). This logic is certainly applicable here, because little documentation has been offered to confirm that the settlement terms are adequate. The fact that the parties reached an agreement before an experienced mediator, while commendable, does not preclude a detailed review of the settlement terms. Settlement adequacy should be scrutinized when there is evidence of fee-driven settlements, exorbitant service payments, or collusion between the parties. Hanlon, 150 F.3d at 1022. An examination of such concerns is addressed below in the preliminary fairness assessment. See infra, Section II(B)(2).
The court reiterates the need for documentation illuminating plaintiffs' decision not to proceed with the litigation. Nonetheless, pending the introduction at the final fairness hearing of further evidence in support of counsel's findings, plaintiffs' proffered "adequacy of representation" showing preliminarily demonstrates that plaintiffs can sufficiently represent the class.
2. Rule 23(b)
An action that meets all the prerequisites of Rule 23(a) may be maintained as a class action only if it also meets the requirements of one of the three subdivisions of Rule 23(b). Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 163 (1974). In this case, plaintiffs seek certification under Rule 23(b)(3), "which is appropriate 'whenever the actual interests of the parties can be served best by settling their differences in a single action.'" Hanlon, 150 F.3d at 1022 (citation omitted). A class action may be maintained under Rule 23(b)(3) if (1) "the court finds that questions of law or fact common to class members predominate over any questions affecting only individual members" and (2) "that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3).
Because Rule 23(a)(3) already considers commonality, the focus of the Rule 23(b)(3) predominance inquiry is on the balance between individual and common issues. Hanlon, 150 F.3d at 1022; see also Amchem, 521 U.S. at 623 ("The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation."). The parties' Stipulation of Settlement sufficiently demonstrates that "[a] common nucleus of facts and potential legal remedies dominates this litigation." Hanlon, 150 F.3d at 1022. Where the aforementioned common questions "present a significant aspect of the case and . . . can be resolved for all members of the class in a single adjudication, there is clear justification for handling the dispute on a representative rather than on an individual basis." Hanlon, 150 F.3d at 1022.
The existence of the individualized assessment of damages in this action does not preclude a finding of predominance. See, e.g., West v. Circle K Stores, Inc., No. 04-0438, 2006 WL 1652598, at *7-8 (E.D. Cal. June 13, 2006) ("[I]ndividual issues regarding damages will not, by themselves, defeat certification under Rule 23(b)(3)." (citing Blackie v. Barrack, 524 F.2d 891, 905-09 (9th Cir. 1975))); see also Alberto v. GMRI, Inc., No. 07-1895, 2008 WL 2561106, at *7 (E.D. Cal. June 24, 2008) ("[P]redominance inquiry satisfied despite the fact that 'individual differences in accrual caps, accrual rates, and amount of vacation time accrued' would result in individualized damages.") (citation omitted).
In addition to the predominance requirement, Rule 23(b)(3) provides a non-exhaustive list of matters pertinent to the court's determination that the class action device is superior to other methods of adjudication. Fed. R. Civ. P. 23(b)(3)(A)-(D). The factors relevant to this case include "the interest of members of the class in individually controlling the prosecution or defense of separate actions" and "the extent and nature of any litigation concerning the controversy already commenced by or against members of the class." Id.; Amchem, 521 U.S. at 620. At this time, the court is unaware of any concurrent litigation and does not have reason to believe that other individuals have an interest in controlling this action, thus the class action device appears to be the superior method for adjudicating this controversy.
B. Rule 23(e): Fairness, Adequacy, and Reasonableness of Proposed Settlement
Having determined that class treatment appears to be warranted,*fn7 the court must now address whether the terms of the parties' Settlement Agreement appear fair, adequate, and reasonable. In conducting this analysis, the court must balance several factors including the strength of the plaintiffs' case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.
Hanlon, 150 F.3d at 1026. But see Molski v. Gleich, 318 F.3d 937, 953-54 (9th Cir. 2003) (noting that a district court need only consider the facts designed to protect absentees). "Given that some of these factors cannot be fully assessed until the court conducts its fairness hearing, 'a full fairness analysis is unnecessary at this stage.'" Alberto v. GMRI, Inc., No. 07-1895, 2008 WL 2561106, at *8 (E.D. Cal. June 24, 2008) (citation omitted). At this stage, the court is "[e]ssentially . . . concerned only with 'whether the proposed settlement discloses grounds to doubt its fairness or other obvious deficiencies such as unduly preferential treatment of class representatives or segments of the class, or excessive compensation of attorneys . . . .'" Id. at *10 (citation omitted).
