Vargas v. Ford Motor Company

Plaintiffs brought this class action suit against Ford seeking damages under a variety of statutory and common law theories on behalf of a class of consumers who bought or leased a 2011–2016 Ford Fiesta or 2012–2016 Ford Focus equipped with the DPS6 (PowerShift) transmission. Plaintiffs alleged that the transmission is defective and poses serious safety concerns. The complaint asserted eighteen separate causes of action, including claims for violations of various state consumer protection laws, fraud, breach of warranty, and unjust enrichment. Class counsel and Ford agreed to a settlement under which 1.9 million class members would release Ford from liability for any claims that could have been asserted in connection with the transmission defect, other than personal injury and property damage claims. The settlement had both a cash payment component and a process for seeking repurchase of class vehicles.

In September 2017, on behalf of five class members, Public Citizen submitted objections urging the district court to deny final approval of the original settlement agreement. We argued that the court lacked reliable information regarding both the value of the relief provided by the settlement and the value of the claims surrendered. We also argued that the benefits of the settlement were not fairly distributed among the class, because class members turned away by Ford dealers when they sought repairs would not qualify for a cash payment, former owners were disadvantaged relative to current owners, and class members from states that allow civil penalties for lemon law claims were treated the same as those from states that allow only repurchase. Despite our objections, the district court granted final approval of the original settlement agreement.

On behalf of the class member-objectors, we appealed. On September 13, 2019, the Ninth Circuit vacated the district court’s decision approving the settlement and remanded the case back to the district court for further proceedings. We then participated in a mediation with the settling parties in an effort to improve the settlement agreement.

Our efforts were largely successful. First, under the revised agreement, Ford guaranteed that it will pay at least $30 million to class members who submit a valid claim under the cash payment component of the settlement. If such claims do not exceed $30 million, the residue will not revert to Ford. Rather, it will be used to make a second distribution to class members who submitted valid claims or, if the residue is too small for additional distribution, as cy pres. The guaranteed minimum payout is a significant improvement over the original settlement.

Second, under the revised agreement, the number of class members eligible for the cash payment component of the amended settlement agreement is greater than under the original settlement. The amended settlement allows for payments to those who lacked the minimum number of software flashes or transmission hardware replacements to qualify for a payment under the original agreement, and who attest that they sought transmission repairs but were turned away by a dealer who claimed that there was nothing wrong with the car. This provision both expands the number of class members eligible for a cash payment and addresses the allegation that Ford discouraged repeated service visits by claiming that the transmission was operating as intended.

Third, the amended settlement agreement allows a greater number of class members to immediately seek repurchase because it eliminates entirely the requirement that class members with fewer than four transmission repair attempts provide Ford with a final opportunity to repair the vehicle before proceeding to arbitration.

Fourth, the amended settlement agreement significantly expands the benefits to former owners by extending the statute of limitations for former owners to seek repurchase and by allowing former owners to utilize the settlement-created repurchase standard. These changes are particularly valuable because many state lemon laws do not provide repurchase for former owners and the original agreement imposed a much shorter statute of limitations for former owners than for current owners.

Fifth, the amended agreement, unlike the original agreement, allows the arbitrator to award civil penalties in addition to repurchase where such penalties are available under the applicable state law and certain conditions are met. This change helps to ensure fairness among class members by taking into account an important difference in state-law remedies, and it provides an incentive for Ford to offer repurchase without requiring class members in states that allow civil penalties to proceed to arbitration.

As a result of these improvements, we withdrew the objections. The district court then approved the revised settlement.