DETROIT -- The U.S 9th Circuit Court of Appeals on Friday declined to approve a class-action settlement involving Ford Motor Co. and nearly 2 million owners and former owners of Focus and Fiesta vehicles with defective dual-clutch transmissions known as DPS6.
The judges vacated "final settlement approval" after Public Citizen, a nonprofit consumer advocacy group, challenged how much money would be awarded to consumers and the fact that the vast majority of the car owners would have received nothing.
The entry-level Fiesta and Focus vehicles, built over the past decade, have a history of costly repair for failing clutches and other problems. A Detroit Free Press "Out of Gear" investigation published in July revealed for the first time internal company documents and emails showing that the Dearborn automaker knew the transmissions were defective from the start and continued building and selling them anyway.
The court decision means the terms of the settlement must now go back to U.S. district court for "more searching inquiry."
The 2-1 decision questioned the district court's scrutiny of the class-action attorneys and the terms of the settlement, suggesting that the lawyers didn't adequately represent consumers but rather pushed through the settlement based on their own financial interests. The agreement called for them to get $8,856,000 in fees.
Ryan H. Wu, lead class counsel at Capstone Law, in April urged the Court of Appeals to keep the settlement. He declined to comment Friday.
Ford spokesman T.R. Reid said, "The proposed settlement was not changed by the opinion. As we have all along, we think the proposed settlement is fair. We look forward to the court's final action on the settlement."
Ford had agreed not to object to the plaintiffs attorneys' fees, the decision noted. The Ninth Circuit "has warned district courts to be alert for certain 'subtle signs that class counsel have allowed pursuit of their own self interests and that of certain class members to infect the negotiations.' At least two of those signs are present in this settlement, which includes a fee award disproportionate to the class recovery and a 'clear sailing' provision whereby (Ford) agreed not to object to the fee award sought by class counsel."
The judges questioned whether the court adequately scrutinized the calculation of the settlement amount. "The court adopted the estimate of class counsel's expert that the cash payments were worth around $35 million."
But that calculation was based on total payments to every eligible vehicle owner, while the actual claims rate was expected to be much lower, resulting in an even smaller payment by Ford, the judges noted.