Vargas v. Ford Motor Company

Topic(s): 
Class Actions — Objections to Proposed Settlements
Documents:
Case Description: 

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 PowerShift transmission. Plaintiffs allege that the transmission is defective and poses serious safety concerns. The complaint asserts 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 proposed settlement has two main components. First, it provides for cash payments (or discount coupons) to class members who had at least three software flashes, three transmission hardware replacements, or three clutch replacements, and who file a timely claim form with extensive required documentation. The cash payment provisions of the settlement provide no relief to any class member with fewer than three of any single qualifying event, but class members ineligible for relief must still release their claims.

Second, the proposed settlement bars class members from litigating individual claims in favor of an arbitration program under which a class member can seek repurchase under the standards of the class member’s state lemon law or under a default standard set forth in the agreement, but the arbitrator cannot award any relief other than repurchase, even where additional relief is available under the applicable state lemon law or any of the other myriad causes of action waived by the settlement. Further, the arbitration program imposes requirements to bring a lemon law claim in arbitration that exceed those required to bring a lemon law claim in court. Finally, the arbitration program caps attorneys’ fees for a class member who successfully arbitrates a repurchase claim at no more than $6,000, which will likely force class members to arbitrate their claims pro se.

Plaintiffs cannot ascertain the value of the proposed settlement because they do not know what portion of the class will qualify for a settlement benefit and because the settlement contains no dedicated fund available to compensate the class. In contrast, the value of the settlement to the class representatives and class counsel is firmly established. The settlement includes a “clear sailing” provision under which Ford agrees not to oppose an award to class counsel of up to $8,856,600 in attorneys’ fees and costs, and incentive awards ranging from $1,000 to $10,000 to each of the named class representatives.

On September 5, 2017, we submitted objections on behalf of five class members, urging the Court to deny final approval of the settlement on the grounds that it would provide no benefit to a large portion of the class; its value is unknown because it is a claims-made settlement without a non-revertable fund to compensate the portion of the class potentially eligible for relief; and the arbitration program benefits Ford more than the class by restricting the relief that would otherwise be available, imposing additional barriers to recovery, and capping attorneys’ fees at a level that will force class members to arbitrate their claims pro se.

On October 2, 2017, we appeared at the fairness hearing and urged the Court to reject the settlement. The Court took the matter under advisement.