Jason Hill v. Volkswagen, Ag , 895 F.3d 597 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE VOLKSWAGEN “CLEAN Nos. 16-17157
DIESEL” MARKETING, SALES 16-17158
PRACTICES, AND PRODUCTS 16-17166
LIABILITY LITIGATION, 16-17168
16-17183
16-17185
JASON HILL et al.,
Plaintiffs-Appellees, D.C. No.
3:15-md-02672-
TORI PARTL; MARCIA WEESE; CRB
RUDOLF SODAMIN; GREG R.
SIEWERT and SCOTT SIEWERT;
RONALD CLARK FLESHMAN, JR.; OPINION
DEREK R. JOHNSON,
Objectors-Appellants,
v.
VOLKSWAGEN, AG; VOLKSWAGEN
GROUP OF AMERICA, INC.; AUDI,
AG; AUDI OF AMERICA, LLC;
PORSCHE CARS NORTH AMERICA,
INC.; ROBERT BOSCH GMBH;
ROBERT BOSCH, LLC,
Defendants-Appellees,
2 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
Appeal from the United States District Court
for the Northern District of California
Charles R. Breyer, Senior District Judge, Presiding
Argued and Submitted December 7, 2017
Pasadena, California
Filed July 9, 2018
Before: A. Wallace Tashima, William A. Fletcher,
and Marsha S. Berzon, Circuit Judges.
Opinion by Judge Berzon
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 3
SUMMARY*
Class Action / Settlement
The panel affirmed the district court’s judgments
certifying a class, approving a settlement, and denying Tori
Patl’s motion to opt out of the settlement that was entered by
Volkswagen and a class of consumers after Volkswagen
admitted that it had installed “defeat devices” in certain 2009-
2015 model year 2.0-liter diesel cars.
The class settlement set aside ten billion dollars to fund a
suite of remedies for class members. The settlement was
reached before class certification. The objectors raised a
variety of challenges.
The panel held that the district court did not abuse its
discretion in certifying the class. The primary objection to
the certification concerned whether the interests of “eligible
sellers” – class members who owned vehicles with defeat
devices when VW’s scheme became public, but sold them
before the proposed settlement was filed – were adequately
represented during settlement negotiations. The panel held
that the eligible sellers benefitted from being in the class
alongside vehicle owners. The panel further held that there
were no signs of an improper conflict of interest that denied
absent class members adequate representation.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
The panel held that the district court more than discharged
its duty in ensuring that the settlement was fair and adequate
to the class, and affirmed the district court’s approval of the
settlement. The panel considered the objections to the
settlement, and concluded that the district court considered
the proper factors, asked the correct questions, and did not
abuse its discretion in approving the settlement. Except with
respect to a reversion provision, the appeals did not directly
challenge the substantive fairness of the settlement, and
therefore the panel held that it had no reason to comment
upon it.
Under the terms of the settlement, money not paid out
from the settlement pool reverted to Volkswagen, and one
objector alleged that this “reversion provision” made it
impossible to know the true value of the settlement to the
class and provided incentive to Volkswagen to discourage
participation in the settlement. The panel held that the
district court adequately explained why the reversion here
raised no specter of collusion. The panel further held that the
incentives for class members to participate in the settlement,
the complementary inducement for Volkswagen to encourage
them to participate, the value of the claims, and the actual
trend in class member participation all indicated that the
reversion clause did not, in design or in effect, allow VW to
recoup a large fraction of the funding pool.
The panel held that the district court did not abuse its
discretion in denying Tori Partl’s motion to opt out of the
class after the deadline to do so had passed. The panel held
that the district court reasonably concluded that Partl had
actual notice of the correct procedure to exclude herself from
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 5
the class, she seemingly misunderstood clear directions, and
such a mistake did not constitute excusable neglect or good
cause.
COUNSEL
James Ben Feinman (argued), James B. Feinman &
Associates, Lynchburg, Virginia, for Movant-Appellant
Ronald Clark Fleshman, Jr.
Sharon Nelles (argued), William B. Monahan, and Robert J.
Giuffra Jr., Sullivan & Cromwell LLP, New York, New
York, for Defendants-Appellants.
N. Albert Bacharach Jr., N. Albert Bacharach Jr. P.A.,
Gainesville, Florida, for Objectors-Appellants Greg R.
Siewert and Scott Siewert.
Bryan E. Brody, Brody & Cornwell, St. Louis, Missouri, for
Objector-Appellant Tori Partl.
Brian Thomas Giles, Giles Lenox, Cincinnati, Ohio, for
Objector-Appellant Derek R. Johnson.
Stephen D. Field, Stephen D. Field P.A., Hialeah, Florida, for
Objector-Appellant Rudolf Sodamin.
Caroline V. Tucker, Tucker Pollard, Irvine, California, for
Objector-Appellant Marcia Weese.
Kevin R. Budner, David S. Stellings, and Elizabeth J.
Cabraser, Lieff Cabraser Heimann & Bernstein LLP, San
Francisco, California; Benjamin L. Bailey, Bailey Glasser
6 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
LLP, Charleston, West Virginia; Roland K. Tellis, Baron &
Budd P.C., Encino, California; W. Daniel “Dee” Miles III,
Beasley Allen Law Firm, Montgomery, Alabama; Lesley E.
Weaver, Bleichmar Fonti & Auld LLP, Oakland, California;
David Boies, Boies Schiller & Flexner LLP, Armonk, New
York; J. Gerard Stranch IV, Branstetter Stranch & Jennings
PLLC, Nashville, Tennessee; James E. Cecchi, Carella Byrne
Cecchi Olstein Brody & Agnello P.C., Roseland, New Jersey;
David Seabold Casey Jr., Casey Gerry Schenk Francavilla
Blatt & Penfield LLP, San Diego, California; Frank Mario
Pitre, Cotchett Pitre & McCarthy LLP, Burlingame,
California; Rosemary M. Rivas, Levi & Korsinsky LLP, San
Francisco, California; Adam J. Levitt, Dicello Levitt & Casey
LLP, Chicago, Illinois; Steve W. Berman, Hagens Berman,
Seattle, Washington; Michael D. Hausfeld, Hausfeld,
Washington, D.C.; Michael Everett Heygood, Heygood Orr
& Pearson, Irving, Texas; Lynn Lincoln Sarko, Keller
Rorhback LLP, Seattle, Washington; Joseph F. Rice, Motley
Rice LLC, Mount Pleasant, South Carolina; Paul J. Geller,
Robbins Geller Rudman & Dowd LLP, Boca Raton, Florida;
Roxanna Barton Conlin, Roxanne Conlin & Associates P.C.,
Des Moines, Iowa; Christopher A. Seeger, Seeger Weiss
LLP, New York, New York; Jayne Conroy, Simmons Hanly
Conroy LLP, New York, New York; Robin L. Greenwald,
Weitz & Luxenberg P.C., New York, New York; Samuel
Issacharoff, New York, New York; for Plaintiffs-Appellees.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 7
OPINION
BERZON, Circuit Judge:
Striving to better, oft we mar what’s well.1
Volkswagen duped half a million Americans into buying
cars advertised as “clean diesel.” They were anything but.
