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IN RE GMC PICKUP TRUCK FUEL TANK PRODS. LIAB. LITI

December 16, 1993

In re: General Motors Corporation Pickup Truck Fuel Tank Products Liability Litigation

Yohn


The opinion of the court was delivered by: WILLIAM H. YOHN, JR.

Yohn, J.

 The parties in this multidistrict litigation have requested final approval for a proposed class settlement. For the reasons explained herein, the court approves the settlement as fair, reasonable and adequate.

 BACKGROUND

 Plaintiffs, in these class action lawsuits *fn1" , are owners of 1973 to 1987 model year General Motors Corporation ("GM") C/K full size pickup trucks and 1987 to 1991 GM R/V pickup trucks with fuel tanks located outside the frame rails. Plaintiffs claim this is a design defect increasing the danger of a post collision fire. The consolidated amended class action complaint alleges federal claims under the Lanham Trademark Act, 15 U.S.C. § 1125(a), and the Magnuson-Moss Warranty Act, 15 U.S.C. § 23(d)(1), as well as various state law claims including strict liability, fraud, unfair trade practices and breach of contract. It seeks compensatory and punitive damages for economic losses as well as injunctive relief. The complaint specifically excludes all claims for personal injury and wrongful death.

 On July 19, 1993, plaintiffs filed a motion for authorization to disseminate notice to class members of the proposed settlement. In Pretrial Order No. 7, the court approved the motion to disseminate notice since the terms of the proposed settlement were sufficiently fair, reasonable and adequate for that purpose. Pretrial Order No. 7 also certified the class for settlement purposes only. The settlement class consists of all persons or entities who purchased in the United States (except for the residents of Texas) and are owners as of July 19, 1993, of a 1973 to 1987 GM C/K full size pickup trucks or 1987 to 1991 GM R/V pickup trucks.

 Plaintiffs subsequently filed an application for final approval of the class action settlement on September 15, 1993. Pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, the court conducted a hearing concerning the fairness of the proposed settlement on October 26, 1993. At that hearing, the court heard from plaintiffs' class counsel, GM and members of the settlement class on the fairness, reasonableness and adequacy of the settlement.

 THE SETTLEMENT2

 Under the agreement of settlement, members of the settlement class will receive, on request, a $ 1,000 certificate toward the purchase of a new GMC or Chevrolet light duty truck. (Agreement P 11A.). Settlement class members requesting a certificate that ultimately choose not to redeem it can transfer the full value of the certificate to either a family member or to a third party purchaser of the vehicle covered by the settlement. (Agreement PP 11E., 11F. and 11G.).

 After negotiating the best possible deal for a new light duty truck, the holder of the $ 1,000 certificate will present the certificate to the dealer. (Agreement P 11H.). The $ 1,000 certificate must be redeemed within 15 months of its availability. (Agreement P 11B.). The $ 1,000 certificate does not require settlement class members to trade-in their current vehicle in order to use the certificate toward the purchase of a new truck. (Agreement P 11C.) The $ 1,000 certificate can also be used in conjunction with any other GM incentive program. (Agreement P 11H.). Moreover, the $ 1,000 certificate can be used toward the down payment of an eligible light duty truck. (Agreement P 11D.).

 A settlement class member can also sell the certificate alone to a third-party, at which point the certificate becomes worth $ 500. (Agreement P 11I.). The new $ 500 certificate is non-transferable and must be used within the original 15 month redemption period. (Agreement P 11I(3)). The $ 500 non-transferable certificate cannot be used in conjunction with any other GMC or GMAC incentive offer. (Agreement P 11I(4)).

 The settlement resolves and dismisses claims arising from the alleged defect in the fuel tank placement. (Agreement P 8 and 16). However, the settlement does not dismiss any claims for personal injury or death. (Agreement P 8 and 16). Also, the settlement does not affect the rights of settlement class members to participate in any future actions GM may undertake as a result of the pending National Highway Traffic Safety Administration ("NHTSA") proceedings. (Agreement P 17).

 DISCUSSION

 Courts favor the resolution of disputes through voluntary compromise. See Williams v. First National Bank, 216 U.S. 582, 595, 30 S. Ct. 441, 54 L. Ed. 625 (1910); Petty v. General Accident Fire & Life Assur. Corp., 365 F.2d 419, 421 (3d Cir. 1966). Therefore, it is well established that courts strongly encourage settlements. Bell Atlantic Corp. v. Bolger, 2 F.3d 1304, 1314 n.16 (3d Cir. 1993).

 Rule 23(e) of the Federal Rules of Civil Procedure requires court approval of any class action settlements:

 
A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such a manner as the court directs.

 Fed.R.Civ.P. 23(e). The approval of a proposed class settlement lies within the sound discretion of the court. See Walsh v. Great Atlantic & Pacific Tea Co., 726 F.2d 956, 965 (3d Cir. 1983); Girsh v. Jepson, 521 F.2d 153, 156 (3d Cir. 1975). The approval or disapproval must be based on the proposed settlement as a whole and as submitted. The settlement must stand and fall as a whole because the court may not re-write the agreement. Davies v. Continental Bank, 122 F.R.D. 475 (E.D.Pa. 1988).

