Motor Generator - Dealership Actions
Filing
142
OPINION AND ORDER denying 138 Motion to Enforce Plans of Allocation with Regard to Reserve Fund Eligibility by Certain Automobile Dealership Settlement Class Members. Signed by District Judge Sean F. Cox. (JMcC)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
_________________________________
IN RE AUTOMOTIVE PARTS
ANTITRUST LITIGATION
MASTER FILE NO. 12-md-02311
HONORABLE SEAN F. COX
_________________________________
In re: AUTOMOTIVE WIRE HARNESSES
In re: INSTRUMENT PANEL CLUSTERS
In re: FUEL SENDERS
In re: HEATER CONTROL PANELS
In re: BEARINGS
In re: OCCUPANT SAFETY SYSTEMS
In re: ALTERNATORS
In re: ANTI-VIBRATION RUBBER PARTS
In re: WINDSHIELD WIPERS
In re: RADIATORS
In re: STARTERS
In re: AUTOMOTIVE LAMPS
In re: SWITCHES
In re: IGNITION COILS
In re: MOTOR GENERATORS
In re: STEERING ANGLE SENSORS
In re: HID BALLASTS
In re: INVERTERS
In re: ELECTRONIC POWERED STEERING
ASSEMBLIES
In re: AIR FLOW METERS
In re: FAN MOTORS
In re: FUEL INJECTION SYSTEMS
In re: POWER WINDOW MOTORS
In re: AUTOMATIC TRANSMISSION FLUID
WARMERS
In re: VALVE TIMING CONTROL DEVICES
In re: ELECTRONIC THROTTLE BODIES
In re: AIR CONDITIONING SYSTEMS
In re: WINDSHIELD WASHERS
In re: CONSTANT VELOCITY JOINT BOOTS
In re: SPARK PLUGS
In re: AUTOMOTIVE HOSES
In re: SHOCK ABSORBERS
In re: BODY SEALING PRODUCTS
Case No. 12-cv-00102
Case No. 12-cv-00202
Case No. 12-cv-00302
Case No. 12-cv-00402
Case No. 12-cv-00502
Case No. 12-cv-00602
Case No. 12-cv-00702
Case No. 12-cv-00802
Case No. 12-cv-00902
Case No. 12-cv-01002
Case No. 12-cv-01102
Case No. 12-cv-01202
Case No. 12-cv-01302
Case No. 12-cv-01402
Case No. 12-cv-01502
Case No. 12-cv-01602
Case No. 12-cv-01702
Case No. 12-cv-01802
Case No. 12-cv-01902
Case No. 12-cv-02002
Case No. 12-cv-02102
Case No. 12-cv-02202
Case No. 12-cv-02302
Case No. 12-cv-02402
Case No. 12-cv-02502
Case No. 12-cv-02602
Case No. 12-cv-02702
Case No. 12-cv-02802
Case No. 12-cv-02902
Case No. 12-cv-03002
Case No. 12-cv-03202
Case No. 12-cv-03302
Case No. 12-cv-03402
In re: INTERIOR TRIM PRODUCTS
In re: BRAKE HOSES
In re: EXHAUST SYSTEMS
In re: CERAMIC SUBSTRATES
In re: POWER WINDOW SWITCHES
In re: AUTOMOTIVE STEEL TUBES
In re: ACCESS MECHANISMS
In re: MINIMODULES
In re: SIDE DOOR LATCHES
Case No. 12-cv-03502
Case No. 12-cv-03602
Case No. 12-cv-03702
Case No. 12-cv-03802
Case No. 12-cv-03902
Case No. 12-cv-04002
Case No. 12-cv-04102
Case No. 12-cv-04302
Case No. 17-cv-13005
THIS DOCUMENT RELATES TO:
Automobile Dealership Actions
OPINION AND ORDER DENYING CERTAIN AUTOMOBILE DEALERSHIP
SETTLEMENT CLASS MEMBERS’ MOTION TO ENFORCE PLANS OF
ALLOCATION WITH REGARD TO RESERVE FUND ELIGIBILITY
Before the Court is Automobile Dealership Settlement Class Members’
(“Members”) Motion to Enforce Plans of Allocation with Regard to Reserve Fund Eligibility
(See ECF No. 590 in 12-102). The Members include 35 Dealerships under the Wolfe
Automotive Group, Kings Nissan & Kings Infiniti, and Young Automotive Group LLC
umbrella. Members seek to share in the pro rata payment from the reserve funds set
forth in the Plans of Allocation, including those Settlements in which they were not
Claimants. The Court heard argument on September 22, 2020, and at the conclusion of
the hearing, took this matter under advisement. For the reasons that follow the Court
DENIES the motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
Members purchased hundreds of thousands of new vehicles containing the
components parts at issue in this litigation. (See e.g. ECF No. 590 in 12-102, Attachment
1, Decl. of Emma K. Burton at ¶ 2). Although Members did not submit claims in the
Rounds 1 and 2 Settlements, they submitted valid Proofs of Claim prior to the January 21,
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2019, Round 3 Settlements filing deadline. (Burton Decl. ¶¶ 3-5). The Claims
Administrator processed and approved Members’ claims in Round 3.
