Court Rejects GM Settlement on Value of Pickup Trucks : Autos: Decision on ‘sidesaddle’ gas tank design is hailed by consumer groups, which still hope for a recall.
In a decision hailed by consumer groups, a federal appeals court in Pennsylvania on Monday rejected a class-action settlement that would have given the owners of an estimated 5 million General Motors Corp. pickup trucks $1,000 coupons toward the purchase of new trucks.
The 18-month-old settlement has been attacked by critics as a “sophisticated marketing program” to sell trucks, and for failing to fix allegedly defective gas tanks that have been blamed for more than 150 deaths and were once the target of a government recall threat.
Consumer advocates said they hope the appellate court decision could eventually lead to a recall and modification of the trucks.
“We are elated by this,” said Joan Claybrook, president of Public Citizen, a Washington-based consumer group. “We think this sends a strong message to plaintiff attorneys and defendants (in class-action suits) that cutting out the consumer will not be tolerated by the courts.”
GM officials were not available for comment Monday. However, in the past GM has defended the safety of the “sidesaddle” fuel tanks installed on trucks built between 1973 and 1987.
The tanks are mounted on the outside of the truck body, making them vulnerable to explosion in a side impact, according to various safety and consumer groups. GM has since abandoned the design.
In December, Transportation Secretary Federico Pena dropped a recall investigation of the gas tanks in return for a GM contribution of $51 million to a highway safety program. Pena said the agreement, which was harshly attacked by consumer advocates, avoided costly litigation and saved lives through improved safety.
In 1993, GM agreed to give away the coupons to settle a federal suit in Philadelphia filed by truck owners, who claimed the tanks’ design and other lawsuits brought by accident victims had reduced their vehicles’ value. The settlement combined 36 class-action suits filed nationwide.
In throwing out the 1993 settlement, the U.S. 3rd Circuit Court of Appeals in Philadelphia said the $1,000 coupon will not help “less wealthy” truck owners unable to afford new GM trucks. The appeals court also found that the federal judge who approved the settlement overestimated the cost of the coupon program, which was estimated at between $1.9 billion and $2.8 billion at the time.
“It had all the earmarks of a sweetheart deal in which the lawyers got millions and the consumer got virtually nothing,” said Clarence Ditlow, director of the Center for Auto Safety. He said the plaintiffs’ lawyers were to be paid $9.5 million.
The coupon program had also been challenged in a Texas lawsuit, which now is before the Texas Supreme Court.
The Philadelphia court decision does not affect the December decision by the federal government to drop its recall investigation. But some consumer advocates say the rejection of the coupon program could lead to a court-ordered recall.
Ditlow said the class-action cases will now be returned to District Court. A new settlement can be reached or the cases can be litigated, which would reopen the issue of whether the auto maker should be forced to repair the vehicles.
“It sends a message to GM that the pickup truck issue is not behind it,” Ditlow said. “The class action may ultimately do for the American public what safety regulation did not.”
The rejection of the GM coupon program comes less than two weeks after a federal judge in New Orleans threw out a class-action settlement involving Ford Motor Co. and the company’s Bronco II sport utility vehicle. The Bronco II has been the target of more than 300 lawsuits over what many claim is a design flaw that makes the vehicle vulnerable to turning over.
In a settlement reached last month, Bronco II owners would get a safety package from Ford consisting of a video on safe driving and a warning sticker, as well as an owner’s manual and free vehicle inspections--but no cash. However, the plaintiffs’ lawyers asked for $4 million in legal fees.
U.S. District Judge Morey L. Sea rejected the settlement, saying the deal provided none of the relief sought by the owners and created at least the appearance that the plaintiffs’ lawyers sold out to Ford. Ford, which would have paid the fees, and the attorneys all denied any connection between legal fees and settlement terms.
Sanchez reported from Los Angeles, Nauss from Detroit.
