The Third Circuit Court of Appeals has determined that the named plaintiffs in a case involving claims pertaining to an allegedly defective automobile sunroof design were not adequate representatives of a putative class alleging both past and future damages and dividing the settlement fund accordingly. Dewey v. Volkswagen Aktiengesellschaft, Nos. 10-3618, -3651, -3652, & -3798 (3d Cir., decided May 31, 2012).
The district court had certified a class with subcategories, based on automobile models and model years; the dividing line to establish the reimbursement and residual groups of claimants depended on the history of damage claims pertaining to the specific models and model years. The named plaintiffs were all part of the reimbursement group, which was composed of consumers that had sustained a “leakage” in the past. The residual group was unrepresented by any named plaintiff and had yet to experience damage. Part of the settlement agreement created an $8-million reimbursement fund that would first satisfy all claims made by members of the reimbursement group for reimbursable repairs. Any remaining funds would be used to satisfy “goodwill” claims consisting in part of the reimbursement claims made by members of the residual group. Members of the residual group challenged the certification asserting intra-class conflict.
The Third Circuit agreed that a fundamental intra-class conflict exists because “[a]ny dividing line on the spectrum of claims rates … would produce the same result—those above the line would, in general, have higher claims rates than those below the line. The problem with dividing the class without having any representation from one of the groups becomes clearly untenable in this case because of who drew the line.” The lawyers for the representative plaintiffs drew the line and could not “adequately represent the interests of the class members in the residual group.”
The lawyers for the representative plaintiffs drew the line and could not “adequately represent the interests of the class members in the residual group.”
The court reversed the certification order and remanded the matter suggesting that the plaintiffs could satisfy Rule 23(a)(4) in either of two ways: by doing away with the distinction between the two groups or dividing the groups into subclasses—with representative plaintiffs—that would be certified separately.