Case Number: BC453480    Hearing Date: July 16, 2014    Dept: 58

Preliminary Approval of Class Action Settlement
Department 58
Hon. Rolf M. Treu

Case Name: Norton v. Ford of Santa Monica, Inc., et al.
Case No.: BC453480

Hearing: July 16, 2014

TENTATIVE RULING

The Court:

(1) Grants preliminary approval of the settlement as fair, reasonable and adequate;
(2) Appoints Christopher Barry of Rosner, Barry & Babbitt, LLP as Class Counsel;
(3) Appoints Plaintiff Stephen Norton as Class Representative;
(4) Approves the proposed notice and method of providing notice; and
(5) Approves the settlement schedule.

SUMMARY

On 1/21/11, Plaintiff Stephen Norton filed this proposed class action against Defendants Ford of Santa Monica, Inc. dba Subaru of Santa Monica; Chase Auto Finance Corp.; and Chrysler Group LLC arising out of deceptive fees charged for the purchase of used vehicles; Plaintiff also asserts individual claims arising out of alleged defects of the vehicle Plaintiff purchased on 5/31/09.

On 2/16/11, Chrysler removed this action to federal court. On 4/29/11, this action was remanded to this Court. On 7/28/11, Plaintiff filed a First Amended Complaint after the Court sustained Chrysler’s demurrer with leave to amend. On 9/14/11, the Court denied a petition to compel arbitration filed by Ford and JPMorgan Chase Bank, N.A. (erroneously sued as Chase Auto Finance Corp.); overruled a demurrer filed by Ford, and sustained a demurrer filed by Chrysler with leave to amend. On 9/26/11, Plaintiff filed a Second Amended Complaint.

The SAC asserts two class claims arising out fees improperly charged to purchasers of used vehicles: California Tire Fees despite there being no new tires on the vehicles (SAC ¶ 2) and Optional DMV Electronic Filing Fee despite the purchasers not being informed or having agreed thereto (SAC ¶ 3). As to the California Tire Fees, Plaintiff asserts COAs for (1) violation of the Consumer Legal Remedies Act (“CLRA”), (2) violation of the Automobile Sales Finance Act (“AFSA”), (3) unfair business practices, and (4) violation of Public Resources Code § 42885. As to the Optional DMV Electronic Filing Fee, Plaintiff asserts COAs for (5) violation of the CLRA, and (6) unfair business practices. The 7th COA for violation of the CLRA, 8th COA for unfair business practices, and 9th COA for violation of the Song-Beverly Warranty Act are based on Plaintiff’s individual claim arising out of his 5/31/09 purchase of a used vehicle.

On 2/23/12, Plaintiff filed a notice of partial settlement with Chrysler: Plaintiff voluntarily dismissed Chrysler and the 9th COA with prejudice on 3/19/12. On 12/28/12, the Court of Appeal affirmed the Court’s denial of the petition to compel arbitration; remittitur issued on 3/1/13. On 5/9/13, the Court denied a renewed petition to compel arbitration and a motion to strike filed by Ford and Chase. On 3/18/14, Plaintiff filed a notice of settlement of the class claims. On 7/2/14, Plaintiff dismissed the 7th through 9th COAs with prejudice.

SETTLEMENT CLASS DEFINITION

Tire Fee Settlement Class:
All persons who, between 1/21/07 and 1/21/11, purchased a vehicle from Ford, for personal use, signed a Retail Installment Sale Contract (“RISC”) for the vehicle, and were charged “California Tire Fees” on their RISC for one or more used tires.

DMV Fee Settlement Class:
All persons who, between 1/21/07 and 1/21/11, purchased a vehicle from Ford, for personal use, signed a Retail Installment Sale Contract (“RISC”) for the vehicle, and who Ford automatically included a charge on the RISC for the “Optional DMV Electronic Filing Fee.”

TERMS OF SETTLEMENT AGREEMENT

A copy of the executed Settlement Agreement is attached as Exhibit A to the Appendix of Exhibits. Its essential terms are as follows:

• Ford will pay $126,965 for the Tire Fee Settlement Class (¶ 2.30) and $28,500 for the DMV Fee Settlement Class (¶ 2.31). The Settlement Funds will be distributed equally to the members of each class who do no opt out: each Tire Fee Settlement Class members’ share is not to exceed $365 and each DMV Fee Settlement Class members’ share is not to exceed $10. ¶ 9.3.

