LOS ANGELES — A federal judge has balked at a proposed class action settlement with American Honda Motor Co. Inc. after objectors including the attorneys general of 25 states questioned whether the plaintiffs or their attorneys would benefit most.
The deal would have provided 158,000 Civic Hybrid owners with rebates on future purchases of Honda vehicles. The plaintiffs’ attorneys would have collected nearly $3 million in fees.
U.S. District Judge Virginia Phillips of Riverside, Calif., issued her tentative ruling on Monday but said that she would let the parties file additional information in support of the deal. As of Wednesday, she hadn’t released a written order. Earlier, Phillips had questioned the benefit to class members but given the deal her preliminary approval.
“In this case, it was essentially a marketing incentive program for Honda,” said Ted Frank, founder of the Center for Class Action Fairness in Washington, who filed an objection on behalf of a class member. “So if you bought a Honda Civic Hybrid in 2o08, the only relief was to get a coupon to buy another Honda. That’s a benefit to Honda, certainly. It’s not clear it’s a benefit to the class members.”
The attorneys general of states including California, Texas and Florida said in an amicus brief that the proposed deal didn’t meet the “heightened scrutiny” for coupon settlements called for under the Class Action Fairness Act.
Plaintiffs’ attorney Jonathan Cuneo of Cuneo Gilbert & LaDuca in Washington noted that the judge left open the possibility that the parties could file a new settlement proposal. The firm was evaluating its options, he said.
“The court did not have enough information about the value of the settlement to approve the settlement. And the burden was on us,” he said. “There is no question that she took, in my opinion, the objections to be serious.”
The suit alleged that Honda’s advertisements for its Civic Hybrid vehicles, which cost on average $7,000 more than conventional Civics, contained inflated fuel efficiency claims. The nationwide class invoked California’s Business and Professions Code Section 17200, which targets unfair business practices, on behalf of customers who bought Civic Hybrids from the 2003 through 2008 model years.
The parties reached the proposed settlement in December 2008. It would have given each class member a DVD demonstrating how to maximize fuel efficiency, rebates of between $500 and $1,000 on the purchase of a Honda vehicle and a $100 payment if they previously had made a documented complaint.
“Critics may mislabel the proposed settlement as a coupon settlement with marginal value to the class,” the parties wrote in court documents in support of their deal. “This is a case where the settlement relief matches up well with the claims set forth in the complaint; it is not like cases where there is a clear disconnect between the relief sought and the relief obtained.”
They also said the attorney fees are reasonable given that costs and expenses to litigate the case exceeded $3 million.
As for the specific objections raised, Cuneo said that the DVD offered a “very important education function” and “addressed one of the problems that we saw, which was that some class members did not know how to operate their vehicles correctly.”
He defended the rebates, saying that plaintiffs could share them with relatives.
Nicholas Chimicles, founding partner of Chimicles & Tikellis, and Mark Mester, a partner in the Chicago office of Latham & Watkins who represents American Honda Motor Co., did not return calls for comment.
Amanda Bronstad can be contacted at [email protected].