As the lawsuits piled up, the car manufacturer hammered out
a ten-billion-dollar settlement with a class of consumers,
agreeing to fix or buy back the affected vehicles and
providing some additional money as well. Following a
thorough review, the district court blessed the agreement. Of
the half million class members, a handful take issue with the
settlement. We consider those appeals.
BACKGROUND
I. Litigation and settlement talks
In September 2015, Volkswagen (or VW) admitted that
it had installed “defeat devices” in certain of its 2009–2015
model year 2.0-liter diesel cars. These devices—bits of
software in the cars—were at the center of a massive scheme
by VW to cheat on U.S. emissions tests. The clever software
could detect that a car was undergoing government-mandated
testing and activate emissions-control mechanisms. Those
mechanisms ensured that the car emitted permissible levels of
atmospheric pollutants when the test was in progress. During
normal road use, however, the emission-control system was
dialed down considerably. As a result, the affected cars
1
William Shakespeare, King Lear, act 1, sc. 4.
8 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
usually emitted on the road between 10 and 40 times the
permissible level of nitrogen oxide, a gas that reacts with
other gases to create ozone and smog. This was no small-
time con: over 475,000 vehicles in the United States alone
contained a defeat device.2
The scheme became public when the Environmental
Protection Agency (EPA) sent a “Notice of Violation” to
Volkswagen alleging that installation of the defeat devices
violated the Clean Air Act, 42 U.S.C. § 7522. The notice
mentioned the possibility of a civil enforcement action by the
Department of Justice.
Vehicle owners were not far behind. Within three
months, hundreds of lawsuits against VW, most of them class
actions, had been filed in or removed to over sixty federal
district courts. See In re Volkswagen “Clean Diesel” Mktg.,
Sales Practices & Prods. Liab. Litig., 148 F. Supp. 3d 1367,
1368 (J.P.M.L. Dec. 8, 2015). The complaints alleged a bevy
of claims under state and federal law, including—to name just
a few—breach of warranty, breach of contract, unjust
enrichment, and violation of consumer protection, securities,
and racketeering laws.
The Judicial Panel on Multidistrict Litigation transferred
all VW defeat device-related cases to Judge Charles Breyer
in the Northern District of California (“district court” or
“MDL court”) for “coordinated or consolidated pretrial
proceedings.” Id. at 1370. In short order the district court
appointed Elizabeth Cabraser lead counsel for the putative
2
Because some of the vehicles had several owners, and the class
included some former owners of the vehicles, the eventual plaintiff class
numbered approximately 490,000.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 9
consumer class actions and chair of the Plaintiffs’ Steering
Committee (PSC) charged with coordinating pretrial work on
behalf of the class. Around the same time, the United States’
newly filed enforcement action was transferred into the MDL
court.3
Settlement talks began early and went quickly. With the
aid of a court-appointed settlement master, Robert Mueller,
the parties—including the United States and the FTC—had
reached agreements in principle by April 2016. Two months
later—and just seven months after the cases were
consolidated in the MDL court—a trio of proposed settlement
agreements were filed by the private plaintiffs’ class counsel,
the United States, and the FTC.4
II. The settlement agreement
The proposed class settlement set aside ten billion dollars
to fund a suite of remedies for class members. A particular
class member’s choices depended on whether she owned,
3
While settlement talks were underway, a separate FTC enforcement
action was also brought into the MDL court. See FTC v. Volkswagen Grp.
of Am., Inc., 3:16-cv-01534-CRB (N.D. Cal. March 29, 2016), ECF No. 3.
4
The consent decree with the United States required VW to (1) buy
back or fix 85% of the affected vehicles before June 2019 and (2) pay
$4.7 billion to mitigate the effects of the pollution caused by its
noncompliant cars and to promote zero-emissions vehicles. The consent
order with the FTC largely overlapped with the terms of the class action
settlement. For instance, it entered judgment in favor of the FTC in the
amount of $10.033 billion, which could be satisfied by establishing a
funding pool for the consumer settlement in that amount. The additional
relief in the FTC consent order is not relevant to these appeals.
10 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
leased, or had previously owned, but sold, a vehicle with a
defeat device:
1. Owners. Owners had the option to (1) sell
the car back to VW at its pre-defeat device
value (the “buyback” option) or (2) have the
car fixed, provided Volkswagen could
develop an EPA-approved emissions
modification.5 In addition, owners would
receive “owner restitution.” For owners who
bought their cars before September 18, 2015
(“eligible owners”), that was a cash payment
of at least $5,100, but possibly more,
depending on the value of the vehicle.
Owners who acquired their vehicles after that
date (“eligible new owners”) would receive
half the eligible owner restitution described
above—a cash payment of at least $2,550.
2. Lessees. Lessees had the option to
(1) terminate their leases without penalty or
(2) have the car fixed subject to development
of an approved modification. In addition,
lessees would receive “lessee restitution,” a
5
Volkswagen was required to have the modifications approved by the
California Air Resources Board (CARB). If VW was unable to develop
a government-approved modification by deadlines set out in the settlement
agreement, class members would still have time to accept the buyback and
would have an additional window of time to opt out of the settlement. As
of July 27, 2017, the EPA and CARB had approved emissions
modifications for most of the affected 2.0-liter affected vehicles. See
Volkswagen Clean Air Act Civil Settlement, U.S. Envtl. Protection
Agency, https://www.epa.gov/enforcement/volkswagen-clean-air-act-
civil-settlement (last visited June 10, 2018).
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 11
cash payment of $1,529 plus 10% of the
vehicle’s value.
3. Sellers. “Eligible sellers”—those who sold
their cars after the defeat device scheme
became public but before the filing of the
settlement with the court in June
2016—would receive “seller restitution” equal
to one-half of full owner restitution (a cash
payment of at least $2,550, but possibly more,
depending on the value of the vehicle).6
To receive benefits, a class member submits a claim and
supporting documentation; a claims processor verifies the
class member’s eligibility; and the class member elects a
remedy, executes a release, and then obtains the benefit. The
last step varies somewhat according to remedy. The deadline
for submitting a claim is September 1, 2018.
The settlement figure of $10.033 billion was calculated to
cover the most expensive option—the buyback—for all
eligible owners, as well as the remedies selected by all non-
owner class members. Any money left over in the funding
pool will revert to Volkswagen after the claims period runs.7
6
The settlement provided other benefits not pertinent to these appeals,
such as loan forgiveness for class members who still owed money on their
vehicles.
7
The full amount will likely not be disbursed. Some class members
have chosen the less expensive modification remedy; some have opted out
of the settlement; and some will not claim the benefits available to them.
12 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
III. Settlement approval
One month after the proposed settlement was filed with
it, the district court granted preliminary approval and ordered
extensive notice to the class. The following schedule was set:
August 10, 2016 Additional information regarding
class counsel’s prospective
request for attorneys’ fees due.
September 16, 2016 Class members’ objections to the
settlement and requests for
exclusion from it (i.e., opt out)
due.