• Class Counsel will seek an award of attorneys’ fees and costs not to exceed $135,000 to be paid by Ford. ¶ 10.1.

• Plaintiff will seek a maximum of $2,500 from each Settlement Class Fund as an incentive award. ¶¶ 8.4(ii), 9.3, 10.2. Plaintiff will also receive $20,000 in settlement of his individual claims. ¶ 8.4(i).

• Costs of administration will be paid by Ford (¶ 6.3), and the parties propose Kurtzman Carson Consultants LCC as the settlement administrator (¶ 2.4).

• Any unclaimed amounts of each Settlement Class Fund will be paid to a non-profit organization or foundation, with the parties agreeing to designate Consumers for Auto Reliability and Safety. ¶¶ 9.9-9.10.

• Upon final approval of the settlement, all class members (except those who opt out) shall be deemed to release and discharge Ford and JPMorgan (and any of their former and present parents, subsidiaries, and affiliates, and their officers, directors, members, managers, heirs, employees, partners, shareholders and agent, and any other successors, assigns, or legal representatives) from any and all claims of every nature and description, whether known or unknown, arising from or related to the claims asserted in this action. ¶¶ 12.2-12.3.

ANALYSIS OF SETTLEMENT AGREEMENT
A. Does a Presumption of Fairness Exist?

a. Agreement reached through arms-length bargaining? Yes. The parties attended a mediation session with Bruce Friedman and subsequently continued to negotiate terms of the settlement through Mr. Friedman and between the parties. Barry Decl. ¶ 5.

b. Investigation and discovery sufficient to allow counsel and the court to act intelligently? Yes. This action was actively litigated and both sides conducted sufficient discovery to intelligently evaluate the strengths and weaknesses of the case. Barry Decl. ¶¶ 4-5.

c. Counsel is experienced in similar litigation? Yes. Plaintiff’s counsel has been class counsel in various AFSA cases. Barry Decl. ¶ 17. Based on this experience, Class Counsel is well-qualified to represent the class.

d. Conclusion: the settlement is entitled to a presumption of fairness.

B. Is the settlement fair, adequate and reasonable?

a. Strengths and weaknesses of Plaintiff’s case.

This case was filed on behalf of persons who purchased used vehicles and were charged California Tire Fees despite no new tires being on the vehicles and Option DMV Electronic Filing Fees despite the purchasers not being informed.

There were several potential litigation risks: Defendants vigorously disputed Plaintiff’s theory and argued that there were minimal or not actual damages. Additionally, there were risks of the Court not awarding rescission of the RISCs or imposing offsets for the use of vehicles if rescission were granted, and the risk of class certification being denied or later decertified.

b. Amount offered in settlement.

The settlement provides for a Tire Fee Settlement Fund of $126,965 and a DMV Fee Settlement Fund of $28,500. There are believed to be 341 members of the Tire Fee Settlement Class and 2,600 members of the DMV Fee Settlement Class. Barry Decl. ¶ 6. Each member of the Tire Fee Settlement Class will receive $365 and each member of the DMV Fee Settlement Class will receive $10. This is a complete reimbursement for any out-of-pocket damages the members of the Settlement Classes may have incurred. Barry Decl. ¶ 9.

The other relevant terms of the settlement include the attorneys’ fee provision and the proposed incentive award. Class Counsel will seek up to $135,000 in attorneys’ fees and costs. Prior to the final fairness hearing, Class Counsel must submit briefing and supporting declarations regarding a lodestar calculation of the attorneys’ fees and costs sought. At the time of final approval, the Court will determine whether the attorneys’ fees sought are reasonably related to the work performed before approving any fee award. Garabedian v. Los Angeles Cellular Telephone Co. (2004) 118 Cal.App.4th 123, 128.

