Class Action Settlement Leaves Class Members in the Cold

Feb. 6, 1998

 

Class Action Settlement Leaves Class Members in the Cold

WASHINGTON, D.C. — Lawyers for Public Citizen urged a state court in Chicago today to reject a class action settlement in an automobile-leasing case in which up to a million class members would be deprived of their legal rights yet would get little or nothing from the settlement.

Public Citizen?s argument on behalf of objecting class members was scheduled to be heard today by Cook County Circuit Judge Ronald C. Riley at an 11 a.m. fairness hearing.

In a brief filed with the court this week, Public Citizen Litigation Group attorney Colette G. Matzzie asks the judge to deny the plaintiffs? request to certify the lawsuit as a nationwide class action. If that fails, the petition asks that the proposed settlement be rejected as unfair to class members.

The lawsuit, which the parties have proposed to certify as a nationwide class for purposes of settlement, stems from an action originally filed by Ford Motor Credit Co. (FMCC) against Virginia Shore to collect money the company alleged she owed them under her lease agreement. Ms. Shore and several other consumers countersued the company, claiming it had violated the Federal Consumer Leasing Act and various state consumer laws by imposing excessive termination charges and failing to adequately disclose the method of calculating those fees, among other charges.

“What?s most offensive about this settlement is that most of the value of these claims to class members lies in being able to assert them as counterclaims if Ford tries to sue them for owing it money,” Matzzie said. “Yet, if this settlement is approved, they are deprived of these defenses and counterclaims in any future actions against them while receiving only a few dollars or nothing at all in monetary damages from this class action.

“This allows Ford to wipe the slate clean one time for approximately one million class members,” Matzzie said. “Under these circumstances, is it really fair to have a class action at all?”

The proposed settlement breaks the class into three groups: Those who have ongoing leases or completed their leases without incurring early termination fees; those who paid early termination charges; and those who currently or will in the future owe FMCC all or a portion of a termination charge under their leases.

The settlement creates a $425,000 fund for the first group. But the parties created a lottery scheme, in which FMCC will draw the names of 100,000 members, who will each receive $4.25. The remaining members, about 90 percent of the group, will receive nothing. The agreement also creates a $675,000 fund for the class members in the second group and $2 million for the class members in the third group.

Matzzie said class actions are a vitally important legal mechanism for holding corporations accountable for their actions. But the system fails when members of the class receive virtually nothing in exchange for relinquishing their rights.