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Hyundai-Kia Settlement Draws Objections Among Plaintiffs' Lawyers

THE DAILY JOURNAL OF LOS ANGELES

38 plaintiffs' firms take issue with $400 million offer over claims

LOS ANGELES - A proposed $400 million settlement in a class action lawsuit involving allegations that automakers Hyundai Motor America and Kia Motors America inflated the fuel economy of their vehicles is running into opposition from some plaintiffs' attorneys unhappy with the terms of the offer.

Lawyers representing a significant subset of class members filed a report last week to U.S. District Judge George H. Wu, who still must sign off on the settlement. Attorneys from the Hagens Berman Sobol Shapiro LLP and McCune Wright LLP firms have championed the agreement for almost a year, saying it represents the best and quickest way for consumers to receive remuneration.

However, objecting parties still have a strong voice, with 38 different firms filing paperwork taking issue with at least some part of the settlement. Some of the most vocal objectors are the attorneys at Consumer Watchdog, who represent plaintiffs in several of the suits consolidated as part of the multidistrict litigation.

Harvey Rosenfield, director of consumer advocate's litigation efforts, said the biggest issues with the offer were a claim form consumers would have to fill out and a rider allowing Hyundai and Kia to recoup any unclaimed funds.

"The claims process as currently construed is designed to discourage people entitled to settlement money from getting their benefits," Rosenfield said. "The court should mmake it very clear that it won't approve the settlement unless modifications are made."

If the current settlement is accepted, some 600,000 Hyundai and 300,000 Kia owners with 2011 to 2013 models affected by misstated fuel economy estimates would be reimbursed nearly $400 million by the automakers. Hyundai owners would receive an estimated $353 on average while Kia owners would get $667, according to statements made by the companies.

Rex Perschbacher, a professor at UC Davis School of Law, said it wouldn't be out of the ordinary for Wu to get involved and work to reconcile the parties.

"Federal judges are very capable of evaluating settlements," he said. "They're good at detecting things in settlements that look suspicious."

A Kia spokesman declined to comment Monday. Hyundai representatives were unavailable at press time.

The return for consumers in these types of class actions has undergone more scrutiny recently. In a similar case involving Nissan's Leaf line of electric cars, 9th U.S. Court of Appeals Chief Judge Alex Kozinski in November objected to settlement in that case, stridently calling for better terms for plaintiffs.

"The proposed settlement is a sham, benefiting only class counsel, named plaintiffs and Nissan," Kozinski wrote. "Class members are getting absolutely nothing of value, while having their rights abrogated."

While that case has yet to be adjudicated on appeal, another matter involving claims of false advertising over Kelloggs Co.'s Frosted Mini Wheat cereal was heard by the 9th Circuit and found the objectors' appeal had merit. In an opinion handed down in July 2012, a three-judge panel sided with the objecting parties finding the settlement at issue devoted too much money for attorneys' fees, was too vague in its compensation model and didn't do enough for the plaintiffs.

The case ultimately settled last March with more favorable terms for the plaintiffs.

In the Hyundai case, Perschbacher said that it would be Wu's responsibility to act as a sort of "gatekeeper" to make sure the plaintiffs were getting a fair shake, while balancing his own interests.

"The judge is usually pretty invested in getting a settlement done because it clears a case off his docket," Perschbacher said. "But if you can convince a judge there's a sweetheart deal or unbalanced settlement - those types of things can disturb a judge a lot.

The next hearing in the case to discuss the settlement is set for March 24.

henry_meier@dailyjournal.com