Bloyed v. General Motors Corp.

• Decision Date: 14 July 1994
• Docket Number: No. 06-93-00113-CV,06-93-00113-CV
• Parties: Clyde BLOYED, Ron Godbey, and Regina Godbey, Appellants v. GENERAL MOTORS CORPORATION, Tommy Dollar and others, Appellees.
• Court: Texas Court of Appeals

Page 422

881 S.W.2d 422

Clyde BLOYED, Ron Godbey, and Regina Godbey, Appellants v. GENERAL MOTORS CORPORATION, Tommy Dollar and others, Appellees.

No. 06-93-00113-CV.

Court of Appeals of Texas Texarkana.

Argued June 7, 1994.

Decided June 22, 1994.

Rehearing Denied July 12 and July 14, 1994.

Marc R. Stanley, Roger L. Mandel, Stanley, Mandel & Kleinman, P.C., Dallas, for Clyde Bloyed.

Tim Crowley, Crowley, Marks & Douglas, Houston, for Tommy Dollar.

W. Richard Davis, Ernest R. Higginbotham, Strasburger & Price, Dallas, Robert B. Ellis, J. Andrew Langan, James H. Schink, Kirkland & Ellis, Chicago, IL, Edward C. Wolfe, Lee A. Schutzman, General Motors Corp., Detroit, MI, for GMC.

Stephen Gardner, Law Offices of Stephen Gardner, Dallas, for Ron & Regina Godbey.

Sam Baxter, Jones, Jones & Curry, Inc., Marshall, for Tommy Dollar & GMC.

Before CORNELIUS, C.J., and BLEIL and GRANT, JJ.

BLEIL, Justice.

This is an appeal from a judgment approving a class action settlement. The primary issue on appeal is whether the trial court abused its discretion in approving the settlement agreement. We conclude that, because the settlement agreement is not fundamentally fair, adequate, and reasonable to the class members, the trial court abused its discretion in approving the settlement. Therefore, we reverse.

In November 1992, Tommy Dollar and others (Dollar) filed a class action suit against General Motors Corporation (GMC) on behalf of all Texas owners of 1973-1986 Chevrolet and GMC full-size pickup trucks and chassis cab models of the "C" or "K" series and all Texas owners of 1987-1991 Chevrolet and GMC full-size pickup trucks and chassis cab models of the "R" or "V" series. There are approximately 645,000 members in the class.

Dollar alleged that the trucks have a design defect because the fuel tanks are located outside the trucks' frame rails and that GMC concealed the defect in violation of the Deceptive Trade Practices-Consumer Protection Act ¹, Dollar's rights under the law of warranty and contracts, and statutory and common-law prohibitions against fraud, deceit, and negligent misrepresentation. Claims for personal injury and wrongful death are excluded from this suit.

The original petition sought injunctive relief in the form of repairs to the fuel tanks, as well as compensatory and punitive damages for the economic harm suffered by the truck owners. After accepting GMC's settlement offer on July 19, 1993, Dollar immediately amended the petition to delete requests for injunctive relief.

The settlement agreement accepted by Dollar provides that each class member, upon written request, is entitled to receive a $1,000 certificate to be used toward the purchase of a new Chevrolet or GMC truck or van. ² Each certificate has a fifteen-month redemption period from the date class members are notified that the certificates are available. The certificate can be used toward the down payment on a new vehicle. ³ The class member need not disclose his intent to use the certificate until he has made his best deal with the dealer. The $1,000 certificate can be used in conjunction with any marketing incentives or promotional offers available through GMC or General Motors Acceptance Corporation (GMAC).

The class member can transfer the certificate to an immediate family member who resides with the class member. ⁴ The $1,000 certificate can also be transferred with the title to the settlement class vehicle, that is, to a third party who purchases the settlement class member's vehicle.

In lieu of a $1,000 certificate, and without transferring title to the settlement class vehicle, a class member may instead request that a nontransferable $500 certificate be issued to any third party except a GMC dealer or its affiliates. This $500 certificate is redeemable with the purchase of a new "C" or "K" series GMC or Chevrolet full-size pickup truck or its replacement model. The $500 certificate cannot be used in conjunction with any GMC or GMAC marketing incentive and is subject to the same fifteen-month redemption period.

The settlement agreement releases GMC from all claims related to the fuel system design of the trucks, excluding past, present, and future claims arising out of any vehicular crash resulting in personal injury or death. The settlement agreement does not affect the rights of the class members to participate in any field action GMC may be required to undertake as a result of pending proceedings before the National Highway Traffic Safety Administration (NHTSA).