1. Terms of the Settlement Agreement Definitions
(1) The Settlement Class: Class Members include all non-excluded residents of the United States who, as of the date of the Preliminary Approval Order own or have owned a Class Vehicle. (Stipulation of Settlement 4:24-26.) Defendant or its designee will determine if the Class Member is eligible for any of the relief available under the Agreement. Unresolved disputes regarding eligibility will be turned over to an impartial mediator who will render a final, non-appealable decision. (Id. at 11:4-10.)
(2) The Class Vehicles: "Class Vehicles" include 2002 through 2005 model year Saturn VUEs equipped with Vti transmissions and 2003 through 2004 model year Saturn IONs equipped with Vti transmissions. (Id. at 5:4-6.)
(3) Judgment: "Judgment" means the judgment to be entered by the court finally approving this Settlement Agreement and dismissing this action with prejudice. (Id. at 5:7-10.)
(4) Effective Date: "Effective Date" means ten (10) business days after the later of (a) the date upon which the time for seeking appellate review of the Judgment (by appeal or otherwise) shall have expired; or (b) the date upon which the time for seeking appellate review of any appellate decision affirming the Judgment (by appeal or otherwise) shall have expired and all appellate challenges to the Judgment shall have been dismissed with prejudice without any person having any further right to seek appellate review thereof (by appeal or otherwise). (Id. at 5:14-20.)
(5) Class Notice: "Class Notice" means the notice provided to Class Members after issuance of the Preliminary Approval Order. (Id. at 5:21-22.)
(6) Final Notice: "Final Notice" means the notice that will be provided to Class Members after the Effective Date. (Id. at 5:23-24.)
(7) Claim Form: "Claim Form" means the forms to be sent to Class Members who purchased their Class Vehicles, new or used, along with the Final Notice. (Id. at 5:25-27.)
(8) Authorized Saturn Retailer: "Authorized Saturn Retailer" means any Saturn Retailer in the United States that is a signatory to an existing and effective Saturn Retailer Agreement. (Id. at 6:10-11.)
(9) Released Claims: "Released Claims" means any and all past, present, and future claims, demands, causes of actions or liabilities based on or related in any way to Vti transmissions in Class Vehicles or (b) the factual allegations and legal claims that were made or could have been made in the Action. Released Claims do not include any claim, demand or cause of action against defendant for property damage or personal injury in connection with Vti transmission. (Id. at 6:12-17.)
(10) Unknown Claims: "Unknown Claims" means any Released Claim that any plaintiff or Class Member does not know or suspect to exist in his, her or its favor at the time of the release provided for herein, including those claims which would have affected his, her or its settlement and release. (Id. at 6:21-26.)
(1) Generally: The relief available to Class Members under the terms of the parties' Stipulation of Settlement is reimbursement for certain out-of-pocket expenses and losses relating to the Vti transmissions of Class Vehicles. (Id. at 7:9-11.) Reimbursable Expenses include (a) costs to inspect, repair or replace a malfunctioning Vti transmission, (b) costs to rent a replacement vehicle or secure other transportation while the malfunctioning Vti transmission was or is being inspected, repaired, or replaced, (c) costs to tow or transport the Class Vehicle to the place where the malfunctioning Vti transmission was or is being inspected, repaired, or replaced, and (d) documented expenses relating to the trade-in of a Class Vehicle with Vti transmission failure at time of trade-in as further limited and defined below ("trade-in costs"). (Id. at 7:11-18.) To be reimbursable, such costs must be incurred by the Class Member within 125,000 miles after the original retail-sale or lease of the Class Vehicle or within the time limitations set forth in Chart A below, whichever occurs first. (Id. at 7:18-22.) The relief provided shall not be assigned. (Id. at 7:22-26.)