According to the Declaration of Scott DiCarlo, the Senior Project Manager with the
Claims Administrator, (ECF No. 593 in 12-102), ,Round 1 Settlements resulted in
approximately $58 million from 23 separate settlement classes arising from settlements
with 10 defendants. (ECF No. 397 in 12-102). For example, Defendant Hitachi
Automotive Systems, Ltd.’s settlement involved nine parts and, therefore, nine different
settlement classes. (See e.g. Notice of Motion and Memorandum of Law in Support for
Preliminary Approval of Proposed Settlement with Hitachi Automotive Systems, Ltd.
and Provisional Certification of Settlement Classes, 2:12-cv-00702, ECF Doc. No. 35,
Attach. 1 - Settlement Agreement (E.D. Mich. Apr. 3, 2015). Moreover, the class periods
identified for each of the Hitachi Round One settlement classes differ from settlement
classes in other settlements because each settlement is based on factors relating to the
defendant, parts, and conduct at issue. Id. Pursuant to the court-approved notice,
dealerships had until March 31, 2016, to file a valid proofs of claim.
The notices authorized by the Court for the Round One settlements alerted
automobile dealerships that they would only share in those settlements if they filed a valid
Proof of Claim by March 31, 2016:
To remain in the Settlement Classes, you do not need to take any further
action at this time. However, to share in the Settlement Funds, your
dealership will be required to submit a Proof of Claim form that will be
available on the Settlement Website at www.AutoDealerSettlement.com,
and to submit it by March 31, 2016 (for more information see Question 8,
below). If you choose this option, your dealership will share in the net
proceeds of the proposed Settlements if its Proof of Claim is timely, valid,
and your dealership is entitled to a distribution under the Plans of Allocation
(described below in response to Question No. 9) and if and to the extent
that the proposed Settlements are approved by the Court. Your dealership
will be bound by the judgment and release to be entered by the Court as
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described below (the “Judgment”). To be valid, your dealership’s request
must contain the information required by the Proof of Claim form and be
postmarked, or submitted electronically, by March 31, 2016.
(See e.g. 2:12-cv-00102, ECF Doc. No. 394, p. 4). The notice clearly informs the
recipients that sharing in the settlement proceeds requires a timely Proof of Claim.
Round 2 Settlements involved 40 separate classes, 10 defendants, and
$125,000,000. To participate in the Round Two Settlements, dealerships were required
to file a Proof of Claim by April 28, 2017. The notice that follows instructed dealerships
how to proceed using the same language used in Round 1, and set a submission date of
April 28, 2017. It likewise informed class members, “In order to receive payment, you
need to file a valid claim.” (See ECF No. 503 at 3 in 12-102, Order Authorizing
Dissemination of Class Notice and Scheduling Hearing for Final Approval of
Settlements; ECF No. 499 at 29, Motion for Final Approval of Settlements (Second
Group).
