Weiss v. Mercedes-Benz of North America, Inc.

Decision Date11 May 1995
Docket NumberCiv. A. No. 93-96.
Citation899 F. Supp. 1297
PartiesNorman WEISS, on behalf of himself and others similarly situated, Plaintiffs, v. MERCEDES-BENZ OF NORTH AMERICA, INC., Defendant. Bert M. BEZ, on behalf of himself and others similarly situated, Plaintiff, v. MERCEDES-BENZ OF NORTH AMERICA, INC., Defendant.
CourtU.S. District Court — District of New Jersey

Goldstein Till & Lite by Allyn Z. Lite, Newark, New Jersey, and Milberg Weiss Bershad Lynes & Lerach by Melvyn I. Weiss, Patricia M. Hynes, Robert A. Wallner, New York City, for Plaintiffs.

Ribis, Graham & Curtin by Jerome J. Graham, Jr., Morristown, New Jersey, for Defendant.

OPINION

BISSELL, District Judge.

The applications presently before this Court arise out of the filing of two separate complaints requesting certification of a class against Mercedes-Benz of North America, Inc. ("Mercedes") on January 14, and 15, 1993. On May 24, 1993, an order consolidating Weiss v. Mercedes and Bez v. Mercedes for discovery purposes was entered. On June 14, 1993, both plaintiffs moved to amend their separate complaints.

The plaintiffs initially moved for class certification in August 1993. This motion as well as defendant's cross-motion were withdrawn as the plaintiffs requested leave of court to amend their complaint for a second time. This Court granted leave for the plaintiffs to file their second amended complaints on November 24, 1993.

The second amended complaints were filed on November 30, 1993 and moved to certify as a class:

all persons in the United States who purchased or leased any 1992 or 1993 Mercedes-Benz S class automobile.

(Second Am.Compl of Norman Weiss and Bert M. Bez (hereinafter "Compl.", ¶ 2).1 As plaintiffs moved for class certification, defendant filed a cross-motion to dismiss the first cause of action in the second amended complaints. The first cause of action alleged that Mercedes violated section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) ("Lanham Act"). (Compl., ¶ 25). This Court granted the cross-motion and dismissed the First Count in both actions. (Op. of Feb. 24, 1994). Mercedes then moved to dismiss both second amended complaints in their entirety on the ground that subject matter jurisdiction is absent.

The plaintiffs' second amended complaint, in their current form, seek relief for the named plaintiffs and the other members of the proposed class against Mercedes for violations of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (Id. at 3). The plaintiffs allege further for themselves and the class that Mercedes committed common law fraud, breached an expressed warranty, breached an implied warranty, and made negligent misrepresentations. (Id.)

Mercedes contended that this Court did not have subject matter jurisdiction to hear these claims since individual class members did not satisfy diversity jurisdiction's amount in controversy requirements. In a March 31, 1994 Order, Mercedes' motion to dismiss was denied. Subsequently, class certification was granted on April 28, 1994 pursuant to Rules 23(a) and (b)(3). In a letter accompanying the class certification Order, this Court stated that Mercedes might revisit the diversity issue after the class certification process had further evolved.

FACTS

Plaintiffs Weiss and Bez both own 1992 500 SEL Mercedes-Benz automobiles. (Compl., ¶ 3). Norman Weiss is a resident of the State of Florida. (Weiss Compl., ¶ 3). He bought his 500 SEL from a Mercedes dealer in Pompano Beach, Florida in November 1991. (Id., ¶ 4). Bert Bez is a resident of the State of Michigan. (Bez Compl., ¶ 3). Mr. Bez purchased his 500 SEL from a dealer in Lansing, Michigan. (Op. of Feb. 24, 1994 at 3). Defendant Mercedes is a corporation organized under Delaware law with its principal place of business in Montvale, New Jersey. (Compl., ¶ 4).

The 500 SEL is one of several models in Mercedes' S-Class of automobiles. (Op. of Feb. 24, 1994 at 4). The S-Class was introduced in model year 1992. (Id.) All of Mercedes' S-Class models retail for more than $50,000 apiece. (Compl., ¶ 4). Plaintiffs allege that all S-Class vehicles suffer from "a serious defect." (Op. of Feb. 24, 1994 at 4). The defect is alleged to be a tendency for the S-Class' steering system to vibrate or shimmy when the car is driven at speeds over 50 miles per hour and the tires on the car had been used for three to five thousand miles. (Id.)

