By John W. Scanlan, J.D.
A $36 million settlement of class action litigation brought against the manufacturers of three models of refrigerators made for RVs has been approved by a federal district court in California. About 575,000 people are members of the settlement class and are eligible for compensation (Etter v. Thetford Corp., October 24, 2016, Staton, J.).
The putative class action was filed in 2012 against Norcold, Inc., and its corporate parents, Thetford Corp. and The Dyson-Kissner-Moran Corp. (DKM) According to the complaint, three models of the defendants’ refrigerators designed for use in recreational vehicles (RVs)—the 1200 series, the N8 series, and the N6 series—were defective in that they corroded, cracked, and leaked, resulting in fires. In 2014, the parties reached a tentative settlement agreement, but while 17 of the named plaintiffs supported the agreement, 6 others objected. Six of the settling plaintiffs then filed a similar class action complaint against the defendants. Limited additional discovery was then conducted, and the court denied preliminary approval of the settlement and certification of the class. Negotiations resumed, and the parties reached a new agreement providing for an additional $3 million in compensation; after the settling plaintiffs addressed three additional concerns raised by the court, the court granted preliminary approval. Now before the court were motions for final approval as well as motions addressing attorneys’ fees, costs, and service awards.
Settlement terms. The settlement agreement provided that $36 million would be paid to the claimants in four annual installments in proportion to each claimant’s allotment of settlement shares, with the owners of 1200 series refrigerators expected to receive about $824, and owners of N8 and N6 refrigerators expected to receive about $164 along with a three-year extended warranty for repairs. Owners of 1200 series units manufactured from January 1, 2002 through October 1, 2012, and owners of N8 and N6 units manufactured from 2009 to 2013 are members of the settlement class; over 575,000 people are estimated to be eligible. The defendants must provide a safety warning to all eligible claimants.
Approval. The court overrode the objections of the non-settling plaintiffs and approved the settlement. The court found that the plaintiffs’ case was not as strong as the non-settling plaintiffs asserted because they would have been required to prove that Thetford and DKM, Norcold’s corporate parents, were the alter ego of Norcold and it was likely that any award won at trial would have had to be paid from Norcold’s less deep pockets; furthermore, approval of class certification in twelve states would not have been beyond doubt. Although the plaintiffs originally had asked for more than $700 million in damages, Norcold will have to rely upon its corporate parents to satisfy even the $36 million sum and the parent companies had no interest in loaning it larger amounts, and it was likely that Norcold could discharge these claims if it filed for bankruptcy. The parties had conduced sufficient discovery from which they could make an informed settlement decision. The attorneys for the settling plaintiffs were highly experienced, whereas the court believed that the attorney for the non-settling plaintiffs may have been acting in his personal interests. Defining the class with a bright line of January 1, 2002 for owners of series 1200 units was fair and equitable, with the court noting that those outside the class would retain their rights against the defendants. Finally, while the non-settling plaintiffs asserted that internet advertising would be inadequate notice to RV owners because they tended to be older and less computer savvy and resided in areas with little or no internet access, the court found that there was a "vibrant" online community of RV owners; further, the claims administrator also provided postcard notice.
Fees/awards. The court approved $9 million in attorneys’ fees, as provided by the settlement agreement, and there was no reason for a downward departure from the 25 percent level that is the benchmark for a fee award in the Ninth Circuit. The court also approved the settling plaintiffs’ request for a $705,000 payment to the claims administrator for its past and future costs. Service awards of $100 per hour were approved for the class representatives, including the non-settling plaintiffs, but the awards were capped at $7,500 each.
The cases are Nos. SACV 13-00081-JLS (RNB) and CV 14-06759-JLS (RNBx).
Attorneys: Caleb Marker (Zimmerman Reed, LLP) for Jeffery Etter. Brian Robert Thompson (Burnham Brown) and Bryan A. Merryman (White & Case LLP) for Thetford Corp., Norcold, Inc. and Dyson-Kissner-Moran Corp.
Companies: Thetford Corp.; Norcold, Inc.; Dyson-Kissner-Moran Corp.
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