In sum, each settlement with a Defendant resulted in one or more settlement
classes because each part sold by a Settling Defendant created a separate settlement
class. (See e.g. Doc. No. 397 p. 15 in 12-102). Also the class periods identified in the
settlement classes were not uniform. Because of the large number of settlements as well
as the number of Defendants in this litigation, Class Counsel opted to defer notice and
the corresponding claims process until Class Counsel determined that an appropriate
number of settlements occurred. Only after multiple settlements were reached did Class
Counsel request leave to provide notice.
This procedure, which was approved by the Court, kept expenses lower.
Moreover, under the settlement plans approved by the Court, after class members
submitted claims they were permitted to “rely on that Proof of Claim and do nothing
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further to participate” in future settlements with Defendants. Consequently, claims
submitted in earlier rounds were automatically processed in subsequent rounds.
To date, settlements have been aggregated four times with four corresponding
notice periods. With each round of settlements, Class Counsel requested that reserve
funds be set aside “for future allocation and distribution to eligible Settlement Class
members.” (See ECF No. 519-1 in 12-101 at 78). The reserve funds were created to
account for “information not currently available about affected, parts, models, and
brands,” and any funds not needed for the stated purpose would be “distributed on a pro
rata basis to members of the Settlement Classes in their respective cases.” (ECF No.
443 in 12-102).
After Class Counsel requested permission to distribute the reserve funds from the
first three rounds of settlements, Members contacted Class Counsel and the Claims
Administrator regarding the distribution. (ECF No. 590 in 12-102, Decl. of Emma K.
Barton, ¶¶ 8,9). A follow-up phone call between Members and the Claims Administrator
confirmed that it was not clear whether Members were eligible to receive reserve funds
from all the settlements, and the Claims Administrator offered to raise the reserve fund
eligibility with Class Counsel. (Id. Barton Decl. ¶ 9). On July 10, 2020, Class Counsel
notified Members that they were not eligible for reserve funds from Rounds 1 and 2
Settlements. Although subsequent discussions took place, the Members and Class
Counsel did not reach an agreement as to Members’ eligibility.
In sum, the parties disagree as to whether Members, as members of the
settlement classes in Rounds I and 2 Settlements that did not file claims and did not
receive any portion of the initial distribution, are entitled to receive a pro rata share of the
Reserve Funds.
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II. ANALYSIS
A. Members Are Not Entitled to a Share of the Cumulative Reserve Funds for
Which They Were Not Claimants Under the Allocation Plan
The parties disagree as to whether Members are entitled to distributions from the
Round 1 and Round 2 Settlement reserve funds, which have not yet been made.
Members contend that a plain reading of the Plans of Allocation shows that all class
members who submitted valid claims are entitled to their pro rata share of the cumulative
funds held in reserve. Because Members were identified as settlement class members1
and filed claims in Round 3 Settlements, they meet the definition. In contrast, Class
Counsel seeks to restrict reserve fund distribution to a particular round’s claimants.
The resolution of this dispute does not turn on whether Members were potential
class members in the first two Settlement Rounds. The court-approved notices advised
dealerships that they could only receive money from Round 1 and Round 2 Settlements if
they filed valid claims by the deadlines. Moreover, the Allocation Plans clearly state: “In
order to receive a payment, you need to file a valid claim.” Members likely had valid
claims, but they did not file them in accordance with the notices governing Rounds 1 and
2 Settlements. Moreover, Members did not and have not provided evidence to the Court
explaining why they failed to file timely proofs of claim. In short, the Court agrees with
Class Counsel that the allocation of the reserve funds turns on whether a class member
Members also argue that Class Counsel use of the term–“class members,”
rather than “claimants” supports their position. The Court disagrees. Class Counsel
modified the term class member to include “eligible”. Moreover, had Class Counsel
used claimant, the description would have to be modified by terms such as eligible or
verified or timely. A claimant is anyone who files a claim, including claims that were
unverified. The term would not allow anyone who filed a claim to partake in a share of
the settlements.
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filed claims in those particular settlements, and Class Counsel clearly represented that
when the reserve funds were distributed it would be to eligible Dealerships. (ECF No.
519 in 12-101). The reserve funds are not separate from the settlements–but a further
distribution of existing settlements, for which Members failed to file claims. The
aggregation of settlements into rounds created by Class Counsel does not alter the
essential facts.