 The court's function in approving the proposed class settlement is to determine whether the proposed settlement is "fair, adequate and reasonable" and in the best interests of the class members. Walsh, 726 F.2d at 965. When making this determination, the court must find that the settlement is substantively reasonable compared to the likely rewards of litigation. Shlensky v. Dorsey, 574 F.2d 131, 147 (3d Cir. 1978); Fisher Brothers v. Cambridge-Lee Industries, Inc., 630 F. Supp. 482, 487 (E.D.Pa. 1985). The court should not substitute its judgment for that of counsel who negotiated the settlement. Sommers v. Abraham Lincoln Federal Savings & Loan Ass'n, 79 F.R.D. 571, 576 (E.D.Pa. 1978).

 The Third Circuit has identified the following nine factors as relevant to determining the fairness of a proposed settlement:

 
(1) the complexity, expense and likely duration of the litigation;
 
(2) the reaction of the class to the proposed settlement;
 
(3) the stage of the proceedings and the amount of discovery completed;
 
(4) the risks of establishing liability;
 
(5) the risks of establishing damages;
 
(6) the risks of maintaining the class action through the trial;
 
(7) the ability of the defendants to withstand a greater judgment;
 
(8) the range of reasonableness of the settlement fund in light of the best possible recovery; and,
 
(9) the range of reasonableness of the settlement fund to a possible recovery in light of the attendant risks of litigation.

 Complexity, Expense and Duration of Litigation

 If the court were to disapprove the proposed class settlement, the complexity, expense and likely duration of the litigation would be mammoth. The litigation would be complex because sub-classes may need to be developed for various groups of truck owners and for various states who have differing state law applicable to the state law claims. Moreover, if the court dismissed the Lanham Act claim, it conceivably would have to remand some actions to state court because of a lack of jurisdiction. *fn3" Such litigation would create very substantial expenses for the parties as well as the judicial system. There would also be substantial delay in the recovery, if any, by the owners of already quite old vehicles if the proposed class settlement were not approved. Given the period for additional discovery, issues of class action certification, motions for summary judgment, trial of approximately three to four weeks, post trial motions and any appeals, it may be years before the litigation would be concluded. In sum, the court finds that this factor weighs in favor of the approval of the proposed class settlement.

 Reaction of the Class

 Pursuant to Pretrial Order No. 7, an individual notice of the proposed class settlement was mailed at GM's expense to each of the approximately 5.7 million class members. (See Aff. of Karen M. Surma, Ex. 1 to GM's Mem. in Resp. to Objections to Proposed Settlement). In response to this notice, approximately 6,450 pickup truck owners objected to the proposed class settlement. In addition, approximately 5,203 pickup truck owners elected to opt-out of the settlement class.

 The Court of Appeals for the Third Circuit has held that silence may be construed as constituting tacit consent to the settlement agreement and strongly favors approval of the settlement. Bell Atlantic Corp., 2 F.3d at 1313 n.15. In this instance, the infinitesimal number of truck owners who have either objected to or sought exclusion from the settlement is less than one-fourth of one percent. Thus, the court finds that the approval or silence of more than 99% of the class members demonstrates that the vast majority of the class members favor the settlement. Moreover, approximately 44,800 owners have already designated family members to whom their $ 1,000 certificate should be assigned. The fact that so many people desire to transfer their certificate is affirmative proof that the vast majority of the class members approve of the settlement. Therefore, the court finds that the reaction of the class members strongly favors approval of the settlement.

 Stage of Proceedings and Discovery

 The parties signed the settlement agreement on July 19, 1993, approximately eight months after the first class action lawsuit was filed. Some objectors argue that the settlement is premature because class counsel have not performed sufficient discovery that would allow them to act reasonably with respect to negotiating the settlement. (Owens Objectors Mem. at 21; Jenkins Objectors Mem. at 7). However, the court does not find the objectors' argument to have a substantial bearing on this factor.

 In this instance, class counsel reviewed extensive discovery on the same issues of product defect that was previously conducted in the various personal injury actions that have been litigated throughout the country. As a result of these efforts, class counsel represent that they have reviewed well over 300,000 pages of documents, over 100 volumes of deposition testimony, numerous volumes of trial testimony and several dozen videotapes of testimony and crash testing. (Plaintiffs' Application for Final Approval of Class Action Settlement at 11). Such discovery has always been available to the objectors' counsel. Also, class counsel reviewed many records in connection with NHTSA's investigation into the safety of the fuel tank location as well as its own investigation into the loss of value of the trucks. Even if it can be argued that the parties entered into the settlement agreement early in the proceedings, it appears that class counsel performed substantial discovery, reviewed even more extensive discovery that had been conducted in prior similar litigation, and considered all of this discovery when negotiating the proposed class settlement. Thus, the court finds that this factor weighs in favor of approval of the settlement.

