A federal judge has approved a $69 million settlement of a class action over allegedly leaky sunroofs in Volkswagen and Audi vehicles, nearly two years after the original deal was struck.
During the past several months, the parties amended what objectors claimed — and an appeals court agreed — was an unfair deal because it divided the class in two and gave one group priority access to an $8 million reimbursement fund.
U.S. District Judge Patty Shwartz on Dec. 13 approved a new settlement agreement that treated each class member similarly by allowing each to seek reimbursement for repairs.
Shwartz also found reasonable the agreed-upon $9.2 million in fees and $677,412 in costs for class counsel: Adam Slater of Mazie Slater Katz & Freeman in Roseland and Samuel Sporn of Schoengold & Sporn in New York.
The plaintiffs in Dewey v. Volkswagen of America, 07-cv-2249, claimed that several vehicles ranging in model year from 1997 to 2009 had defective sunroof drainage systems that clogged and allowed water seepage, damaging electrical components and interiors.
Two suits were filed in May 2007 and consolidated later that year. They alleged violations of the state Consumer Fraud Act and other causes of action.
The parties proposed certification of a class consisting of buyers and lessees of the affected models. It was to be split, with the reimbursement group getting first crack at a common fund designated for reimbursement of repairs related to the defect. In addition, some of them would be provided repairs.
The residual group would have to wait, but would be entitled to any remaining funds through “goodwill” claims.
Attorneys for both sides used claim rates connected to each model year vehicle to designate a dividing line between the groups.
Shwartz certified the class and gave final approval in January 2010, over objections that the settlement structure yielded an intraclass conflict.
The differing relief available to each group represented a compromise based on each model year’s defect rate rather than divergent interests, Shwartz ruled.
The objectors appealed, contending that the lead plaintiffs did not adequately represent the class under Rule of Civil Procedure 23(a)(4) because they were all in the reimbursement group.
Last May 31, the U.S. Court of Appeals for the Third Circuit reversed Shwartz’s approval of the deal, finding that a fundamental conflict did exist.
The lead plaintiffs, as reimbursement group members with priority access to the funds, had incentive to keep other plaintiffs out, while the residual group members had incentive to join, said U.S. Circuit Judges D. Brooks Smith, Julio Fuentes and Kent Jordan.
The parties could either allow all class members access to the fund or certify separate subclasses with representative plaintiffs for each one, the court said.
The parties chose the first option and weeks later reached a new agreement that removed the distinction. The new deal also required that all class members receive preventive maintenance materials and entitled certain model year owners and lessees to a modification meant to correct the problem.
Shwartz granted preliminary approval in August, and notification went out to about 1.1 million class members. Just 105 excluded themselves from the class and five maintained objections other than those argued on appeal.
The plaintiffs moved for final approval in October, and on Dec. 13, Shwartz granted it.
“Under the New Settlement Agreement, the representative plaintiffs have no incentive to prioritize recovery for one group over another, since each class member will be treated similarly,” she wrote, finding that it “provides at least as great a benefit” as the previous one.
She added that the “objectors who vigorously opposed the prior settlement support the new settlement,” which “permits more than one million additional class members to recover money from the settlement fund without simply hoping that the Defendants will contribute additional funds to satisfy all claims.”
She signed off on the fees and costs for class counsel; they were the same as those she previously approved.
And she granted fee requests by the objectors’ counsel: $82,134 to Theodore Frank of the Center for Class Action Fairness in Washington, D.C., and $22,529 to Gary Sibley of Dallas. The objectors improved the settlement by identifying a deficiency and added about $780,000 in value to class members, Shwartz noted.
Shwartz rejected the five remaining objectors’ claims that cash payments are wrongfully limited to those who have already paid for repairs, Volkswagen shouldn’t pay for repairs because the owners failed to maintain their vehicles and class-counsel fees should be limited by state law or otherwise reduced.
Frank, reached by phone, says the simple step of removing the division among class members “makes all the difference.”
“I think the fees are a little bit disproportionate to the relief, but that’s not something we raised on appeal,” he says.
“It was just time to get the class paid at this point.”
Slater did not provide comment by press time.
Jeffrey Chase of Herzfeld & Rubin in New York, Volkswagen’s counsel, could not be reached by telephone and did not respond to an email.