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True v. American Honda Motor Co., Inc.

Topic(s): Class Actions – Objections to Proposed Settlements
Citation: 07-0287, U.S. District Court, C.D. Cal.
Date Of Involvement: 12/14/2009

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Plaintiffs brought this class action suit alleging that Honda used false or misleading advertising regarding the fuel efficiency of the Honda Civic Hybrid to induce consumers to pay about $2,500 more for the Civic Hybrid than for a comparably equipped standard-engine Honda Civic, even though the Hybrid gets only marginally better gas mileage. Class counsel and Honda then agreed to a settlement under which 176,990 class members would release their claims in exchange for a DVD with tips on how to improve their gas mileage, an opportunity to receive a rebate on the future purchase of another Honda, and, for less than 2% of the class, an opportunity to make a claim for $100. The settling parties also agreed that Honda would not oppose class counsel's motion for $2.95 million in attorneys' fees.

On December 14, 2009, we submitted objections on behalf of three class members, urging the Court to deny final approval of the settlement on the ground that it would provide no benefit to the vast majority of class members. We explained that the DVD provides little value because the same information is already available free, the rebates amount to coupons that will have an extremely low redemption rate, and the $100 cash payment is available to only a small subclass.

In response to our objections, the settling parties made several changes to their agreement, but as we explained in our February 17, 2010 response to the settling parties' submissions in support of final approval, the changes were not sufficient to address the fundamental problem with the proposed settlement-that it would leave the vast majority of class members with no meaningful relief. On February 22, 2010, we appeared at a fairness hearing to urge the Court to reject the settlement. In an order entered on February 26, 2010, the Court denied final approval of the settlement for the reasons set forth in our submissions. Specifically, the Court held that the creation of a small subclass eligible for a cash award was "patently unfair" because it was based on an arbitrary distinction among class members with identical claims, the rebate program was a coupon settlement that would have an extremely low redemption rate and "far less" value than plaintiffs suggested, and the vast majority of the class would receive "nothing more than a DVD of little value." The Court also opined that, in light of the low value of the settlement, an award of almost three million dollars in attorneys' fees "would be unconscionable."