October 18, 2016 Final fairness hearing on the
settlement.
Eighteen class members appeared at the fairness hearing to
voice concerns about, or objections to, the settlement. By
that point—just four months after the first proposed
settlement was filed and three months after preliminary
approval was granted—over 63% of class members had
registered for benefits under the settlement. Of the 490,000
class members, some 3,300 had opted out (although the
district court noted a trend of those opt outs reversing course
and later claiming benefits), and 462 had timely objected to
the settlement.
One week after the fairness hearing, the district court, in
a 48-page order, granted final approval of the settlement. The
approval order first found that (1) the class met the threshold
requirements to be certified under Rules 23(a) and 23(b)(3),
and (2) notice to the class was adequate, see Fed. R. Civ. P.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 13
23(c)(2). Next, it determined that the settlement was “fair,
reasonable, and adequate,” see Fed. R. Civ. P. 23(e)(2),
devoting over thirty pages to an analysis of eleven separate
factors going to the fairness of the settlement and to the
objections of class members. The district court noted that the
overwhelming early participation in the settlement and the
very low numbers of opt outs and objections signaled the
strength of the settlement. Assessing factors derived from In
re Bluetooth Headset Products Liability Litigation, 654 F.3d
935, 946–47 (9th Cir. 2011), the district court found that none
of the settlement terms evinced collusion or militated against
a finding that the settlement was fair, reasonable, and
adequate.
In her motion for final approval of the settlement, class
counsel stated that she would seek no more than $333 million
in attorneys’ fees and costs.8 The court’s order granting final
approval directed her to submit a motion for fees by
November 8, 2016, and set a deadline for objections to that
motion for six weeks after that.
Fourteen appeals from the order approving settlement
were consolidated with one related appeal. Of those, this
opinion addresses six.9
8
As it turned out, the fee request, granted by the district court, was for
$175 million, little more than half the maximum that lead counsel had
earlier specified. Appeals from the district court’s orders on attorneys’
fees were taken separately and are not addressed in this opinion.
9
Of the fifteen appeals, five have been voluntarily dismissed. In
separately filed orders, we dismiss another two for lack of standing and a
third for failure to prosecute. We address a fourth on the merits in a
14 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
DISCUSSION
“Especially in the context of a case in which the parties
reach a settlement agreement prior to class certification,
courts must peruse the proposed compromise to ratify both
the propriety of the certification and the fairness of the
settlement.” Staton v. Boeing Co., 327 F.3d 938, 952 (9th
Cir. 2003). The settlement here was reached before class
certification, so Staton’s dual direction applies.
The objectors bring a hodgepodge of challenges. One
contests the district court’s decision to approve certification
of the class. Several others dispute the fairness of the
settlement itself or the adequacy of the district court’s process
in approving it. And one appeals the district court’s denial of
her motion to opt out of the class after the deadline had
passed.
The district court’s decision to certify a class action and
its conclusion that a class action settlement is “fair,
reasonable, and adequate” are reviewed for abuse of
discretion. See id. at 960. So is its denial of a class
member’s motion to exclude herself from the class out of
time. See Silber v. Mabon, 18 F.3d 1449, 1453 (9th Cir.
1994). As we explain below, the district court appropriately
exercised its considerable discretion in making its
determinations. We affirm.
separate memorandum disposition. Of the six appeals we address, two
(Nos. 16-17158 and 16-17166) were jointly briefed and present the same
issues.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 15
I. Certification of the class
We begin by considering whether the class was
appropriately certified. Before certifying a class, a court must
ensure that it satisfies the prerequisites of Rule 23, including
that “the representative parties will fairly and adequately
protect the interests of the class.” Fed. R. Civ. P. 23(a)(4).
In the settlement context, a court “must pay ‘undiluted, even
heightened, attention’ to class certification requirements.”
Staton, 327 F.3d at 952 (quoting Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 620 (1997)).
The primary objection before us to the district court’s
certification decision concerns whether the interests of
“eligible sellers”10 in the class were adequately represented
during settlement negotiations. Distilled down, objector
Derek Johnson posits a conflict of interest between the
eligible sellers and the vehicle owners—both the eligible
owners and the “eligible new owners”11—in the class. As
evidence of the conflict, he mainly points to the fact that
eligible sellers receive only half the restitution payment
accorded to eligible owners: In effect, eligible sellers
“split”—figuratively—the amount provided eligible owners
with the eligible new owners, who presumably purchased the
10
As described earlier, eligible sellers are class members who owned
vehicles with defeat devices on September 18, 2015, when VW’s scheme
to evade emissions standards became public, but sold them before the
proposed settlement was filed on June 28, 2016.
11
Those are the class members who own an affected Volkswagen but
did not purchase it until after the defeat device became public knowledge.
16 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
sellers’ cars with full knowledge of the vehicle’s defect.12
According to Johnson, this equivalent distribution to eligible
new owners and sellers is so unfair to sellers that it
demonstrates the sellers were not adequately represented by
the named class representatives, only one of whom was a
seller.
“The adequacy [of representation] inquiry under Rule
23(a)(4) serves to uncover conflicts of interest between
named parties and the class they seek to represent.” Amchem,
521 U.S. at 625. Serious conflicts of interest can impair
adequate representation by the named plaintiffs, yet leave
absent class members bound to the final judgment, thereby
violating due process. See Hanlon v. Chrysler Corp.,
150 F.3d 1011, 1020 (9th Cir. 1998) (citing Hansberry v. Lee,
311 U.S. 32, 42–43 (1940)).13
12
See Frequently Asked Questions, Volkswagen,
https://www.vwcourtsettlement.com/en/2-0-models/ (last visited June 10,
2018) (“I sold my car after September 18, 2015. Why is my payment
different from eligible owners?” “Class members who have sold their
eligible vehicle between September 18, 2015 and June 28, 2016 receive
the Seller Restitution because they no longer possess the vehicle to pursue
a Buyback or Approved Emissions Modification. Because the Settlements
also compensate the current owners of these vehicles, the eligible sellers
split the Owner Restitution compensation with the current eligible
owner.”).
13
The existence of a conflict does not categorically foreclose class
certification. Where a conflict of interest exists within a class, however,
additional due process safeguards—such as creating subclasses for groups
with disparate interests and appointing separate counsel to represent the
interests of each—may be required. See Amchem, 521 U.S. at 627;
Hanlon, 150 F.3d at 1021.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 17
The initial inquiry in assessing adequacy of
representation, then, is whether “the named plaintiffs and
their counsel have any conflicts of interest with other class
members.”14 Id. at 1020. That general standard must be
broken down for specific application; conflicts within classes
come in many guises. For example, two subgroups may have
differing, even adversarial, interests in the allocation of
limited settlement funds. See Amchem, 521 U.S. at 626.