On July 20, 1993, the trial court entered an order certifying the action as a class action for settlement purposes only, setting a fairness hearing for October 27, 1993, and directing that notice of the proposed settlement be sent to the members of the settlement class. The notice instructed class members who wished to opt out of the settlement class to send a written request to the district clerk by October 5, 1993. Class members objecting to the settlement were instructed to write to the district clerk, the attorneys for the class, and GMC by October 5, 1993. Class members Clyde Bloyed, Ron Godbey, and Regina Godbey, who are the appellants in this case, filed objections to the proposed settlement agreement and were represented by counsel at the fairness hearing.

On November 3, 1993, the trial court entered its judgment approving the settlement and entered a separate order awarding class counsel $9 million in attorneys' fees and $500,000 in expenses. At the request of the appellants, the trial court filed findings of fact and conclusions of law.

ABUSE OF DISCRETION

A class action shall not be dismissed or compromised without the approval of the court. TEX.R.CIV.P. 42(e). Approval of a settlement of a class action suit is within the sound discretion of the trial court, and its decision to approve the proposed settlement will not be reversed on appeal absent an abuse of that discretion. Crouch v. Tenneco, Inc., 853 S.W.2d 643, 646 (Tex.App.--Waco 1993, writ denied); Ball v. Farm & Home Sav. Ass'n, 747 S.W.2d 420, 423 (Tex.App.--Fort Worth 1988, writ denied); Shebay v. Davis, 717 S.W.2d 678, 681 (Tex.App.--El Paso 1986, no writ). The test for abuse of discretion is whether the trial court acted without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S.Ct. 2279, 90 L.Ed.2d 721 (1986). An abuse of discretion implies more than an error in judgment. Crouch, 853 S.W.2d at 646; Ball, 747 S.W.2d at 423.

The settlement must be fundamentally fair, adequate, and reasonable. Ball, 747 S.W.2d at 423 (citing to In re Corrugated Container Antitrust Litig., 643 F.2d 195, 207 (5th Cir.1981), cert. denied, 456 U.S. 998, 102 S.Ct. 2283, 73 L.Ed.2d 1294 (1982)). ⁵ In determining whether the settlement meets this standard, the trial court should consider: (1) whether the settlement was a product of fraud or collusion; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and amount of discovery; (4) the factual and legal obstacles to prevailing on the merits; (5) the possible range of recovery and the certainty of damages; and (6) the respective opinions of the participants, including class counsel, class representatives, and the absent class members. Id. at 423-24 (citing to Parker v. Anderson, 667 F.2d 1204, 1209 (5th Cir.), cert. denied, 459 U.S. 828, 103 S.Ct. 63, 74 L.Ed.2d 65 (1982)); see also Shebay, 717 S.W.2d at 683-84. We now turn to a consideration of the factors to be reviewed in determining whether a settlement is fundamentally fair, adequate, and reasonable.

1. Whether the settlement was a product of fraud or collusion:

The trial court found that the settlement was the product of good faith, arm's-length negotiations. While appellants allege and speculate that there is fraud or collusion underlying the settlement, there is no evidence that the settlement agreement is the product of fraud, collusion, or other improper conduct on the part of GMC, its counsel, the class representatives, or class counsel.

2. Complexity, expense, and likely duration of the litigation:

The trial court found that the complexity, expense, and likely duration of the litigation favor settlement. A trial of this case would be both expensive and time consuming in terms of discovery, retention of expert witnesses, the trial itself, and the strong possibility of an appeal regardless of who won at the trial court level. The inherent complexity of class action suits results in an overriding public interest in favor of settlement. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir.1977).

3. Stage of the proceedings and amount of discovery:

Extensive discovery from prior personal injury suits filed against GMC was available to class counsel. Experts were consulted. GMC and the class had also served and responded to requests for admissions, interrogatories, and requests for production. All of this discovery was available to those objecting to the proposed settlement. The trial court found that sufficient discovery had taken place and that the suit had advanced to the proper stage for settlement.

4. Factual and legal obstacles to prevailing on the merits:

In considering the proposed settlement, the trial court does not attempt to decide the merits of the controversy. City of Detroit v. Grinnell Corp., 495 F.2d 448, 456 (2d Cir.1974). The trial court has neither the right nor the duty to reach any ultimate conclusions on the issues of fact and law underlying the merits of the dispute. Id. The temptation to convert a settlement hearing into a full trial on the merits must be resisted. Mars Steel Corp. v. Continental Illinois Nat'l Bank and Trust Co., 834 F.2d 677, 684 (7th Cir.1987).

The trial court found that uncertainty exists concerning Dollar's ability to prove liability. The issue of a safety defect is contested by GMC. There is evidence...