B. Principles of Equity and Fairness Do Not Require Allocation of Reserve
Funds to Members
The parties disagree as to whether Members’ claims to the reserve funds can be
characterized as late, and if they are, whether equitable distribution and the fiduciary duty
owed by Class Counsel to all class members regardless of timing issues requires
allocation of those reserve funds to Members. The Court discusses the arguments
below.
1. Timeliness of Claims
Members argue that their request for reserve funds is timely because (1) they
submitted timely claims in Rounds 3 and 4 Settlements, and (2) are not seeking
recompense from the distributions already made in Rounds 1 and 2 Settlements despite
being members. The argument falls flat.
The Court assesses whether claims are late in terms of compliance with claims
deadlines. Here, Members did not file proofs of claim in the Round 1 Settlements. The
deadline–March 31, 2016, has long since passed. Likewise, the Round 2 Settlements
required proofs of claim to be filed by a deadline long since passed–April 28, 2017.
Although the settlement plans allowed class members submitting claims to rely on their
proof of claim in future settlements with Defendants, as they were processed
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automatically, there is nothing in the settlement plans that would allow a proof of claim in
a latter round to relate back to an earlier settlement. Therefore, the Court finds Members’
claims to reserve funds from Rounds 1 and 2 Settlements are late.
2. Equitable Considerations
The parties next argue whether Members should participate in the distribution of
reserve funds regardless of timing issues. Members assert that given the method by
which settlement rounds were established, the fiduciary duty owed to Members by Class
Counsel, and the lack of any resulting prejudice to class members, equities favor allowing
Members’ participation. Class Counsel argues that the circumstances of this case
undermine any argument that Members should participate in the distribution of reserve
funds based on equity and fairness.
The Supreme Court held that in deciding whether to accept late claims, courts
consider “all relevant circumstances” including the danger of prejudice to other class
members, the length of the delay and effect on judicial proceedings, the reason for the
delay, and whether the late claimant acted in good faith. Pioneer Inv. Servs. v. Brunswick
Assoc. Ltd., 507 U.S. 380, 395 (1993).
After considering all of the circumstances and case law relevant to the resolution
of Members’ position, the Court concludes that there is no justification for the delay and
allowing Members to participate in the distribution of the reserve funds from Rounds 1
and 2 would prejudice class members. In In re Dairy Farmers of Am., Inc. Cheese
Antitrust Litig., No. 09-3690 (N. D. Ill. 2016), for example, the class counsel supported
allowing nine late-filed claims because the claims processing would not be delayed, and
the claims were filed within weeks to several months of the deadline. In contrast, DiCarlo,
a Senior Project Manager for the Claims Administrator, has represented that the delay
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here could last 18 months and would preclude distribution of any money from any
settlement until every claim was processed. (DiCarlo Decl. ¶ 24). DiCarlo’s detailed
description of the process by which the allocation plans were used to calculate the pro
rata shares of dealerships that filed claims, and the painstaking process for valuing the
claims is uncontested. (DiCarlo Decl., ¶¶ 20, 21). The administrative costs would
necessarily increase if Members were allowed to participate. In addition, the delay by
Members here was not months, but years.
The late claim allowed in In re Orthopedic Bone Screw Prods. Liab. Litig., 246 F.3d
315, 319-20 (3d Cir. 2001), involved a potential member who did not learn of the
settlement in time to file the initial registration as required by the claim process, but did
file a timely proof of claim. The court allowed the claim, and 100 similar claims, observing
that the claims constituted “a minuscule fraction of the total settlement class,” that the
inclusion was not prejudicial because the administration and distribution were still
underway, and the inclusion would neither disrupt nor delay the process. The court
further found that the individual showed excusable neglect and good faith because he
had not received direct notice. Id. at 328-29. Again, in the case before this Court,
Members did not file timely proofs of claim in Rounds 1 and 2, and the evidence
demonstrates that Members received multiple copies of the Round 1 and Round 2
Settlement notices via email and hard copy. (ECF No. 593 in 12-102, Class Counsels’
Response Brief, DiCarlo Decl. ¶¶ 32-34). Members do not contend otherwise.2
In fact, the Claims Administrator, KCC, identified at least 96 Round 1 settlement
emails sent to employees of the Wolf Automotive Group, including managers,
executives, salespeople, and others on September 15, 2015. All were delivered
successfully. KCC sent 96 Round 2 Settlement notices on September 9, 2016, but 14
were bounced. KCC then mailed notices to 7 of the 21 listed Wolfe Automotive Group
dealers in Rounds 1 and 2. (DiCarlo Decl. ¶ 32). KCC identified emails sent to 8
2
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The late claims filed and allowed by the court in In re Agent Orange Prod. Liab.