Class members with higher-value claims may have interests
in protecting those claims from class members with much
weaker ones, see Ortiz v. Fibreboard Corp., 527 U.S. 815,
857 (1999), or from being compromised by a class
representative with lesser injuries who may settle more
valuable claims cheaply, see Molski v. Gleich, 318 F.3d 937,
955 (9th Cir. 2003), overruled en banc on other grounds by
Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010),
rev’d, 564 U.S. 338 (2011). Aside from such evident
structural conflicts, some proposed agreements are so unfair
in their terms to one subset of class members that they cannot
but be the product of inadequate representation of that subset.
See, e.g., In re GMC Pick-Up Truck Fuel Tank Prods. Liab.
Litig., 55 F.3d 768, 801 (3d Cir. 1995).
Perusing the settlement before us, we see no indication of
an “irreparable conflict of interest,” either in the structure of
the class or the terms of the settlement, that prevented the
named class representatives from adequately representing
sellers, or prohibited the commingling of the two in a single
class. Hanlon, 150 F.3d at 1021.
14
Adequacy “also factors in competency and conflicts of class
counsel.” Amchem, 521 U.S. at 626 n.20; see also Hanlon, 150 F.3d at
1021. The objection here raises no questions about that aspect of
adequacy of representation.
18 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
Far from getting the short end of the stick, the eligible
sellers gained enormously from being in the class with
vehicle owners. The eligible owners—who comprise the vast
majority of the class—were the ones with leverage enough to
obtain benefits for the class. First, they had individually
valuable and near-ironclad claims for rescission or restitution
against VW. Second, the DOJ consent decree required VW
to fix or buy back a large percentage—85%—of the affected
vehicles. Failure to do so would result in immense fines.
That Volkswagen thus needed to reach a deal with vehicle
owners—a group including both eligible owners and eligible
new owners—gave the class as a whole enormous collective
power in bargaining.
By contrast, the eligible sellers’ claims, viewed in
isolation, were fairly weak. The eligible sellers no longer had
the cars whose purchase allegedly caused them injury; their
theory would have been that they sold their defective cars at
a loss attributable to VW’s installation of the defeat device
(and the subsequent public revelation). But it would be
difficult to prove why any eligible seller chose to sell his car
or the degree to which, if any, the sale price reflected a
discount for the defeat device. As one class member
conceded at the fairness hearing, “[n]o one forced eligible
sellers to sell their vehicles.” Given the speed with which the
putative classes were consolidated and settlement talks began,
it is likely that many eligible sellers knew of the lawsuit, and
some of the looming settlement, when they sold. The cars,
moreover, were still functional and safe to drive, and the
federal government made it clear from the beginning that it
would not punish those driving cars with defeat devices—all
of which puts a question mark over how much value the
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 19
vehicles lost as a result of the scandal.15 So eligible sellers
would face challenging, if not insurmountable, questions of
causation and damages if they litigated their cases against
VW.
Instead of getting nothing, eligible sellers received several
thousand dollars in compensation. They quite possibly
obtained it because they were in the same class as vehicle
owners who had leverage against Volkswagen, not in spite of
that inclusion. The patent upside of the settlement to eligible
sellers defeats Johnson’s central argument that the settlement
was so unfair to sellers that it could only have been the result
of inadequate representation. In that respect, this case bears
no resemblance to ones in which the settlement terms are so
skewed that it may be confidently inferred that some class
members were not adequately represented. See Amchem,
521 U.S. at 627; Molski, 318 F.3d at 956; In re GMC, 55 F.3d
at 801.
Further, even if the eligible sellers’ claims were viable,
the seller restitution, if evaluated as covering the economic
losses incurred, was in an amount that generally fairly
compensated for such losses. Class counsel explained at the
fairness hearing that the restitution figure “in most instances”
15
In a press release, the EPA told drivers: “Car owners should know
that although these vehicles have emissions exceeding standards, these
violations do not present a safety hazard and the cars remain legal to drive
and resell.” The EPA website advises that “EPA will not confiscate your
vehicle or require you to stop driving.” Frequent Questions About
Volkswagen Violations, U.S. Envtl. Protection Agency,
https://www.epa.gov/vw/frequent-questions-about-volkswagen-violations
(last visited June 12, 2018). Most state attorneys general have also
publicly disclaimed any intent to punish drivers of defeat device-equipped
vehicles.
20 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
accounted for the loss realized by eligible sellers when they
sold their vehicles. That Johnson and some others were not
made whole by it does not render the benefit amount
unreasonable,16 much less demonstrate that it was necessarily
the product of inadequate representation of the sellers. See
Molski, 318 F.3d at 955 (representation held inadequate
because “the consent decree released almost all of the absent
class members’ claims with little or no compensation”).
Moreover, the restitution payments overall more closely
resemble compensatory damages awards or penalty
payments, as they are for most class members an amount of
money over and above the economic value of any fix or
buyback. It was therefore sensible that Volkswagen should
be required to pay that “bonus” amount only once per car.
The fact that eligible sellers “split” the restitution payment
with eligible new owners is thus fully explicable, and does
not alter our analysis, demonstrate unfairness to eligible
sellers, or otherwise reveal an intra-class conflict.
In sum, the eligible sellers benefitted from being in the
class alongside vehicle owners. We see no signs of an
“improper conflict of interest . . . which would deny absent
class members adequate representation.” Hanlon, 150 F.3d
16
Any settlement value based on averages will undercompensate
some and overcompensate others. See Robert G. Bone, Agreeing to Fair
Process: The Problem with Contractarian Theories of Procedural
Fairness, 83 B.U. L. Rev. 485, 552 (2003) (“[W]ealth transfers are
endemic to damage class actions that settle for average amounts . . . .”);
see also Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1146 (8th Cir. 1999).
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 21
at 1021. There was no abuse of discretion in certifying the
class.17
II. The settlement
We turn now to the settlement itself. Judicial review of
class settlements is replete with contrasts. The district court
must undertake a stringent review, “explor[ing]
comprehensively all factors, and . . . giv[ing] a reasoned
response to all non-frivolous objections,” Dennis v. Kellogg
Co., 697 F.3d 858, 864 (9th Cir. 2012) (citation and quotation
marks omitted), whereas our own review of the district
court’s reasoning is “extremely limited”; we reverse “only
upon a strong showing that the district court’s decision was
a clear abuse of discretion.” Hanlon, 150 F.3d at 1026, 1027
(citation and quotation marks omitted). In another
dichotomy, “we hold district courts to a high[] procedural
standard” in their review of a settlement, Allen v. Bedolla,
787 F.3d 1218, 1223 (9th Cir. 2015), but we “rarely overturn
an approval of a class action consent decree on appellate
review for substantive reasons.” Staton, 327 F.3d at 960
(emphasis added). Our decision here reflects the interplay of
these standards.
This settlement is highly unusual. Most class members’
compensation—buybacks, fixes, or lease terminations plus
some cash—is as much as, perhaps more than, they could
17
This conclusion is not affected by this court’s recent decision in In
re Hyundai & Kia Fuel Economy Litigation, 881 F.3d 679 (9th Cir. 2018),
petition for reh’g en banc filed, No. 15-56014 (9th Cir. Mar. 8, 2018).
Unlike in that case, the district court here provided a thorough
predominance analysis under Rule 23(b)(3), sufficient under In re
Hyundai. Cf. id. at 702.
