Litigation

Coupon Settlement in Ford Explorer Class Action

By Bruce Nye

For months, I wanted to write a post on the Ford Explorer UCL litigation pending in Sacramento Superior Court, (Ford Explorer Cases, JCCP Nos. 4266 and 4270), but I never got around to it.  The cases -- discussed at some length at UCLPractioner.com -- were pretty ingenious.  The pitch was this:  Ford had failed to disclose the fact that Explorers had a high center of gravity, making them prone to roll over and therefore unsuitable as family vehicles.  Every single owner was allegedly damaged by the difference between the value of the vehicle if it was as advertised, and its true value (an amount estimated at $1,000 per vehicle).  The plaintiffs got a multi-state class certified, and trial was underway earlier this year.

Then, not long after the plaintiffs rested, the parties announced a settlement without announcing the details.  Now we have the details, and guess what?  It's a coupon settlement -- the bane of class litigation.  Each member of the class gets a coupon worth up to $500 toward a new Explorer or other Ford -- transferable only between family members and expiring after a year -- in this purported "$25 million settlement."  Oh, and the attorneys' fees?  "Up to" another $25 million.

Legal interests aside, and just examining the social interests involved, coupon settlements are problematic in general, but even more so in cases involving consumer vehicles.  In general, the coupons don't get used.  I've seen all kinds of figures on how many coupons get redeemed in coupon settlements, and all the figures have been very, very low.  So any coupon settlement is worth, at most, the amounts actually redeemed.

But for automobiles and other big ticket items, the situation for the consumer is even worse.  There is not a vehicle manufacturer  in the United States who wouldn't pay $500 just to get a willing buyer into a showroom.  So the $500 should really be viewed as a marketing expense for Ford, not a damages payment.

CalBizLit  has no views on the merits of the Ford Explorer Cases, nor do I have any idea how the judge was leaning at trial;  obviously, if the case was tanking, it behooved their counsel to get whatever deal they could.  But this looks like a settlement where the winners will be the lawyers.  For once in my life, I find myself agreeing with the Nader crowd.  According the the Sacramento Bee, Clarence Ditlow of the Center for Auto Safety weighed in as follows:  "They should pay the lawyers in coupons."

Full post as published by CalBizLit on December 04, 2007 (boomark / email).