The plaintiffs also alleged that Mercedes concealed this defect from future and previous purchasers even after it received complaints of "uneven and or rapid tire wear on all S-Class models," regardless of the tire brand. (Id.) The concealment is asserted to have occurred despite internal memoranda identifying the problem as being endemic to the S-Class. (Id.) The autos weight was seen as being "a big factor." (Id.)

Mercedes proffers that each vehicle in the S-Class differs in weight and is "equipped with a tire ... of varying size and rating." (Id.) Mercedes' warranty for S-Class vehicles specifically excludes the tires. (Id. at 5).

During the alleged concealment of the defect, the plaintiff proffers that Mercedes advertised:

the new Mercedes Benz S-Class as nothing less than the car of a lifetime, with performance, comfort and safety features like no car before, and claimed that the automobiles were engineered like no other car in the world. Its safety steering system features an impact-absorbing steering wheel and that its automobiles are the most dependable in America, with manufacturing tolerances somewhat finer than the width of a human hair.

(Id.)

The Proposed Settlement

Once the class was certified, settlement discussions were commenced between the parties. Ultimately, a settlement was reached. Under the proposed settlement, Mercedes has agreed to issue certificates to each member of the class for each automobile owned.2 As stated above, the class consists of people who purchased or leased a Mercedes S-Class automobile of the model years 1992 or 1993. Pursuant to the settlement, the value of the certificate varies according to the exact model and year of the car.

The following chart explains how much an individual car owner is due:

                  1992 Model            Immediate Value
                     300SD                  $2,400
                     300SE                  $2,400
                     400SE                  $3,000
                     500SEL                 $4,200
                     600SEL                 $5,700
                  1993 Model            Immediate Value
                     300SD                  $2,400
                     300SE                  $2,400
                     400SEL                 $3,000
                     500SEL                 $4,200
                     500SEC                 $4,200
                     600SEL                 $5,700
                     600SEC                 $5,700
                

The immediate value of the certificates issued to lessors and lessees of the automobiles are one-third ( 1/3 ) and two-thirds ( 2/3 ) respectively, of the above-described amounts. Any member of the class, except for Mercedes-Benz Credit Corporation ("MBCC"), is allowed to redeem the certificate for a four-year period after the settlement date. Redemption will allow the holder to receive the certificate's immediate value, offsetting the cost of purchasing or leasing a new Mercedes-Benz S-Class (Series 140) or SL Class (Series 129) automobile. Use of this certificate will not interfere with any other discount being provided by Mercedes. These certificates are freely transferable.

A third option is available if the holder of the certificate decides not to buy or lease a new Mercedes during the four-year period, but remains in possession of the certificate. This is the cash redemption feature of the settlement agreement. Pursuant to the settlement agreement, the certificates can be redeemed for half their immediate value in cash starting three years after the settlement date. Cash redemption is available throughout the entire fourth year post-settlement.

This agreement restricts MBCC, as a member of the class, in its use of the certificates. MBCC must use all of its certificates for the benefit of non-Mercedes affiliated customers before the certificates expire. Any certificate not used within 36 months of issuance will be transferred to charitable or educational institutions designated by the parties and approved by the Court.

Moreover, Mercedes will be responsible for the administration of this entire program. During the four-year period, the defendant will also have to provide quarterly reports to class counsel. Moreover, all costs that result from the settlement, i.e., class notice and counsel fees, are borne by Mercedes.

ANALYSIS
I. The Settlement Agreement

Under the Federal Rules of Civil Procedure:

a class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such a manner as the court directs.

Fed.R.Civ.P. 23(e). When making this discretionary decision, a district court must give comprehensive consideration to all relevant factors and undertake an independent evaluation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir.1974). In approving, a court has the fiduciary responsibility to ensure the settlement is fair and not the product of collusion, and that the class members' interests were represented. In re Warner Communications Securities Litigation, 798 F.2d 35, 37 (2d Cir.1986). The Third Circuit has enumerated certain factors to assist a district court in reaching its determination. They are:

(1) the complexity, expense and likely duration of the litigation;
(2) the reaction of the class to the settlement;
(3) the stage of the proceedings and the amount of discovery completed;
(4) the risks of establishing liability;
(5) the risks of establishing damages;
(6) the risks of maintaining the class action through trial;
(7) the ability of the defendants to withstand a greater judgment;
(8) the range of reasonableness of the settlement fund in light of the best recovery; and
(9) the range of reasonableness of the
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