22 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
expect to receive in a successful suit litigated to judgment.
And not just some of them: the $10.033 billion set aside
would fund the most expensive remedy option for every
single class member. Class members did not loiter in
claiming these benefits. By the time these appeals were
briefed, Volkswagen had paid out or committed to pay over
$7 billion. And according to the last report from the court-
appointed independent claims supervisor, by May 2018
Volkswagen had fixed or removed from the road 85.8% of all
affected vehicles; paid out $7.4 billion to over 350,000 class
members; and paid out or committed $8.1 billion to almost
450,000 class members. Terming the settlement a
“compromise” of claims, although true of most class action
settlements, is largely inapt here. The district court so noted,
stating that the class members generally “are made whole” by
the settlement.
Not surprisingly given the scope of the remedies afforded,
most of the objections to the settlement are in some sense
procedural: the district court did not sufficiently examine the
settlement for signs of collusion between the defendants and
class counsel; or misinterpreted what signs of collusion there
were; or failed to respond specifically to an objection; or did
not give class members a real shot to respond to class
counsel’s fee motion. In considering these objections, we
keep in mind that the fundamental issue before the district
court was whether the proposed settlement is “fair,
reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2).
A. Review of class settlements
A proposed settlement that is “fair, adequate and free
from collusion” will pass judicial muster. Hanlon, 150 F.3d
at 1027. The inquiry is not a casual one; the uncommon risks
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 23
posed by class action settlements demand serious review by
the district court. An entire jurisprudence has grown up
around the need to protect class members—who often lack
the ability, positioning, or incentive to monitor negotiations
between class counsel and settling defendants—from the
danger of a collusive settlement. See, e.g., Staton, 327 F.3d
at 959–60; In re Bluetooth, 654 F.3d at 946–47; Mirfasihi v.
Fleet Mortg. Corp., 356 F.3d 781, 785 (7th Cir. 2004).
Because of “the inherent tensions among class representation,
defendant’s interests in minimizing the cost of the total
settlement package, and class counsel’s interest in fees,”
Staton, 327 F.3d at 972 n.22, we impose upon district courts
“a fiduciary duty to look after the interests of . . . absent class
members,” Allen, 787 F.3d at 1223.
At the same time, there are few, if any, hard-and-fast rules
about what makes a settlement “fair” or “reasonable.” We
have identified a lengthy but non-exhaustive list of factors
that a district court may consider when weighing a proposed
settlement.18 When, as here, the settlement was negotiated
before the district court certified the class, “there is an even
greater potential for a breach of fiduciary duty” by class
counsel, so we require the district court to undertake an
additional search for “more subtle signs that class counsel
have allowed pursuit of their own self-interests and that of
18
These factors include “the strength of the plaintiffs’ case; the risk,
expense, complexity, and likely duration of further litigation; the risk of
maintaining class action status throughout the trial; the amount offered in
settlement; the extent of discovery completed and the stage of the
proceedings; the experience and views of counsel; the presence of a
governmental participant; and the reaction of the class members to the
proposed settlement.” Hanlon, 150 F.3d at 1026; Officers for Justice v.
Civil Serv. Comm’n, 688 F.2d 615, 625 (9th Cir. 1982).
24 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
certain class members to infect the negotiations.” In re
Bluetooth, 654 F.3d at 946–47.19
For all these factors, considerations, “subtle signs,” and
red flags, however, the underlying question remains this: Is
the settlement fair? The factors and warning signs identified
in Hanlon, Staton, In re Bluetooth, and other cases are useful,
but in the end are just guideposts. “The relative degree of
importance to be attached to any particular factor will depend
upon . . . the unique facts and circumstances presented by
each individual case.” Officers for Justice, 688 F.2d at 625.
Deciding whether a settlement is fair is ultimately “an
amalgam of delicate balancing, gross approximations and
rough justice,” id. (citation omitted), best left to the district
judge, who has or can develop a firsthand grasp of the claims,
the class, the evidence, and the course of the
proceedings—the whole gestalt of the case. Accordingly,
“the decision to approve or reject a settlement is committed
to the sound discretion of the trial judge.” Hanlon, 150 F.3d
at 1026. “As a practical matter we will rarely overturn an
approval of a class action consent decree on appellate review
for substantive reasons unless the terms of the agreement
contain convincing indications that the incentives favoring
pursuit of self-interest rather than the class’s interests in fact
influenced the outcome of the negotiations and that the
district court was wrong in concluding otherwise.” Staton,
327 F.3d at 960.
19
A few such “warning signs” are attorneys’ fees out of proportion to
class member compensation, “clear sailing” arrangements, and agreements
in which unawarded attorneys’ fees revert to the defendants. See In re
Bluetooth, 654 F.3d at 947. A “clear sailing” arrangement is one in which
defendants agree not to object to class counsel’s prospective motion for
attorneys’ fees provided the request does not exceed a certain amount. See
Allen, 787 F.3d at 1224.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 25
With these principles in mind, we turn to the objections.
B. The district court’s examination of signs of
possible collusion
The sole substantive objection before us to the terms of
the settlement centers on its so-called “reversion clause.”
Under the settlement, money not paid out from the $10.033
billion settlement pool will revert to Volkswagen. According
to one objector, the potential for reversion makes it
impossible to know the true value of the settlement to the
class, and creates perverse incentives for Volkswagen to
discourage participation in the settlement.
A “kicker” or reversion clause directs unclaimed portions
of a settlement fund, or in some cases money set aside for
attorneys’ fees but not awarded by the court, to be paid back
to the defendant. See In re Bluetooth, 654 F.3d at 947;
Mirfasihi, 356 F.3d at 783. A reversion can benefit both
defendants and class counsel, and thus raise the specter of
their collusion, by (1) reducing the actual amount defendants
are on the hook for, especially if the individual claims are
relatively low-value, or the cost of claiming benefits
relatively high; and (2) giving counsel an inflated common-
fund value against which to base a fee motion.20 See Allen,
20
See also Mirfasihi, 356 F.3d at 783 (“The part of the $2.4 million
that is not claimed will revert to Fleet, and it is likely to be a large part
because many people won’t bother to do the paperwork necessary to
obtain $10 . . . .”).
Some commentators and courts disfavor reversions because they
arguably undermine the deterrent effect of class actions. See 4 William B.
Rubenstein, Newberg on Class Actions § 12:29 & n.5 (5th ed. 2014). That
is not the basis of the objection here—as it hardly could be, with VW on
26 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
787 F.3d at 1224 & n.4. Given these possibilities, a reversion
clause can be a tipoff that “class counsel have allowed pursuit
of their own self-interests and that of certain class members
to infect the negotiations.” In re Bluetooth, 654 F.3d at 947.
But reversion clauses can also have perfectly benign
purposes and impacts, and so are not per se forbidden.
Rather, to exercise its discretion appropriately, a district court
must explain why the reversionary component of a settlement
negotiated before certification is consistent with proper
dealing by class counsel and defendants. See id. at 950.