Litig., 69 F. Supp. 1250, 1263 (E.D. N.Y. 1988), caused no significant administrative
costs, and that court found that late claims would be “de minimus” compared to timely
claims. In contrast, here, the number of eligible class members would increase
dramatically, by 1500, because just over 3400 Dealership class members submitted
claims in Round 1 whereas approximately 5000 submitted claims in Round 3. The Court
does not find the increase de minimis; it could result in an increase of 50%, depending on
how the number of claims and dealerships are calculated. (DiCarlo Decl. ¶ 25).
In addition to the distinctions between the matter at hand and those addressed by
the cases cited above, the Court recognizes that the reserves were created to account for
potential changes to the allocation based upon new information about parts and models
targeted by the conspiracies, not as a back-up to cover late claims. (See DiCarlo Decl. ¶
2); See also ECF No. 394-1, pp 5-9 in 12-102). Class Counsel made clear that “In the
event and to the extent that the reserve fund is not needed to cover payments described
above, any funds remaining in the reserve fund after future allocations will be paid to
eligible dealerships based on their pro rata share of the settlement funds and the eligible
claims filed.” Nothing in the reserve fund explanation to the Court suggests that they
were created to account for the situation in which Members find themselves.
employees of Young Automotive Group LLC regarding Round 1 Settlement, which were
delivered successfully. KCC successfully emailed notice of Round 2 Settlements to 21
employees; eight successfully. KCC mailed paper notice to 8 dealerships in both
Rounds. The same occurred regarding Kings Nissan and Kings Infiniti, Inc.: 26 emails
were successfully delivered in Round 1, and 3 emails in Round 2. Paper notices were
also sent to both dealerships. (Id. at ¶ 34).
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Nor does the Court find Class Counsel has violated its fiduciary duty to protect all
class members’ interests by arguing against Members. Members contend that Class
Counsel is protecting early filers at Members’ expense, arguing that Class Counsel has
measured Members’ interests against so-called “early filers.” Members mischaracterize
the status of eligible dealerships in Rounds 1 and 2 Settlements–they are timely filers, not
early filers. Moreover, reserve funds were put in escrow years ago with the stated
purpose of allowing dealerships with timely proofs of claim to receive an initial advance.
Considering the amount of time that has passed between the claims deadlines in Rounds
1 and 2, and distribution of the reserves, as well as the purpose of the reserve funds, the
Court rejects Members’ position that Class Counsel is not meeting their fiduciary duty to
class members. Notably, Class Counsel does not take the position that eligible class
members have some justifiable expectation to a particular payout and would be
prejudiced on that basis by approval of Members’ late claims. Their position turns on
factors such as the lack of evidence that Members pursued their claims diligently.
Deadlines are necessary for finality, and here ignoring those deadlines would delay
distribution 18 months or more and increase administrative costs. DiCarlo has
represented to the Court that a distribution of the reserve funds was in the works, likely to
occur within a month. The claims already have been reviewed, validated, and tabulated.
The equities do not favor Members, who are not unsophisticated consumers and have not
even provided an explanation for their delay. They certainly have not established good
cause for the position in which they find themselves.
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III. CONCLUSION
The plan language of the Allocation Plans limited participation in the settlements to
those class members that filed timely and valid claims. The equities here do not favor
opening the reserve funds to Members relative to Rounds 1 and 2 Settlements.
Therefore, the Court DENIES Members’ motion.
IT IS SO ORDERED.
Dated: September 30, 2020
s/Sean F. Cox
Sean F. Cox
U. S. District Judge
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