Legal News

Judge Questions Coupon Settlement in Honda Class Action

By Ashby Jones

The Class Action Fairness Act of 2005 took several steps to, in the eyes of Congress, make the class-action system more fair. Among the things, the act provided that coupon settlements — those much criticized settlements in which plaintiffs’ lawyers walk away with millions while the class members get coupons — receive heightened scrutiny.

We can’t speak for the entire federal judiciary, but one judge is taking Congress’s mandate seriously. Virginia Phillips, a federal judge in Riverside, Calif., has raised questions over a proposed class action settlement with American Honda Motor after objectors questioned whether the plaintiffs or their attorneys would benefit most. Click here for the story, from the National Law Journal’s Amanda Bronstad.

The deal would have provided 158,000 Civic Hybrid owners with rebates on future purchases of Honda vehicles. Meanwhile, the plaintiffs’ attorneys would have collected nearly $3 million in fees. Phillips issued a tentative ruling on Monday but said that she would let the parties file additional information in support of the deal.

“In this case, it was essentially a marketing incentive program for Honda,” said Ted Frank, founder of the Center for Class Action Fairness in Washington, who filed an objection on behalf of a class member. The attorneys general of a number of states said in an amicus brief that the proposed deal didn’t meet the “heightened scrutiny” for coupon settlements.

Plaintiffs’ attorney Jonathan Cuneo of Cuneo Gilbert & LaDuca in Washington noted that the judge left open the possibility that the parties could file a new settlement proposal. The firm was evaluating its options, he said.

The suit alleged that Honda’s advertisements for its Civic Hybrid vehicles, which cost on average $7,000 more than conventional Civics, contained inflated fuel efficiency claims. The parties reached the proposed settlement in December 2008. It would have given each class member a DVD demonstrating how to maximize fuel efficiency, rebates of between $500 and $1,000 on the purchase of a Honda vehicle and a $100 payment if they previously had made a documented complaint.

Full post as published by Law Blog - WSJ.com on February 25, 2010 (boomark / email).