Products Liability Law Daily Caterpillar proposes $60M fund to settle emission control system class action
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Thursday, April 21, 2016

Caterpillar proposes $60M fund to settle emission control system class action

By Pamela C. Maloney, J.D.

In order to afford closure and compensation to its “loyal customers” and to avoid further litigation that could be “risky and costly for both sides,” Caterpillar has asked the federal district court in New Jersey to grant preliminary certification of a settlement class and preliminary approval of a proposed settlement agreement pursuant to which the company will establish a $60 million fund to settle claims that engines equipped with an exhaust emission control system known as the CAT Regeneration System (CRS) were defective (In re: Caterpillar Inc. C13 and C15 Engine Products Liability Litigation, April 20, 2016, Fox, J.).

Class action allegations. Caterpillar designed the CRS, which utilized an after-treatment regeneration device (ARD) to vaporize soot captured in the Diesel Particulate Filter (DPF) from the exhaust gas, in order to meet the Environmental Protection Agency’s stringent soot and NOX emission-control regulations for heavy duty diesel engines. Caterpillar’s goal was to produce an emission control system that would meet the EPA emission standards and at the same time protect the complex engine parts from contamination. A putative class of purchasers of vehicles equipped with the CRS filed a class action complaint in which it was alleged that the CRS failed to operate under all conditions and all applications on a consistent and reliable basis even after repeated CRS warranty repairs and replacements. According to the complaint, these repeated warranty repairs and replacements failed to correct the CRS issues, resulting in damages to engine purchasers. The alleged damages included diminished value of the vehicles powered by these engines, as well as out-of-pocket costs such as repair invoices, towing costs, vehicle rental costs and related hotel/taxi charges. Among other claims, the complaints allege causes of action for breach of express warranty.

Proposed settlement agreement. Under the terms of the proposed settlement, all class members who submit a valid claim will be eligible to receive a pro rata share of the settlement fund according to the following guidelines:

  1. Class members who experienced no CRS-related repairs are eligible (but not guaranteed) to receive $500 for each subject engine.
  2. Class members who experienced one to five qualified CRS-related repairs are eligible (but not guaranteed) to receive $5,000 per subject engine.
  3. Class members who experienced six or more qualified CRS-related repairs are eligible (but not guaranteed) to receive $10,000.00 per subject engine.

Instead of seeking a payment as set forth in guidelines B or C, each eligible class member that experienced at least one CRS-related repair has the option to pursue a claim for losses, up to a maximum of $15,000, experienced as a consequence of qualified CRS-related repairs. These losses can include but not be limited to towing charges, rental charges, and hotel charges. In the event the class member seeks payment pursuant to this optional prove up process, the class member shall not be eligible to seek payment under B or C.

Payments to eligible claimants may be adjusted pro rata (up or down) depending on the number of eligible claims filed and the total amount of the Settlement Fund available to pay claims. It is expected that payments to class members will exhaust the settlement fund and that no money will be returned to Caterpillar.

In endorsing the proposed settlement agreement, Caterpillar emphasized in its brief that it stands behind its engines, arguing that they are well-designed and that the emissions systems design had been certified by the EPA following a thorough review of the engineering of the engines. The company also noted that there was no evidence that the company ever denied a legitimate warranty claim and pointed to testimony by class representatives and Caterpillar witness that the company had provided repair services at no cost or reduced cost to customers, even after warranty coverage had expired. Nonetheless, Caterpillar moved for approval of the settlement, describing it as fair and reasonable, and a “realistic resolution” of the class action, given the uncertainty, delay and costs of continuing the litigation.

Class certification. Caterpillar also supported preliminary approval of a settlement class, agreeing with the putative class’s arguments in support of certification. The putative class had argued in its brief that the proposed class met all the applicable requirements for certification. The underlying proceeding presented common questions as to whether the engines were defective, whether the manufacturer’s conduct constituted a breach of its express warranty, and whether that conduct caused the damages alleged. In addition, class certification was the superior method of adjudicating the claims because without class certification, many members of the proposed settlement class would go uncompensated and the prosecution of separate actions by individual members of the class would impose heavy burdens on the courts and the parties and increase the risk of inconsistent rulings. The brief also outlined how the proposed settlement class met the predominance requirement and presented arguments in favor of the class representatives.

The case is MDL No. 2540; Master Docket No. 14-cv-03722 (Proposed Settlement Agreement).

Attorneys: James E. Cecchi (Carella, Byrne, Cecchi, Olstein, Brody & Agnello, PC) and Natalie Finkelman Bennett (Shepherd, Finkelman, Miller & Shah, LLP) for Vandalia Bus Lines, Inc., BK Trucking Co. and Eagle Valley South, Inc. Anthony J. Anscombe (Sedgwick, Detert, Moran & Arnold, LLP), Ashley Webber Broach (Swift, Currie, McGhee & Hiers, LLP) and C. Todd Koebele (Murnane Brandt, PA) for Caterpillar Inc.

Companies: Vandalia Bus Lines, Inc.; BK Trucking Co.; Eagle Valley South, Inc.; Caterpillar Inc.

MainStory: TopStory DesignManufacturingNews DamagesNews IndustrialCommercialEquipNews NewJerseyNews

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