Lawyers Emerge As the Winners in Ford Rollover Settlement

August 3, 2009 - 4:46 AM
The practice of settling class action lawsuits by doling out discount coupons rather than cash has come under fire from tort reform activists and others who complain that such lawsuits mainly benefit the lawyers -- and even the companies being sued -- at the expense of their clients.
San Francisco (AP) - The lawyers were paid millions of dollars. Ford Motor Co. put behind it a costly lawsuit connected to the Explorer rollover scandal of the 1990s. And the judge closed out a complex case that clogged the Sacramento County Superior Court's overburdened calendar for more than seven years.
 
Everyone seemingly got some tangible benefit -- except for nearly all of the 1 million consumers covered by the class action lawsuit filed in their name. None of the consumers got money, only discount coupons toward new Ford purchases. Few used them.
 
The practice of settling class action lawsuits by doling out discount coupons rather than cash has come under fire from tort reform activists and others who complain that such lawsuits mainly benefit the lawyers -- and even the companies being sued -- at the expense of their clients.
 
Sacramento County Superior Court Judge David De Alba authorized the settlement of a class action that lawyers argued could be worth as much as $500 million to people who owned Ford Explorers during the 1990s.
 
In exchange for dropping the lawsuit that alleged rollover problems unfairly diminished the resale value of Explorers, Ford customers could receive a $500 discount coupon toward the purchase of a new SUV or a $300 coupon to buy another Ford vehicle. Consumers had until April 29, 2008 to apply for the coupons.
 
De Alba awarded the lawyers $25 million in fees and expenses after presiding over a 50-day trial without a jury in 2007. The case settled before the judge reached a verdict.
 
De Alba declined comment.
 
A report filed with the court in June showed just 75 coupons have been redeemed for a combined $37,500.
 
"This coupon is valueless to me," said Stephen Webber, a Glendale lawyer who owns a 1998 Explorer and qualified for the discounts. "It did nothing to improve the safety of my vehicle, and I have no intentions of buying a new one."
 
The lawyers who represented Webber and the million other SUV owners argue that they did the best they could with a complicated case vigorously fought by Ford's phalanx of high-priced attorneys. They said that in the fall of 2007 when the case settled, there was a chance Ford would file for bankruptcy, wiping out the case and leaving consumers with nothing.
 
In a statement e-mailed to The Associated Press by the class action firm Lieff, Cabraser, Heimann, & Bernstein on behalf of the five firms who sued Ford, the lawyers noted that they also forced Ford to stop touting the Explorer's safety features and make a $950,000 donation to nonprofit auto-safety groups, which they said benefits their clients.
 
They said they spent $6 million of their own money and thousands of hours fighting Ford.
 
"Class counsel were surprised and, of course, disappointed by the low redemption rate which undoubtedly was affected by the near-collapse of the economy just as the period to redeem vouchers began," the lawyers said. "The real story here is Ford's failure to take responsibility for producing a vehicle, the 1991-2001 model year Explorer, that has killed hundreds of consumers over the past 18 years."
 
Ford spokeswoman Kristen Kinley said the settlement prevented the company from discussing the case.
 
"We are pleased to have finally settled this case with the plaintiffs and to finally put this behind us," Kinley said. "We are also pleased to hear that some people took advantage of the vouchers to purchase a new Ford Explorer."
 
Lawyers, judges and legal scholars have long wrangled with how to fairly compensate large number of people who suffered harm that is worth very little individually but adds up in the aggregate.
 
Earlier this year, for instance, a Los Angeles Superior Court judge ordered that a class action lawyer receive 12,500 $10 gift certificates for winning the discount for the roughly 43,000 customers of clothing retailer Windsor Fashions, which solicited personal information during credit card purchases. The judge later reversed himself and ordered the lawyer paid in cash.
 
Typically the rate of redemption of such coupon settlements is not tracked, and judges are only presented with anecdotal evidence of how fair such agreements are when considering approval.
 
But the judge in the Ford case, at the urging of several lawyers objecting to the original settlement, required the class action attorneys to file a report this year detailing the redemption rates. That report, which highlighted the dismal consumer participation, is expected to be considered by other judges pondering coupon settlements across the country.
 
The Ford case stands out even against the backdrop of endless debate over class action litigation where lawyers get multi-million-dollar paydays for settlements that have minimal value for most of their clients.
 
The Ralph Nader-founded Center for Auto Safety in Washington D.C. expressed outrage and tried to stop the settlement last year. Several others also urged the judge to withhold approval before dropping their opposition in exchange for the donation to auto safety nonprofits and the requirement that coupon redemptions be reported.
 
"The reality is that class members are almost totally irrelevant and the lawyers are in charge," said McGeorge Law School professor John Sims who worked for Nader's Public Citizen Litigation Group. "But this was a stupid case that included a requirement to buy a new car within a year."