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Fath v. American Honda Motor Co., Inc.

United States District Court, D. Minnesota

December 13, 2019

TROY FATH, HIGINIO BAUTISTA, AND CHRISTOPHER HAMILTON, Plaintiffs,
v.
AMERICAN HONDA MOTOR CO., INC., Defendant.

          ORDER GRANTING PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT

          NANCY E. BRASEL UNITED STATES DISTRICT JUDGE

         This matter came before the Court on the Plaintiffs' Unopposed Motion for Preliminary Approval of Class Action Settlement. [ECF No. 72 (the “Motion”).] Troy Fath, Higinio Bautista, and Christopher Hamilton (collectively, the “Named Plaintiffs”) have sued American Honda Motor Co., Inc. (“Honda”) on behalf of a putative class in the above-captioned litigation (the “Litigation”). The Named Plaintiffs and Honda have agreed on a putative settlement class, and now the Named Plaintiffs seek preliminary approval of the Class Action Settlement Agreement and Release dated July 22, 2019 and its attached exhibits. [ECF No. 75-1 (collectively, the “Settlement Agreement”)].[1] For the reasons stated below, the Court GRANTS the Motion.

         BACKGROUND

         In November 2018, the Court ordered the consolidation of two putative class actions alleging a latent fuel dilution defect in the engines of certain Honda vehicles. [See ECF No. 42.] The Court also appointed interim class counsel. (See id.)

         The parties have since negotiated a proposed class action settlement. On August 15, 2019, the Named Plaintiffs filed their first amended consolidated class action complaint [ECF No. 71 (the “FAC”)] and moved for preliminary approval of the Settlement Agreement that, among other things, provides for the release of claims relating to or arising out of the alleged latent oil dilution defect.

         A. Summary of the Allegations in the FAC

         According to the FAC, Honda failed to disclose to the Named Plaintiffs and members of the putative class that the Class Vehicles[2] are predisposed to an engine defect that causes dilution of engine oil. (See FAC ¶¶ 1-2.)[3] Once the defect manifests, the internal engine components that rely on lubrication experience rapid wear. (See Id. ¶ 3.) Honda has long been aware of this latent defect but has been unable to adequately repair the Class Vehicles when the defect manifests. (See Id. ¶ 5.) It has not issued a recall, offered suitable repairs, or offered to reimburse customers for out-of-pocket repair expenses. (See id. ¶ 8.) The Named Plaintiffs and members of their putative class would not have purchased any of the Class Vehicles had they known about the defect and have incurred costs paying for related repairs. (See Id. ¶¶ 9-11.) The FAC asserts causes of action under certain state consumer protection statutes and various common law theories. (See Id. ¶¶ 99-184.)

         B. Summary of the Settlement Agreement

         The Settlement Agreement provides that Honda agrees to put certain measures in place in exchange for Named Plaintiffs' promise to seek dismissal of this case. (See Settlement Agreement ¶ 3.1.) Among other things, Honda agrees to: (1) extend the existing Powertrain Limited Warranty an additional year (see Id. ¶¶ 3.2-3.4); (2) reimburse certain towing expenses incurred before the date by which Honda completes serving notice on the putative settlement class members (the “Notice Date”) (see Id. ¶¶ 1.14, 3.5-3.4); (3) reimburse certain oil change costs incurred before the Notice Date (see Id. ¶¶ 3.7-3.8); (4) reimburse up to $250 of certain diagnostic costs incurred before the Notice Date (see Id. ¶¶ 3.9-3.10); (5) provide a Product Update to Class Vehicles registered in certain cold-weather states so that they receive software updates that will reduce the likelihood that the defect manifests (see Id. ¶ 3.11, ECF No. 74 at 6.).