Under the settlement, Plaintiff will seek a maximum incentive award of $2,500 per Settlement Class. This is approximately 2% of the Tire Fee Settlement Fund and 8.8% of the DMV Fee Settlement Fund, which is on the higher end of incentive awards. Plaintiff must still demonstrate his efforts on behalf of the class. Class Counsel submits that Plaintiff has diligently prosecuted this case, expending over 25 hours in participating in litigating this action. Barry Decl. ¶ 15. While this issue need not be determined at this time, prior to the final fairness hearing, Plaintiff must submit a declaration attesting to why he should be entitled to the incentive awards. The California Court of Appeal has made it clear that trial courts should not sanction enhancement awards of thousands of dollars with “nothing more than pro forma claims as to ‘countless’ hours expended, ‘potential stigma’ and ‘potential risk.’ Significantly more specificity, in the form of quantification of time and effort expended on the litigation, and in the form of reasoned explanation of financial or other risks incurred by the named plaintiffs, is required in order for the trial court to conclude that an enhancement was “necessary to induce [the named plaintiffs] to participate in the suit….” Clark v. American Residential Services LLC (2009) 175 Cal.App.4th 785, 806-07.

c. Extent of discovery completed.

As noted earlier, the extent of investigation and discovery was sufficient to allow the parties to reach an intelligent settlement.

d. Views of Counsel.

Plaintiffs’ counsel believes the terms of the settlement are fair and reasonable. Barry Decl. ¶¶ 10-11.

e. Conclusion

The Court finds the settlement agreement fair, adequate and reasonable from a preliminary standpoint. The motion demonstrates that the settlement is entitled to a presumption of fairness and sets forth the disputed nature of the class claims and the challenges to proceeding on a class basis.

C. Conditional Class Certification?

Although a detailed analysis of the elements required for class certification is not required, it is advisable to review each element when a class is being conditionally certified. Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591, 620, 622-627. The trial court can appropriately utilize a different standard to determine the propriety of a settlement class as opposed to a litigation class certification. Specifically, a lesser standard of scrutiny is used for settlement cases. Dunk v. Ford Motor Co. (1996) 48 Cal.App.4th 1794, 1807 fn. 19. With the Tire Fee Settlement Class consisting of 341 members and the DMV Fee Settlement Class consisting of 2,600 members and after reviewing the Settlement Agreement, the Court concludes that (for purposes of settlement) Plaintiff has established the typicality, numerosity, ascertainability, commonality, adequacy, and superiority elements. Therefore, conditional class certification is appropriate.

D. Notice to Class of Final Approval Hearing

a. Required Contents of Notice. Attached as Exs. B-C to the Appendix of Exhibits.

i. Class definition? Yes__X__. No____.
ii. Description of substantive issues and proceedings? Yes__X__. No____.
iii. Neutral description of the proposed settlement? Yes__X__. No____.
iv. Amount of attorneys’ fees and expenses? Yes_X___. No____.
v. Amount of enhancement fee? Yes__X__. No____.
vi. How to file a Claim? Yes__X__. No___.
vii. Right to opt-out of the settlement class? Yes__X__. No____.
viii. Right to appear by counsel and how to object to the settlement? Yes__X__. No__
ix. Consequences of remaining a settlement member? Yes__ X __. No____.
x. Identity of plaintiffs’ and defendant’s counsel? Yes_X___. No____.
xi. Date, time and place of the fairness hearing? Yes__X__. No____.

Fields as to the fairness hearing to be completed consistent with the Court’s ruling herein.

b. Method of Notice:

The settlement provides for the following procedures by the claims administrator to notify the class: 1) obtain current addresses of known class members using the National Change of Address database to ensure that current addresses are in hand; and 2) mail the notices to the class members’ via first class mail to their current addresses, using reasonable efforts to ascertain current addresses for each notice returned as undeliverable and re-mailing the notice. These procedures are sufficient to ensure reasonable notice to the class members.

c. Proposed Timeline of Settlement Procedures:

i. Defendant provides Claims Administrator with class list by 7/30/14 (within 14 days of preliminary approval);
ii. Claims Administrator mails the Notice Packet: by 8/13/14 (within 28 days of preliminary approval);
iii. Deadline for opt-out request or objection: 9/24/14 (70 days after preliminary approval);
iv. Deadline for Class Counsel to file Motion for Final Approval, Motion for Attorney Fees and any supporting documents: 10/8/14 (7 days before the final approval hearing);
v. Final Approval Hearing: 10/15/14 (91 days after preliminary approval).