The district court adequately explained why the reversion
here raises no specter of collusion. First, as the district court
noted, Volkswagen has every incentive to “to buy back or fix
as many Eligible Vehicles as possible.” Under the terms of
the DOJ consent decree, if Volkswagen fails to fix or remove
from the road 85% of the affected vehicles, it will be fined
$85 million for each percentage point it comes up short.
Second, from a class member’s perspective, the benefits
available are quite substantial, worth at least thousands of
dollars, and in some cases more, to each class member.
Given the amounts at stake, there is little chance class
members will forego the benefits because of the effort of
lodging a claim. Indeed, we needn’t speculate as to
participation. As of the date of the fairness hearing, 336,000
class members (of 490,000 total) had already registered to
claim settlement benefits, and the numbers have only grown.
The incentives for class members to participate in the
settlement, the complementary inducement for Volkswagen
the hook for billions of dollars by the time of the approval hearing on the
settlement.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 27
to encourage them to participate, the value of the claims, and
the actual trend in class member participation all indicate that
the reversion clause did not, in design or in effect, allow VW
to recoup a large fraction of the funding pool.21
The district court did not abuse its discretion in
determining that the reversion clause was a reasonable
provision in this settlement, given the incentives to the class
to claim quite substantial benefits, and was in no way a sign
of collusion or unfairness. See Allen, 787 F.3d at 1225.22
C. The district court’s obligation to respond to every
objection
One objector finds fault in the district court’s failure to
respond specifically to her objection to the settlement.
“To survive appellate review, the district court must show
it has explored comprehensively all factors, and must give a
reasoned response to all non-frivolous objections.” Dennis,
697 F.3d at 864 (citations and quotation marks omitted). That
“procedural burden” on the district court helps to ensure the
21
As noted in the district court’s order, the $10.033 billion figure was
arrived at by estimating the cost of the most expensive remedy—the
buyback—for all owners in the class. Money would be left over in the
funding pool if, as happened, some class members chose the less-
expensive engine modification remedy and others opted out.
22
The same objector argues that the district court abused its discretion
by failing to examine the settlement for the signs of collusion laid out in
In re Bluetooth, 654 F.3d at 947. To the contrary, the district court
explicitly discussed those factors over several pages in its order. We find
no error in its analysis.
28 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
substantive fairness of the settlement. See Allen, 787 F.3d at
1223.
Class member Marcia Weese objected to the settlement
on two grounds relevant here. First, she maintained that
different claims-processing procedures for class members
with liens on their vehicles meant that Rule 23’s
“predominance requirement” was not met.23 Second, and
relatedly, she contended that the long-form notice to the class
did not adequately explain the effects of a class member’s
vehicle lien on her eligibility for settlement benefits. The
district court did not respond to either argument in its order.
As a threshold matter, even assuming Weese’s arguments
were “non-frivolous,” Dennis, 697 F.3d at 864, we would be
reluctant in the extreme, on the procedural ground raised, to
upset a settlement—especially one of such overall benefit to
the class—that otherwise evinced no signs of collusion,
unfairness, or irregularity. See Torrisi v. Tucson Elec. Power
Co., 8 F.3d 1370, 1378–79 (9th Cir. 1993). That is all the
more true here because the objector’s complaint appears to be
purely technical—it draws no link between the district court’s
supposed oversight and any substantive deficiency in the
settlement. By so noting, we are not suggesting a harmless
error standard for class action settlement review or otherwise
disparaging the importance of procedural rigor in the review
of such settlements. We merely emphasize that a reviewing
court is concerned with the overall adequacy of the district
23
Class actions certified under Rule 23(b)(3), such as this one, may
be maintained only if “questions of law or fact common to class members
predominate over any questions affecting only individual members.” Fed.
R. Civ. P. 23(b)(3).
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 29
court’s fairness determination, not with parliamentary points
of order about its process.
In any event, Weese’s objections were frivolous, and so
did not demand a response from the district court. In three
sentences, she argues that additional claims-processing steps
for class members with liens create individualized questions
of law or fact that defeat predominance under Rule 23. But
that objection is faulty on its face. The settlement does not
“den[y] recovery” to, or exclude from class membership,
vehicle owners with liens or loans. It just provides that,
because of technical issues raised by the loan or lien as to the
vehicle’s title, those individuals—who still have the same
legal claims, based on the same questions of law and fact, as
other class members—must take additional steps to claim
their benefits under the settlement. The district court
properly concluded that class members—including those with
liens—asserted the same injury and invoked the same basic
legal theories against Volkswagen, thereby satisfying Rule
23(b)(3).
Again contrary to Weese’s objection, the long-form notice
to class members makes eminently clear how outstanding
loans impact a class member’s compensation. As the notice
explains, the settlement provides additional compensation to
class members with outstanding loans, over and above
buyback value, to help them clean up title and deliver their
vehicles to Volkswagen. The challenge to the notice was thus
frivolous.24
24
The long-form notice discusses outstanding “loans,” rather than
“liens” on the vehicles, but we do not think the distinction significant. A
class member reading the notice would understand that she could
participate in the buyback even if she did not own her vehicle outright.
30 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
Because Weese’s arguments entirely lacked merit, the
district court was not obligated to respond. See Dennis,
697 F.3d at 864.
D. The notice and timing of class counsel’s motion
for fees
Objections were raised with regard to both the timing and
notice of class counsel’s fee application.
Challenges to the notice and timing of fees under Rule
23(h) are typically framed and analyzed as challenges to the
fee award, not the settlement. See In re Mercury Interactive
Corp. Sec. Litig., 618 F.3d 988, 992 (9th Cir. 2010); Allen,
787 F.3d at 1225; Keil v. Lopez, 862 F.3d 685, 703 (8th Cir.
2017). Here, the district court’s fee orders have been
separately appealed.25 By pressing fee-related arguments in
these appeals, we understand appellants to be arguing that the
district court’s scheduling and notice with regard to fee
objections under Rule 23(h) rendered the substantive
settlement, not the fee award, unfair. See Fed. R. Civ. P.
23(e)(2); In re NFL Players Concussion Injury Litig.,
821 F.3d 410, 444 (3d Cir. 2016) (considering whether fee-
scheduling issues merited reversal of the order approving
settlement, even though fees would be separately ruled upon
and appealed). In rejecting these Rule 23(h) arguments in
this appeal, we express no opinion as to the reasonableness or
procedural propriety of the district court’s fee award.
25
One of the two objectors challenging fees in these appeals has also
separately appealed the district court’s order awarding fees to class
counsel.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 31
i. The timing of objections to class counsel’s fee
motion
Several objectors contend that the district court
misapplied Rule 23 by setting the deadline for class members
to object to the settlement before the date by which class
counsel had to file a motion for fees. We disagree.
A court may award reasonable attorneys’ fees in a
certified class action. Fed. R. Civ. P. 23(h). Class counsel
seeking a fee award must make a motion for fees under Rule
54, and notice of the motion must be “directed to class
members in a reasonable manner.” Fed. R. Civ. P. 23(h)(1);
see also Fed. R. Civ. P. 54(d)(2) (laying out the requirements
for an attorney’s motion for fees). Any class member “may
object to the motion.” Fed. R. Civ. P. 23(h)(2).
