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Class Action Settlements–Lessons From the Ford Rollover Case

We’ll deviate slightly from our usual drug-centric discussion today to talk about class actions, generally. A 2007 class action settlement covering Illinois, Texas, California, and Connecticut was meant to resolve claims that Ford Explorers built from 1990 to 2001 were prone to rollover. The settlement allowed affected consumers a “coupon” for $500 off a new Ford Explorers, or $300 off a different Ford, Lincoln, or Mercury. Lawyers for the plaintiffs received $15.9 million in fees.

Following the settlement, 1,647 coupons were approved. Assuming every one of those was used for a new Explorer, Ford would lose $823,500. However, at this point only 75 coupons have been redeemed, meaning at most Ford has paid out $37,500 (not including attorneys’ fees).

Of course, the settlement also garnered some non-monetary benefits. Ford has agreed to stop advertising the safety of its SUVs, absent reliable scientific evidence. Furthermore, Ford will provide consumer warnings about rollovers and tire safety dangers.
So, in balance, was the settlement worth it?

On the one hand, class counsel for plaintiffs accomplished a great deal—during the litigation, representatives of Ford even admitted that an early Explorer was a “defective product.” These cases are extremely difficult to litigate, and reports show that counsel was concerned about Ford going bankrupt, which would have meant no recovery for class members. So, something is better than nothing. Also, class actions are the only way to hold large corporations accountable for non-personal injury defective products—otherwise, they get away scot-free with trampling on the rights of consumers.

From a punishment perspective, even though consumers aren’t winning in this situation, Ford certainly lost a lot—in attorneys’ fees, times, and reputation (which translates into lost sales). And, other automakers have kept close tabs on the case—hopefully, they will avoid Ford’s mistakes.

On the other hand, this case points to the many issues inherent in class actions. Coupons are routinely used in class action cases, but frequently not redeemed. Let’s put it this way—if you bought a defective television, and got a coupon to get a reduced price on your next television from the same manufacturer, would you use it? Likely not—the company makes bad products, and you still have to spend more cash. Furthermore, you probably already replaced the T.V. by the time of the settlement, so you just don’t need it.

Certainly, some drug cases end up being class action lawsuits. The infamous Dalkon Shield and Fen-Phen had class action components. More and more, though, drug and device litigation is moving toward individual lawsuits (like the pain pump litigation), or lawsuits that have been consolidated in an MDL for pretrial discovery, but then are disbanded for individual trials (like the gadolinium litigation).