Dec. 30, 2009
Ohio Appeals Court Rejects Class-Action Settlement With Carfax, Agrees With Public Citizen’s Objections
Court Overturns Approval of Coupon Settlement
WASHINGTON, D.C. – An Ohio appeals court has agreed with Public Citizen’s objections to a nationwide class-action settlement involving Carfax, ruling that a trial judge should not have approved the settlement without requiring notice to all of the affected consumers and without considering information about whether the coupons offered under the settlement had any value.
The settlement would have resolved a class-action lawsuit alleging that Carfax, a company that sells history reports for used cars, deceives consumers by representing that its reports are based on complete national accident data. Public Citizen represented 17 individual class members and the nonprofit Center for Auto Safety in objecting to the proposed deal.
The settlement had defined the class of consumers bound by its terms to include anyone who purchased a Carfax vehicle history report prior to Oct. 2006, which would include consumers who purchased the reports during more than a decade preceding that date. However, individual notice of the proposed settlement was sent only by e-mail and only to customers who bought Carfax reports during the one year preceding the settlement. As a result, the majority of class members got no notice of the settlement, according to Public Citizen’s objections. The decision of the 11th District Court of Appeals in Ohio held that individual notice should have been sent to all class members.
Moreover, as part of the settlement, consumers were offered a coupon for additional Carfax history reports. The time for claiming a coupon had expired before the trial court approved the settlement, yet the court had denied Public Citizen’s motion seeking disclosure of how many class members filed claims. The court of appeals found that the trial court erred in not requiring Carfax to disclose how many consumers had taken advantage of the coupon offer. Those numbers would show whether the coupons had actual value to the class members and, therefore, whether the settlement had value to the class, said Deepak Gupta, one of the Public Citizen attorneys who handled the case.
“Class actions are a tool for securing consumer justice, but settlements like this one give class actions a bad name,” Gupta said. “The appeals court’s decision sends a strong message that class-action settlements should be approved only after a legitimate attempt to inform the class members and only if the settlement offers real value to the class.”
READ the opinion.