Rule 23(h) is silent as to the timing of fee motions, but the
requirement that a class member be able to object by
necessity imposes one. After all, a class member can’t object
to a nonexistent motion for fees. “The plain text of [Rule 23]
requires a district court to set the deadline for objections to
counsel’s fee request on a date after the motion and
documents supporting it have been filed.” In re Mercury,
618 F.3d at 993 (emphasis omitted).
In In re Mercury, class members received notice
describing the terms of the settlement and informing them
that class counsel would seek 25% of the nine-figure
settlement sum—almost $30 million—in fees. Id. at 991.
The district court set a deadline for class members to object
to the settlement and the “application” for attorneys’ fees. Id.
But class counsel’s actual fee application was not filed until
two weeks after that deadline. Id. at 990–91. We concluded
32 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
that Rule 23(h) plainly requires that class members have a
chance “to object to the fee ‘motion’ itself, not merely to the
preliminary notice that such a motion will be filed,” even if
counsel specifies in its preliminary notice to the class the
amount in fees it will later request. Id. at 993–94. Setting a
schedule that denies class members a chance to object
meaningfully to a fee motion by class counsel “borders on a
denial of due process,” id. at 993, and represents a failure by
the district court “to fulfill its fiduciary responsibilities to the
class,” id. at 994–95; see also Allen, 787 F.3d at 1225–26; In
re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 954 (9th
Cir. 2015) (explaining that In re Mercury “rejected as
insufficient Rule 23(h) notice when the motion for attorneys’
fees was due after the deadline for class members to object to
the attorneys’ fees motion” (emphasis added)).
But Rule 23(h) does not require that class counsel’s fee
motion be filed before the deadline for class members to
object to, or opt out of, the substantive settlement. Rather, the
rule demands that class members be able to “object to the
motion”—that is, the motion that class counsel must file to
make a claim for fees under Rule 23. Fed. R. Civ. P.
23(h)(1)–(2) (emphasis added). An entirely separate
provision of Rule 23 provides for class members’ objections
to the terms of a proposed settlement. See Fed. R. Civ. P.
23(e)(5). If Rule 23(h)(2) required that class members be
able to object to the settlement as a whole only after class
counsel’s fee motion had been filed, it would say so.26
26
The Third Circuit—the only circuit that has squarely decided the
issue—agrees that deferring consideration of class counsel’s fees until
after a settlement is approved—and, consequently, until after objections
to the settlement are heard and ruled upon—is no affront to Rule 23. See
In re NFL, 821 F.3d at 445–46 (holding that “the separation of a fee award
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 33
In sum, approving a settlement before class counsel has
filed a fee motion does not violate Rule 23(h). What matters
is that class members have a chance to object to the fee
motion when it is filed.27
Here, the district court gave class members six weeks to
object to class counsel’s completed fee motion, and several of
them did so.28 That period of time was more than enough for
class members to “object to the motion.” Fed. R. Civ. P.
23(h)(2). See In re Online DVD-Rental Antitrust Litig.,
779 F.3d at 954 (fifteen-day period to object to class
from final approval of the settlement does not violate Rule 23(h)”); id. at
445 (observing that “the practice of deferring consideration of a fee award
is not so irregular” and collecting cases).
27
We appreciate that the Advisory Committee Notes to Rule 23
encourage the simultaneous filing of notice of the terms of a proposed
settlement and of class counsel’s fee motion. See Fed. R. Civ. P. 23(h)
advisory committee’s note to 2003 amendment (“In cases in which
settlement approval is contemplated under Rule 23(e), notice of class
counsel’s fee motion should be combined with notice of the proposed
settlement . . . .”). A fee motion in some circumstances can “play[] an
important role in class members’ capacity to evaluate the fairness of the
settlement itself.” 4 Rubenstein, supra, § 8:22. But we cannot say that
separating consideration of the settlement from consideration of class
counsel’s fees violates Rule 23(h). We leave for another day, and a more
dubious settlement, the question of whether the inability of class members
to object to a settlement after seeing a completed fee motion from class
counsel could render the whole settlement unfair or unreasonable.
28
To boot, the class had reason to know as early as August 10,
2016—more than a month before the deadline to opt out—that class
counsel would seek no more than $333 million in attorneys’ fees and
costs. See supra note 8. Providing a dollar amount to class members does
not by itself satisfy Rule 23(h), see In re Mercury, 618 F.3d at 994, but
here it gave class members a ballpark estimate early on, in addition to the
more-than-adequate six weeks they had to respond to the fee motion itself.
34 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
counsel’s fee motion satisfied Rule 23). Because the
scheduling orders did not violate Rule 23(h), they provide no
basis for upsetting the settlement.
ii. Notice of class counsel’s fee motion
Relatedly, two objectors argue that the district court erred
by not ensuring that notice of class counsel’s fee motion was
“directed to class members in a reasonable manner.” Fed. R.
Civ. P. 23(h)(1). Because the fee motion was only posted on
the settlement website, the argument goes, rather than
individually mailed or emailed to class members, the notice
was unreasonable and inadequate under Rule 23(h). For their
part, plaintiffs-appellees respond that together, the long-form
settlement notice and the district court’s order granting final
approval sufficiently advised class members to look for a
prospective fee motion posted online.
We do not reach this objection. No matter how construed,
it is a challenge to the fee award, not to the district court’s
order approving the settlement. Unlike the Rule 23(h)
argument regarding the scheduling of class counsel’s fee
motion, the objectors draw no link between the notice of class
counsel’s fee motion—which occurred after the settlement
was approved—and whether the settlement is “fair,
reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2). If
meritorious, objectors’ notice argument goes to whether the
district court’s order awarding fees to class counsel may
stand. For all we know, this court will later address this
objection in the fee award appeals. But as briefed here, the
objection does not point to any possible defect in the
settlement order. We therefore do not pass upon the
objection.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 35
E. Remaining objections
The last objector, Ronald Clark Fleshman, Jr., asks that
we overturn the district court’s approval of the settlement
because it unfairly exposes some class members to future
liability under the Clean Air Act, and because it assertedly
permits the ongoing unlawful use of unmodified
Volkswagens.
We discussed these same arguments at length in our
opinion affirming the district court’s denial of Fleshman’s
attempted intervention in the United States’ enforcement
action. See In re VW “Clean Diesel” Mktg., Sales Practices
& Prods. Liab. Litig., No. 16-17060 (9th Cir. July 3, 2018).
In a nutshell, Fleshman contended there, and maintains here,
that under a proper reading of the Clean Air Act and its state-
level implementations, it is unlawful to drive or resell an
unmodified Volkswagen with a defeat device. Because the
settlement allows class members to wait for an approved
emissions modification—and drive their vehicles in the
meantime—and because class members can decline to
participate in the settlement and continue to drive their
unmodified vehicles as long as they wish, the settlement
permits ongoing illegal conduct. That conduct could,
Fleshman maintains, expose hundreds of thousands of class
members to criminal or civil liability, as well as to the
possibility that their vehicles will be confiscated. At that
point, Fleshman represents, the class members’ claims against
Volkswagen will have been released by the settlement
agreement. That concatenation of risks, and the settlement
notice’s failure to advise class members of them, says
Fleshman, renders the settlement unfair and unreasonable.