(2) Past Reimbursable Expenses: Defendant will reimburse Class Members who incur Reimbursable Expenses for repair, rental, and towing costs relating to a Vti transmission on or before the date of Final Judgment ("Past Reimbursable Expenses") based on the percentages shown in Chart B below. (Id. at 8:2-5.) To obtain reimbursement, the Class Member must submit a Claim Form along with the requisite documentation of the Reimbursable Expenses incurred by the Class Member within one (1) year after the Effective Date. (Id. at 8:5-14.)
Past Trade-In With Vti Transmission Malfunction
(3) Reimbursement: To claim reimbursement for "trade-in expense," the Class Member must submit a Claim Form and provide the requisite contemporaneous dealer documentation. (Id. at 8:16-21.) The reimbursement shall equal the repair estimate multiplied by the appropriate percentage from Chart B based on the Class Vehicle's mileage and the Class Member being either a new or used Vehicle purchaser. (Id. at 8:21-23.) Class Members may seek reimbursement of trade-in losses only upon proof that the Class Vehicle was traded-in before the date Class Notice was mailed to potential Class Members. (Id. at 8:23-25.) All claims for reimbursement of trade-in expense must be submitted within one (1) year after the Effective Date. (Id. at 8:23-9:2.)
(4) Future Reimbursable Expenses: Defendant will reimburse Class Members who incur an expense relating to a Vti transmission after the date of Final Judgment (except trade-in expense) ("Future Reimbursable Expenses") based on the percentages shown in Chart B below. (Id. at 9:4-6.) To obtain reimbursement, the Class Member must submit a Claim Form along with the requisite documentation of the Reimbursable Expenses incurred by the Class Member. (Id. at 9:6-19.)
Model Year Date Before Which Expense is Reimbursable
2002 January 1, 2010 2003 January 1, 2011 2004 January 1, 2012 2005 January 1, 2012
(Id. at 9:20-26.)
Vehicle Mileage Reimbursement (New) Reimbursement (Used) 100,000 or less 100 percent 75 percent 100,101-125,000 75 percent 30 percent (Id. at 10:1-5.)
Defendant, in addition to all other relief provided herein, shall pay all costs of Class Notice and claims administration, which payments shall not diminish any relief provided to Class Members. (Id. at 10:19-21.) Defendant, subject to the terms of the Preliminary Approval Order, shall use its best efforts to direct or cause to be directed first-class mail notice to Class Members. (Id. at 10:21-25.) Defendant also agrees to provide appropriate notification to authorized Saturn Retailers. (Id. at 10:25-26.)
Requests for Exclusion
Any putative Class Member who wishes to be excluded from the Class must deliver a proper written request for exclusion to Class Counsel within the stipulated time-frame. (Id. at 13:27-14:1.) Any putative Class Member who does not file a timely written request for exclusion shall be bound by all subsequent proceedings, orders and judgments in the Action. (Id. at 14:5-7.)
Objections to the Settlement
Any Class Member who has not submitted a timely written request for exclusion and who wishes to object to the Agreement, the proposed settlement, or to the request for Attorneys' Fees and Expenses, must serve a proper written objection within the stipulated time-frame. (Id. at 14:19-22.)
2. Preliminary Determination of Adequacy
Although "assessing the fairness, adequacy and reasonableness of the substantive terms of a settlement agreement can be challenging," Staton v. Boeing Co., 327 F.3d 938, 959 (9th Cir. 2003), the court is assisted in its inquiry where, as here, "the stipulation and settlement appear to be, for the most part, the result of vigorous, arms-length bargaining." Alberto, 2008 WL 2561106, at *10.
Before addressing the primary concerns at this stage of the inquiry--"attorneys' fees and the distribution of relief"--the court notes its concern with the administration of the settlement agreement. Staton, 327 F.3d at 960. While most settlement agreements provide for an equal, or easily definable, division of a lump sum between the class members, the parties' settlement contemplates an individualized assessment of damages for each member. For obvious reasons, administration of such a settlement will require more time and resources than a traditional settlement, thus greater consideration about how the settlement will be administered will provide the court with greater confidence as to its fairness and adequacy. The court also lacks confidence that all of the class members will have retained the requisite receipts and estimates described at oral argument, which raises concerns as to the reasonableness of a blanket requirement for receipts and estimates.
a. Attorneys' Fees
For a settlement to be fair and adequate, "a district court must carefully assess the reasonableness of a fee amount spelled out in a class action settlement agreement." Id. at 963.