 Risks of Establishing Liability

 Liability in this case is hotly contested and the risks of establishing liability are clearly substantial. At the October 26, 1993, fairness hearing, class counsel gave an example of how risky establishing liability could be by pointing to the fact that of seven personal injury cases that have proceeded to trial against GM for accidents that occurred in trucks with fuel tanks outside the frame rails, plaintiffs have won four and GM has won three. Convincing a jury of liability in these cases, where no personal injury or death is present, would be even more difficult.

 In this instance, plaintiffs argue that the location of the fuel tanks outside the frame rails seems intuitively to constitute an inferior design because it increases a vehicles exposure to side impact collision fires. (Pls' Supp. Mem. at 34). In addition to this common sense argument, the trial testimony of Ronald Elwell in Mosely v. General Motors, No. 90V-6276 (Fulton County, GA 1993), presents evidence which would bolster the plaintiffs' effort in proving GM's liability. *fn4" Elwell testified that in September, 1983, he first learned that GM had conducted approximately 21 car-to-truck side impact crash tests in order to analyze the outside the frame rail fuel tanks. (Elwell Test. at 20). The tests occurred from 1981 to 1983. (Id.). When Elwell went to the test grounds, he viewed over twenty trucks that were smashed in the sides with split open fuel tanks. (Id. at 21-22). Elwell inferred that such testing would have required high level approval by GM because of the substantial expenditure involved in crashing such a large number of vehicles. (Id. at 31). Elwell further testified that Alexander McKeen, then GM's director of Engineering Analysis, informed him in September, 1983, that one of GM's in-house counsel had stated that because of the test results, GM had come to the conclusion that it could "no longer defend the product." (Id. at 24). Neither the parties nor the objectors presented any testimony or affidavits from McKeen or the unnamed in-house counsel, and presumably no such corroboration is available.

 Contrary to the above evidence which supports the establishment of liability, GM raises numerous legal and factual issues as to why liability would be difficult for the plaintiffs to establish. Legally, GM contends that plaintiffs' claims for economic losses are barred by applicable state statute of limitations and/or repose. (See GM Class Opp. Mem. Ex. 20 for summary of various state limitation periods). The statute of limitations creates a problem for plaintiffs because it generally begins to run when the defect or fraud is discovered or should have been discovered by exercising ordinary diligence. See Pocono Int'l Raceway, Inc. v. Pocono Produce, Inc., 503 Pa. 80, 468 A.2d 468, 471 (1983). GM argues that many plaintiffs had knowledge of the fuel tank location at or before the time they purchased their truck because GM had publicized the location of the fuel tanks in its C/K trucks with advertisements as early as 1973. Also, there has been publicity since the early 1980s on product liability litigation involving the same alleged defect. (GM Support Mem. Appx. Exs. 1-9, 11-14).

 A further legal problem facing many of the plaintiffs is that their Magnuson-Moss Warranty Act and implied warranty claims may fail for lack of vertical privity. Many class members are not in privity with GM because they purchased their trucks from independent dealers or other third parties. A lack of privity in many states can act as an absolute defense to actions for breach of implied warranty seeking economic damages. (See GM Supp. Mem. at 33-34 for states affected and the applicable case law).

 Factually, GM points out that statistical evidence does not support plaintiffs' claim that the fuel tank location on the C/K pickup trucks is unsafe. A statistical analysis presented by GM concerning side collisions in various scenarios involving fires, fatal injuries or major injuries, and combinations thereof demonstrates that the C/K pickup truck compares favorably with Ford and Dodge trucks of the same size for the same model years. (See, Lange Aff. PP 8-30 and Attach. B-G, Ex. 21 to GM's Supp. Mem.). In addition, GM points out that when it moved the fuel tanks on the C/K pickups from the right-passenger side to the left-driver side in 1981 that, contrary to general expectations, there was no change exhibited in the fatality rate for the vehicles. (Lange Aff. P 24 and Attach. J, Ex. 21 to GM's Support Mem.). Moreover, GM points to statistics concerning fatal fire rates of "twin vehicles." Twin vehicles are vehicles which essentially have the same design but are marketed under different company names. *fn5" GM's statistical analysis of twin vehicles demonstrates that it is not uncommon for one twin vehicle to have a much higher occurrence of fatal accidents than the other twin because of driver demographics. (Lange Aff. P 27, Ex. 21 to GM's Supp. Mem.). C/K pickup trucks do not have a twin vehicle relationship with Ford trucks; however, statistics indicate that the range of variation for fatal fire rates for these two types of trucks is comparable to that of vehicles with twins. *fn6" (Id.).

 In sum, the court finds that there appears to be a substantial risk in establishing liability because of the complexity and size of case along with the legal and factual problems raised by GM. Thus, the court concludes that this factor ...


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