36 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
That argument did not persuade us in Fleshman’s last
appeal, and it does not persuade us here. Leaving to one side
whether his interpretation of the Clean Air Act is correct, his
central premise—that class members may be subjected to a
civil or criminal sanction for driving unmodified
Volkswagens—is wholly speculative. As the district court
noted, the EPA and the vast majority of states have stated
unequivocally that they will permit unmodified vehicles to
stay on the road, and none has specifically declared them
illegal to drive. Because the risks and dangers Fleshman
warns about were completely improbable at the time of
settlement (and remain so), the settlement notice need not
have advertised them to class members, nor need the
settlement have protected against them. The district court did
not abuse its discretion in finding the settlement fair and
reasonable over Fleshman’s objections.29
* * * *
Again, the district court’s task in reviewing a settlement
is to make sure it is “not the product of fraud or overreaching
by, or collusion between, the negotiating parties, and that the
settlement, taken as a whole, is fair, reasonable and adequate
to all concerned.” Officers for Justice, 688 F.2d at 625. Our
thorough consideration of the objections before us does not
betoken any doubts on our part that the district court
considered the proper factors, asked the correct questions, and
did not abuse its discretion in approving this settlement.
Except as noted—with respect to the reversion
provision—these appeals did not directly challenge the
29
Likewise, Fleshman’s predictions that Volkswagen would not be
able to develop an EPA-approved modification, or to buy back or fix at
least 85% of the vehicles, have proven wrong.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 37
substantive fairness of the settlement, and we therefore had
no reason to comment upon it directly other than as to that
provision. We do note that the settlement delivered tangible,
substantial benefits to class members, seemingly the
equivalent of—or superior to—those obtainable after
successful litigation, and was arrived at after a momentous
effort by the parties, the settlement master, and the district
court. The district court more than discharged its duty in
ensuring that the settlement was fair and adequate to the
class. We affirm its order approving the settlement.
III. Belated opt-out
In her related appeal, Tori Partl challenges the district
court’s denial of her motion to opt out of the settlement class
after the deadline to do so had passed. Discerning no abuse
of discretion, we affirm.
A. Facts
Partl sued Volkswagen in 2013 for problems related to
water leaks and “abnormal noises” in her vehicle. On August
7, 2016, Partl received an email regarding the class action
settlement. The email included a link to the settlement
webpage. Partl forwarded the email, along with the 32-page
long-form settlement notice available at the settlement
website, to her attorney. The relevant portions of the
settlement notice read:
2. How do I claim Class Action Settlement
benefits?
To claim Class Action Settlement benefits,
you will need to make a claim online at
38 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
www.VWCourtSettlement.com, or by mail or
fax, as the Claims Supervisor provides.
...
50. How do I get out of the Class Action
Settlement?
If you do not want to receive benefits from the
Class Action Settlement, and you want to
retain the right to sue Volkswagen about the
legal issues in this case, then you must take
steps to remove yourself from the Class
Action Settlement. You may do this by
asking to be excluded—sometimes referred to
as “opting out” of—the Class Action
Settlement. To do so, you must mail a letter
or other written document to the Court-
Appointed claims supervisor.
...
You must mail your exclusion request,
postmarked no later than September 16, 2016,
to Opt Out VW Settlement, P.O. Box 57424,
Washington, DC 20037 (emphasis added).
Partl and her lawyer spoke by phone later that day and
agreed that Partl would opt out of the settlement. After their
conversation, Partl returned to the settlement website and
completed what she believed were all the steps needed to opt
out of the settlement.
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 39
The deadline to opt out—September 16, 2016—came and
went. On September 30, Partl learned at a mediation session
in her state-court action that she had missed the deadline.
Following that discovery, her lawyer undertook the necessary
steps to be admitted pro hac vice in the MDL court so he
could attempt to remedy the situation. Finally, on October
17, 2016—one month after the deadline had passed—Partl
filed her belated motion to opt out of the settlement.
The district court denied her motion, noting that the long-
form settlement notice “clearly provide[d]” that to opt out,
class members had to mail in their notices of exclusion by
September 16, 2016. The court held that Partl had actual
notice of the correct procedure to exclude herself from the
class. She seemingly misunderstood clear directions. Such
a mistake does not constitute excusable neglect or good
cause.
B. Discussion
A court may, in cases of “excusable neglect,” extend the
time in which a class member may opt out of a settlement.
See Fed. R. Civ. P. 6(b), 60(b)(1); Silber, 18 F.3d at 1455. In
the context of a tardy opt-out from a class action settlement,
we have specifically identified as the relevant “excusable
neglect” factors “the degree of compliance with the best
practicable notice procedures; when notice was actually
received and if not timely received, why not; what caused the
delay, and whose responsibility was it; how quickly the
belated opt-out request was made once notice was received;
how many class members want to opt out; and whether
allowing a belated opt out would affect either the settlement
or finality of the judgment.” Id.; see also Pioneer Inv. Servs.
Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395
40 IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION
(1993) (stating the factors for determining “excusable
neglect” generally). “The scope of appellate review of the
district court’s disallowance of a late claim is narrow. . . .
[W]e are not to substitute our ideas of fairness for those of the
district judge in the absence of evidence that he acted
arbitrarily, and such evidence must constitute a ‘clear
showing’ of abuse of discretion.” Silber, 18 F.3d at 1455
(internal quotation marks omitted) (quoting In re Gypsum
Antitrust Cases, 565 F.2d 1123, 1128 (9th Cir. 1977)).
The district court did not abuse its discretion in refusing
to grant Partl’s opt-out request. Properly identifying Silber as
governing the excusable neglect inquiry in this context, the
court zeroed in on the two Silber factors most relevant here:
whether Partl received notice, and who was responsible for
the delay. See id. Weighing them, the court concluded Partl’s
neglect was not excusable because (1) she had actual and
timely notice of the proper method of excluding herself from
the settlement; and (2) she was therefore herself squarely
responsible for the failure to opt out on time. That conclusion
is reasonable, supported by the record, and grounded in the
relevant legal standard. Cf. Kyle v. Campbell Soup Co.,
28 F.3d 928, 932 (9th Cir. 1994) (attorney’s two-day-late
filing caused by a mistake in interpreting the court’s
“nonambiguous” local rules was not excusable neglect).
Under the “narrow” review appropriate here, there was no
abuse of discretion in denying Partl’s motion to opt out late.
See id.; In re Gypsum Antitrust Cases, 565 F.2d at 1128.
CONCLUSION
The district court did not abuse its discretion in certifying
the class, approving the settlement, or denying Tori Partl’s
IN RE VOLKSWAGEN “CLEAN DIESEL” LITIGATION 41
motion to opt out of the settlement. Its judgments are
AFFIRMED.