         In addition, under the Settlement Agreement, Honda is the Settlement Administrator, meaning it will administer certain components of the settlement and bear any associated costs. (See Id. ¶ 3.12.) In that role, among other things, Honda agrees to process claims for reimbursement and provide notice to putative settlement class members of the terms of the settlement. (See id.) In particular, Honda agrees to send members of the proposed settlement class an agreed-upon notice that describes this litigation, their legal rights, the settlement terms, and the claims processing procedure. (See Id. ¶¶1.14, 3.12; Ex. B.) Under the Settlement Agreement, the method of providing notice is by first-class mail and establishment of a website. Pursuant to the Settlement Agreement, Honda will mail each putative settlement class member the agreed-upon Notice and Claim Form by first-class mail and also create and maintain a website that will make these documents, as well as others related to the settlement, available for download. (See Id. ¶¶ 3.12, 4.2.)

         DISCUSSION

         To determine whether approval on a preliminary basis is appropriate, a district court considers whether it will “likely be able to: (1) approve the proposal under Rule 23(e)(2); and (2) certify the class for purposes of judgment on the proposal.” Fed.R.Civ.P. 23(e)(1); see also Swinton v. SquareTrade, Inc., No. 18-CV-144 (SMR/SBJ), 2019 WL 617791, at *5 (S.D. Iowa Feb. 14, 2019); Famuliner v. Walmart Inc., No. 19-CV-60, 2019 WL 2566443, at *2 (W.D. Mo. June 21, 2019). “If these two elements are satisfied, the Court will consider whether the parties' proposed method of giving notice satisfies the requirements set out in Rule 23(c)(2)(B).” Swinton, 2019 WL 617791, at *5.

         This standard comes from the December 2018 Amendments to the Federal Rules of Civil Procedure, including Rule 23(e). Advisory Committee Notes to the 2018 Amendments indicate that the process set forth in Rule 23(e) is meant to codify the preliminary approval process that was a matter of practice, but not rule. See In re GSE Bonds Antitrust Litigation, No. 19-CV-1704 (JSR), 2019 WL 5838960, at *1 (S.D.N.Y. Nov. 7, 2019) (noting that prior to the amendments, Rule 23 did not specify a standard for preliminary approval); Swinton, 2019 WL 617791, at *4 (noting that the process was meant to “codify the ‘preliminary approval' process that is customary in class action settlements”).

         A. The proposed settlement satisfies the Rule 23(e)(2) requirements.

         Rule 23(e)(2) provides that “[i]f the proposal would bind class members, the court may approve it only after a hearing and only on finding that it is fair, reasonable, and adequate after considering” certain factors. Fed.R.Civ.P. 23(e)(2). And so, courts must consider: (1) whether “class representatives and class counsel have adequately represented the class, ” Fed.R.Civ.P. 23(e)(2)(A); (2) whether “the proposal was negotiated at arm's length, ” Fed.R.Civ.P. 23(e)(2)(B); (3) whether “the relief provided for the class is adequate, ” taking certain specified considerations into account, Fed.R.Civ.P. 23(e)(2)(C); and (4) whether “the proposal treats class members equitably relative to each other, ” Fed.R.Civ.P. 23(e)(2)(D). The Eighth Circuit has set forth its own largely overlapping test to ascertain the fairness and adequacy of a proposed settlement. See Swinton, 2019 WL 617791 at *5. For the reasons stated below, the Court finds that the proposed settlement is likely to satisfy these requirements.

         First, the Court is persuaded that the class representatives and class counsel have adequately represented the proposed settlement class. The Court is not aware of a conflict of interest or anything else that would render the Named Plaintiffs' representation of the proposed settlement class deficient. Upon review of the declarations submitted in this matter and their interactions with the Court, the Court also finds that Sauder Schelkopf LLC; Mazie Slater Katz & Freeman, LLC; Gustafson Gluek PLLC; and Migliaccio and Rathod LLP (“Class Counsel”) are qualified, experienced, and able to conduct the litigation. Accordingly, the first factor weighs in favor of approving the proposed settlement on a preliminary basis.

         Second, the Court finds that the proposed settlement was the result of arms-length negotiation. As noted above, it was negotiated between experienced, capable counsel knowledgeable in complex class action litigation. And an experienced, capable mediator was also involved. [See ECF No. 74 at 15 (representing “mediation was conducted by Bradley A. Winters, an experienced and respected JAMS mediator”).] In these circumstances, the second factor weighs in favor of approving the proposed settlement on a preliminary basis. See, e.g., In re GSE Bonds Antitrust Litig., 2019 WL 5848960 at *2; Stephens v. Farmers Rest. Grp., No. 17-CV-1087 (TJK), 2019 WL 2550674, at *6 (D.D.C. June 20, 2019).