The district court has discretion to use either the percentage-of-the-fund method*fn8 or the lodestar/multiplier method*fn9 in calculating fee awards in common fund cases. In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1295 (9th Cir. 1994). Because "no presumption in favor of either the percentage or the lodestar method encumbers the district court's discretion to choose one or the other," the choice between percentage calculation and lodestar depends upon the circumstances of the case. Id. at 1295, 1296 (citing Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990)). Irrespective of the chosen method, "the district court should be guided by the fundamental principle that fee awards out of common funds be 'reasonable under the circumstances.'" Id. (quoting Florida v. Dunne, 915 F.2d 542, 545 (9th Cir. 1990)).
Plaintiffs' counsel requests an attorneys' fee award in the amount of $4,425,000.00, (Pls.' Mem. in Supp. of Mot. for Preliminary Approval of Class Action Settlement 16:22), and insists that this amount is reasonable because it constitutes less than five percent of the estimated settlement amount--i.e., a number significantly below the Ninth Circuit's twenty-five percent benchmark for attorneys' fees in common fund cases. See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1029 (9th Cir. 1998) ("This circuit has established 25% of the common fund as a benchmark award for attorney fees."). Nonetheless, the Ninth Circuit has also stated that "[t]he 25% benchmark rate, although a starting point for analysis, may be inappropriate in some cases. Selection of the benchmark or any other rate must be supported by findings that take into account all of the circumstances of the case." Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002); see also In re Wash. Pub. Power Supply Sys. Sec. Litig., 19 F.3d at 1295-96 (holding that, in passing on post-settlement fee applications, "courts cannot rationally apply any particular percentage--whether 13.6 percent, 25 percent or any other number--in the abstract, without reference to all the circumstances of the case").
While the instant record shows no evidence of bribery or collusion in reference to the requested attorneys' fees, it is nonetheless devoid of any direct support for plaintiffs' counsel's requested fee amount. Specifically, this action is less than a year old. There has not been a single hearing in the matter, and the only motions filed--defendant's two motions to dismiss--were mooted by the plaintiffs' decision to amend its original Complaint as a matter of course and the parties' stipulated continuance pending mediation, respectively. The parties also fail to proffer a reliable estimate as to the final class size, and the nature of the relief being granted to the class makes it difficult to predict the final amount of the class award.*fn10 Thus, while the parties estimate that $4,425,000.00 is less than five percent of the value of the estimated class relief, this percentage remains entirely speculative.
Other than filing three complaints, one opposition, and the instant motion--as well as engaging in limited discovery and the subsequent mediation--any circumstances necessitating a $4,425,000.00 fee award for plaintiff's counsel are not readily apparent to the court. Compare Fischel v. Equitable Life Assur. Soc'y of the U.S., 307 F.3d 997, 1007 (9th Cir. 2002) ("The fact that the case was settled early in the litigation supports the district court's ruling [not to award class counsel's requested fee award request because] the percentage-of-the-fund approach might very well have been a 'windfall.'"); with Vizcaino, 290 F.3d at 1050 (upholding percentage of the fund fee award where class counsel submitted evidence showing that they "achieved excellent results" in a "extremely risky" matter, their "performance generated benefits beyond the cash settlement fund," and their representation of the class "extended over eleven years, entailed hundreds of thousands of dollars of expense, and required counsel to forgo significant other work, resulting in a decline in the firm's annual income"); see also Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990) (affirming percentage of the fund fee award where "the litigation lasted more than 13 years, obtained substantial success, and involved complicated legal and factual issues"); Santos v. Camacho, No. 04-0006, 2008 WL 1699448, at *34 (D. Guam Apr. 10, 2008) (holding that, given "the minimal amount of discovery conducted" and the lack of "any pre-trial or trial proceedings," "[i]t seems quite clear that the requested 10% of the common fund would be unreasonable").
