Class Action

Carfax Class Action Defense Cases–West v. Carfax: Ohio Appellate Court Reverses Trial Court Approval Of Class Action Settlement Holding Notice To Class Members Was Inadequate

By Michael J. Hassen

Class Action Settlement Approved by Trial Court Warranted Reversal because Notice to Absent Class Members was not Best Practicable under the Circumstances Ohio Appellate Court Holds

In August 2004, plaintiff filed a putative class action in Ohio state court against Carfax and Center for Auto Safety alleging violations of Ohio’s Consumer Sales Practices Act (as well as common law claims) based on the central allegation that Carfax failed to advise consumers that its reports “did not contain all information regarding vehicles’ histories.” West v. Carfax, Inc., 2009-Ohio-6857, 2, ¶2 (Ohio App. December 24, 2009). (Around the same time, nine other class actions were filed against Carfax in seven other states. Id.) Two years later, in September 2006, plaintiff and Carfax entered into a proposed class action settlement; the trial court gave preliminary approval to the class action settlement the following month. Id., at 2, ¶3. The court order “gave preliminary approval to the proposed settlement, certified a class, appointed [plaintiff] the class representative, and ordered that class members be notified of the proposed settlement in the manner specified therein.” Id. Several objections were filed to the proposed class action settlement, including objections by a group of class members who sought received leave to intervene, and objections by co-defendant Center for Auto Safety. Id., at 3, ¶4. The fairness hearing concluded with the trial court ordering further settlement negotiations, id. A revised class action settlement was reached, which the trial court approved after rejecting objections to the settlement and denying a request to compel discovery. Id., at ¶¶5-6. A group of objectors appealed the trial court’s order, supported by an amicus brief filed by the State of Ohio. Id., at ¶6. The Ohio Court of Appeals reversed.

Appellants advanced three challenges to the class action settlement: (1) that the notice procedure failed to “take reasonable steps to provide individual notice to all class members”; (2) that the trial court failed to require disclosure of “the likely redemption rate, and, in particular, information about the number of claims made”; and (3) that the trial court erred in denying their motion to compel discovery as to claims information. West, at 3-4, ¶¶ 8-10. The appellate court first addressed whether the trial court abused its discretion in approving the notice procedures at issue, see id., at 4, ¶ 11. The Court explained that due process requires only that “individual notice be given all class members ‘who are identifiable through reasonable effort’” and that it be the “‘best notice practicable.’” Id., at 5, ¶13 (citations omitted). “In this case, the class consisted of all persons purchasing a Carfax Vehicle History Report directly from Carfax in the United States prior to the date the trial court gave its preliminary approval to the settlement agreement: i.e., October 27, 2006. This class may include people extending as far back as 1996.” Id., at ¶15. The settlement approved by the court required “(1) individual email notice to email addresses of purchasers in the Carfax database extending back to October 27, 2003; and, (2) publication, one time each, in Investor’s Business Daily and USA Today.” Id. According to defense attorneys, Carfax sent more than 1.77 million emails, 92% of which were not rejected, and the two publications had a combined circulation of 2.7 million readers per day. Id.

Full post as published by Class Action Defense Blog on January 12, 2010 (boomark / email).