         Third, the Court finds that the proposed settlement provides adequate relief to the proposed settlement class members. Rule 23(e)(2)(C) instructs the Court to consider the following to determine whether the proposal provides adequate relief:

(i) the costs, risks, and delay of trial and appeal;
(ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims; [and]
(iii) the terms of any proposed award of attorneyʹs fees, including timing of payment

Fed. R. Civ. P. 23(e)(2)(C).[4]

         As noted above, the Settlement Agreement provides members of the proposed settlement class the opportunity to submit claims and be reimbursed by Honda for certain towing, oil change, and diagnostic costs incurred due to the manifestation of the oil dilution defect in the Class Vehicles. The Court acknowledges that historically few class members file claims in cases that use claims-making processes such as the one contemplated by the Settlement Agreement and that such distribution methods generally bring little benefit to class members. See In re MyFord Touch Consumer Litig., 3:13-cv-03072- EMC, ECF No. 449 at 3 (N.D. Cal. June 14, 2018) (collecting cases); see also 4 Newberg § 12:17 (“The theoretical and empirical evidence suggest[s] that few class members file claims in most cases . . . .”). There is no indication that claims rates here would outpace low claims rates in similar cases. But the additional year of Powertrain Limited Warranty that Honda agrees to make available to all members of the proposed settlement class would provide additional value to the class, as would the Product Update that Honda would provide to Vehicles registered in cold-weather states.

         And while Class Counsel maintains that the Named Plaintiffs' legal positions are strong, they recognize the inherent risks and costs of continuing to litigate further, particularly as Honda continues to disclaim liability. [See ECF No. 74 at 12.] Class Counsel acknowledges that consumer class actions generate complex legal issues that are heavily contested both throughout the country and within the Eighth Circuit. (Id.) In addition, proving liability and damages would require experts and extensive Daubert briefing. (Id.) The Court agrees that the risks of proceeding to trial are substantial. And the parties are likely to appeal any rulings issued on the complex legal issues implicated by this case, further increasing litigation costs and delaying the distribution of relief to members of the proposed settlement class.

         Having analyzed the value of the settlement offer to members of the proposed class-paying particular attention to the effectiveness of the method of distributing relief and the costs, risks, and delay of trial and appeal-the Court is satisfied with the proposal for attorneys' fees vis-à-vis the settlement offer. Honda has agreed not to oppose Class Counsel's request for up to $850, 000 in attorneys' fees and expenses. [ECF No. 74 at 6-7.] This sum would not be deducted from a finite settlement fund and therefore would not deduct from any award to the proposed settlement class. (See Settlement Agreement ¶ 5.4.) Further, the Settlement Agreement provides that this sum will be paid out when an order and judgment approving the Settlement Agreement becomes final, see Settlement Agreement ¶¶ 1.7, 1.8 5.3, 5.4, and so the Court finds nothing problematic with “timing of payment, ” Fed.R.Civ.P. 23(e)(2)(C)(iii). Accordingly, the Court finds that the proposed settlement provides adequate relief to the members of the proposed settlement class. This factor therefore also weighs in favor of approving the proposed settlement on a preliminary basis.

         Fourth, the Court finds that the “proposal treats class members equitably relative to each other.” Fed.R.Civ.P. 23(e)(2)(D). “There is no requirement that all class members in a settlement be treated equally.” Swinton, 2019 WL 617791, at *8. Here, members of the proposed settlement class with Class Vehicles registered in 21 cold-weather states will receive Product Updates while members with Class Vehicles registered in other states will not. But Class Counsel represents that Class Vehicles in cold-weather states are more likely to manifest the oil dilution defect. [See ECF No. 74 at 6.] The Court therefore finds that this differing approach is fair because “[t]he ...


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