Where, as here, plaintiffs' counsel cannot provide sufficient documentation in support of its fee and the circumstances "indicate that the percentage recovery would be either too small or too large in light of the hours devoted to the case or other relevant factors," the "benchmark percentage should be adjusted, or replaced by a lodestar calculation." Six Mexican Workers, 904 F.2d at 1311. "At the very least, a court should employ the lodestar method as a cross-check on the percentage method in order to ensure a fair and reasonable result." Alberto v. GMRI, Inc., No. 07-1895, 2008 WL 2561106, at *13 (E.D. Cal. June 24, 2008) (citing In re Immunex Sec. Litig., 864 F. Supp. 142, 144 (W.D. Wa. 1994)); see also Santos, 2008 WL 1699448, at *34 ("[A]fter doing a lodestar cross-check with the percentage requested, this request of 10% seems far less reasonable.").
Because significant questions remain regarding the fair and reasonable allocation of attorneys' fees, the court will decline plaintiff's invitation to employ only the percentage-of- the-fund method and will instead exercise its discretion to calculate and/or cross-check the requested fee award via the lodestar method. Recognizing that plaintiffs' counsel has already indicated that it intends to "prepare and file a memorandum in support of the attorneys' fee request prior to the final approval hearing," (Pls.' Mem. in Supp. of Mot. for Preliminary Approval of Class Action Settlement 17:5-6), the court will instruct plaintiffs' counsel to include a thorough petition detailing the hours reasonably spent representing plaintiffs in this action and the justification for any enhancement due to risks associated with its representation.
b. Distribution of Award to Named Class Members
"[N]amed plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments." Staton, 327 F.3d at 977. The district court, however, must "evaluate their awards individually" to detect "excessive payments to named class members" that may indicate "the agreement was reached through fraud or collusion." Id. at 975. To assess whether an incentive payment is excessive, district courts balance "the number of named plaintiffs receiving incentive payments, the proportion of the payments relative to the settlement amount, and the size of each payment." Id.
The proposed Settlement Agreement provides that each named plaintiff shall receive an incentive payment of $2,500 for his or her role as class representative. (Pls.' Mem. in Supp. of Mot. for Preliminary Approval of Class Action Settlement 16:13.) Courts have generally found that incentive payments of up to $5,000 are reasonable. See, e.g., In re Mego Fin. Corp. Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000) (approving incentive awards of $5,000 each to the two class representatives of 5,400 potential class members in a settlement of $1.725 million); In re SmithKline Beckman Corp. Sec. Litig., 751 F. Supp. 525, 535 (E.D. Pa. 1990) (approving incentive awards of $5,000 for one named representative of each of the nine plaintiff classes involving more than 22,000 claimants in a settlement of $22 million). As noted above, the size of the Class and the amount of the proposed relief remain uncertain; however, given the general scope of proposed settlement, the court is confident that the $2,500 incentive award for each named plaintiff will not amount to an excessive percentage of the ultimate award.*fn11 See In re Mego Fin. Corp., 213 F.3d at 463 (approving $5,000 incentive payments to two named plaintiffs as such award did not exceed 0.56% of total settlement).
While portions of the parties' proposed settlement agreement admittedly suffer from the aforementioned shortcomings, the court trusts that the deficiencies can be cured prior to the final fairness hearing in order to ensure a fair, adequate, and reasonable settlement. Accordingly, because the court preliminarily finds that the Settlement Class meets the requisite certification standards and the terms of the parties' Settlement Agreement are acceptable pending the fairness hearing, the Stipulation for Settlement will be granted.
IT IS THEREFORE ORDERED that (1) plaintiffs motion for leave to amend their Complaint be, and the same hereby is GRANTED and (2) the parties' joint motion for preliminary approval of settlement be, and the same hereby is, GRANTED.
