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Castillo v. General Motors Corp.

September 5, 2008



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.

II. Discussion

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 [1] the propriety of the certification and [2] 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).

a. Numerosity

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).

b. Commonality

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").

c. Typicality

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 ...

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