Concerns about the allocation of possible excess cash appear to have held up for now the proposed $1.6 billion settlement between Toyota and consumers asserting economic damages tied to sudden acceleration defects.

U.S. District Judge James Selna in Santa Ana, Calif., concluded in a tentative order that the deal was “fair, adequate, and reasonable,” but said that “certain difficulties in the plan of allocation of the settlement funds preclude the Court’s final approval of the proposed settlement at this time.”

He also denied the plaintiffs’ steering committee’s proposed $227 million in attorney fees and costs, since he hadn’t approved the deal. He scheduled a new hearing for July 19.

Selna said his conclusions were based on his own assessment of the way leftover cash in two funds totaling $500 million would be handled following distribution to class members.

In a separate tentative order on Friday, Selna addressed concerns that the attorney fees and costs were excessive. The payouts, amounting to 12.3 percent of the settlement value, appeared to be “fair, reasonable, and adequate,” he wrote. But he declined to complete his analysis until after the proposed settlement is approved. The plaintiffs’ steering committee has asked for $200 million in attorney fees and $27 million in expenses for 31 firms.

“By any measure, the results achieved by class counsel are exceptional,” he wrote.

In an emailed statement, Steve Berman, co-lead plaintiffs’ counsel for the economic damages claims against Toyota, looked on the bright side. He was “extraordinarily pleased” with the judge’s ruling, he said, which “characterized the results of the settlement as exceptional.”

Berman, of Seattle’s Hagens Berman Sobol Shapiro, said that he had not expected final approval of the settlement so soon. “This is a very complex settlement agreement and we anticipated that we might have additional work to do to answer the court’s questions regarding the allocation plan.”

He anticipated obtaining court approval during next month’s hearing. “I know that millions of current and former Toyota owners are watching this closely, and we hope to have a final settlement agreement buttoned up for them very soon.”

Toyota spokesman Celeste Migliore also defended the deal. “This agreement is structured in ways that we believe provide significant value to our customers and demonstrate that they can count on Toyota to stand behind our vehicles,” she wrote in a prepared statement. “We believe that approval of this settlement, as amended, is in the best interests of all affected parties.”

The deal aims to resolve claims that certain Toyota vehicles lost value due to the recalls. In particular, the settlement covers class members who own or lease 16 models of Toyota, including the Camry and the Corolla, nine Lexus models and three Scion models. The model years range from 1998 to 2010.

Selna had granted preliminary approval of the deal on December 28.

According to Selna’s order, about 2,000 class members opted out of the settlement and 77 objections were filed over problems including a $30 million cy pres award for automotive research and the potential release of claims in companion litigation over anti-lock braking system defects in Priuses.

Selna called those numbers small, given that more than 422,000 claims were at issue.

The settlement carries a total estimated value of $1.63 billion, according to plaintiffs’ attorneys. Among its provisions are two cash funds worth $250 million each. One fund would be earmarked for class members whose vehicles lost value due to the recalls, while the other would pay class members whose vehicles are ineligible for installation of a brake override system.

Some objectors argued that the research fund, which would go to five universities for studies on automotive safety, was improper because it focused on driver safety and not sudden acceleration defects. A cy pres distribution is a way to dispose of money unclaimed after class members have been paid. Such funds have been under scrutiny by the U.S. Court of Appeals for the Ninth Circuit, which last year threw out a class action settlement with Kellogg Co. because a cy pres fund had no “nexus” to the consumer claims, for example.

Selna said the research fund did not amount to a cy pres contribution because it would not come out of the cash portions of the settlement. “It is not made in lieu of any payments to the class,” he wrote. “Instead, it is simply one part of a multi-part settlement of complex litigation that the Court must consider as a whole.” In any event, the payouts would appear to comply with Ninth Circuit precedent, he said.

The judge took issue, however, with a related provision in which excess funds from the cash portions of the deal would go to reimburse Toyota for administering the settlement, with an equal amount going to the research fund. Selna estimated that such costs could amount to $20 million.

“A cy pres contribution in the amount equal to the settlement administration costs does not meet the cy pres requirements in the Ninth Circuit,” he wrote.

He also had reservations about a provision for cash payments to nonclaimants. That was added to the settlement after the plaintiffs’ steering committee projected that distributions to class members would equal less than $80 million in one fund and $59 million in the other, Selna wrote.

“Before any excess funds can be transferred to a cy pres, the Court needs to ensure that class member [sic] are compensated to the maximum degree possible, whether through distribution to non-claimants or increased payments to class members with diminished value claims or cash payment in lieu of BOS [brake override system] claims,” Selna wrote. “The Court cannot make a final judgment at this time.”

But he emphasized that the allocation issues in such a large settlement were “unsurprising.”

“The present case involves millions of class members, and the claims filing deadline of July 29, 2013, has not yet passed,” he wrote. “Thus, the Court does not fault the parties, their counsel, or the settlement administrator on this point.”

He rejected all other objections. As for the separate litigation over Prius antilock braking systems, Selna acknowledged the possibility of some overlap of claims in the settlement’s release and invited both sides to address the matter during the next hearing.

Contact Amanda Bronstad at abronstad@alm.com.