IT IS FURTHER ORDERED that:
(1) the following class be provisionally certified for the purpose of Settlement in accordance with the terms of the Stipulation for Settlement: all non-excluded residents of the United States who, as of the date of the Preliminary Approval Order, own or have owned a Class Vehicle;
(2) if the Stipulation for Settlement does not receive the court's final approval, should final approval be reversed on appeal, or should the stipulation otherwise fail to become effective for any reason (including any party's exercise of a right to terminate under the Stipulation for Settlement), the court's preliminary grant of certification of the class shall be vacated and become null and void without further action or order of the court; (3) the Stipulation for Settlement--and the Settlement provided therein--are preliminarily approved as fair, reasonable, and adequate within the meaning of Federal Rule of Civil Procedure 23, subject to final consideration at the fairness hearing provided for below; (4) for purposes of the Stipulation for Settlement and carrying out the terms of the settlement only:
a. plaintiffs Kelly Castillo, Nichole Brown, Brenda Alexis Digiandomenico, Valerie Evans, Barbara Allen, Stanley Ozarowski, and Donna Santi are appointed as the representatives of the Settlement Class;
b. The Lakin Law Firm, P.C. and Kershaw Cutter & Ratinoff, L.L.P. are appointed as Class Counsel for the Settlment Class and shall be responsible for the acts and activities necessary or appropriate to present this Stipulation for Settlement and the proposed Settlement to the court for approval and, if the Settlement is finally approved, to implement the Settlement in accordance with the terms of the Stipulation for Settlement and orders of the court;
(5) defendant General Motors Corporation is hereby approved and appointed as the Settlement Administrator to carry out the duties of the Claims Administrator set forth in the Stipulation for Settlement;
(6) the form and content of (a) the Notice of Settlement of Class Action and (b) the Request for Exclusion from Settlement (Notice of Proposed Class Action Settlement Ex. 1) is approved;
(7) the form and content of the Class Claim Forms (Notice of Proposed Class Action Settlement Exs. 6, 7) is approved;
(8) a hearing (the "Final Fairness Hearing") shall be held before this court on February 17, 2009 at 2:00 p.m. in Courtroom 5 to determine whether the proposed settlement, on the terms and conditions set forth in the stipulation, is fair, reasonable, adequate, and should be approved by the court; to determine whether a judgment as provided in the Stipulation for Settlement should be entered finally approving the Settlement; and to consider Class Counsel's applications for attorneys' fees, reimbursement of costs, and service payments. The court may continue the Final Fairness Hearing without further notice to the members of the Settlement Class;
(9) within thirty-one (31) days prior to the Final Fairness Hearing, Class Counsel shall serve and file with the court the Settlement Administrator's declaration setting forth the services rendered, proof of mailing, and list of all Class Members who have time opted out of the Settlement;
(10) within thirty-one (31) days prior to the Final Fairness Hearing, Class Counsel shall file and serve all papers in support of the Settlement, request for enhancement for the class representatives, and any request for attorneys' fees and costs;
(11) any person who has standing to object to the terms of the proposed Settlement may appear at the Final Fairness Hearing in person or by counsel, if an appearance is filed as hereinafter provided, and be heard to the extent allowed by the court in support of, or in opposition to, (1) the fairness, reasonableness, and adequacy of the proposed Settlement; (2) the requested award of attorneys' fees, reimbursement of costs, and incentive payment to class representative; and/or (3) the propriety of class certification. To be heard in opposition, a person must, within forty-five (45) calendar days after notice is mailed, (a) serve by hand or through the mails written notice of his, her, or its intention to appear, stating the name and case number of this litigation and each objection and the basis therefore, together with copies of any papers and briefs, upon class counsel and upon counsel for defendant, and (b) file said appearance, objections, papers, and briefs with the court, together with proof of service of all such documents upon counsel for the parties. Responses to any such objections and Class Counsel's application for attorneys' fees, reimbursement of costs, and the class representatives' incentive payment shall be served by hand or through the mails on the objectors (or on the objector's counsel if any there be) and filed with the Clerk of this court no later than fourteen (14) calendar days before the Final Fairness Hearing. Objectors may file optional replies no later than one week before the Final Fairness Hearing in the same manner described above. Any Class Member who does not make his, her, or its objection in the manner provided herein shall be deemed to have waived such objection and shall forever be foreclosed from objecting to the fairness or adequacy of the proposed settlement as memorialized in the Stipulation for Settlement, the judgment entered, and the award of attorneys' fees, expenses, and the incentive payment unless otherwise ordered by the court;
(12) pending final determination of whether the Settlement should be ultimately approved, the court preliminarily enjoins all Class Members (unless and until the Class Member has submitted a timely and valid Request for Exclusion) from filing or prosecuting any claims, suits, or administrative proceedings regarding claims to be released by the Settlement.