By Anne C. Vitale

After four years of litigation in Missouri, Kansas and California state and federal courts, a Kansas City firm has obtained final court approval from a Jackson County judge for a $33 million nationwide class settlement against DaimlerChrysler Corp. and Mitsubishi Motors North America Inc.

The firm, Stueve Siegel Hanson Woody LLP, represented 390,000 class members with breach of express and implied warranty and deceptive trade practice claims arising out of the allegedly defective 17-inch rims installed on about 350,000 Dodge Avenger and Sebring Coupes — model years 1997-2001, and Mitsubishi Eclipse and Eclipse Spyders — model years 1997-2002.

"Our case demonstrates that nationwide product defect cases are very expensive to pursue and require tremendous resources, but if you have a strong case and persevere, the defendants will ultimately accept responsibility for their conduct," said lead class counsel Patrick J. Stueve.

Stueve called the outcome "very gratifying" — especially in light of the "vigorous defense" mounted by a team of lawyers from Baltimore-based DLA Piper Rudnick and Shook Hardy & Bacon in Kansas City.

"Our class members would have received nothing from defendants but for our efforts," he said. "Many of our clients have experienced several bent rims and now will receive cash reimbursement for their out-of-pocket expenses or now can replace those rims and be reimbursed and also have an extended warranty apply to those new rims."

Jackson County class representatives Tarina Daily and Robert Davis experienced nearly identical problems with their Chrysler and Mitsubishi vehicles. Daily owned a 1997 Chrysler Sebring and experienced four bent rims. When she notified Chrysler of the problem she was denied warranty coverage and told the deformations were due to road conditions.

Davis owned a 2001 Mitsubishi Eclipse Spyder and experienced five bent rims. When he notified Mitsubishi of the rim deformations the company also denied warranty coverage.

Kansas class representative Charles Loose leased a 2000 Mitsubishi Eclipse from a Kansas dealership. He experienced six bent rims while he leased the vehicle — but warranty coverage was denied in each instance. He eventually replaced the original Mitsubishi rims with aftermarket rims because he could not afford to continue paying for replacement rims.

Los Angeles resident Neil Tadken, who served as the California class representative, owned a 2001 Mitsubishi Eclipse Spyder. After experiencing five bent rims, he was denied warranty coverage and told the rim deformations were due to road conditions or driver error.

Stueve filed the initial class action lawsuit in Johnson County, Kan., in November 2001.

Defective design

Stueve claimed that the 17-inch rims were defectively designed to bend or deform to protect the fragile suspension and frame of the vehicles in question. As a result, he said the rims would bend under normal driving conditions from low impacts such as hitting bumps or potholes. The bent rims caused lower tire pressure, resulting in flat tires or blowouts.

To establish the defective nature of the rims at issue, Stueve retained a wheel design expert who conducted impact testing on defendants' rims and competitors' wheels. He further argued that Mitsubishi and DaimlerChrysler knew of the defect prior to selling the vehicles and failed to disclose this information to consumers.

In defense, Mitsubishi and DaimlerChrysler disputed every element of class certification, Stueve said. The companies contended that individual issues concerning causation of the rim deformation predominated over any common issues underlying the claims and that differences in state laws prevented certification of a manageable nationwide class.

Furthermore, he said the car manufacturers identified five experts who supported their claim that the wheels in question were not defective. The companies maintained that any deformation in the rims was the result of driver error or poor road conditions. Therefore, they argued, the warranty claims failed and there was no deception as to any defect in the wheels.

Following a three-day class certification hearing in Johnson County, Kan., Stueve said the judge denied class certification because the class was "not manageable" on a nationwide basis. Stueve then filed in Jackson County, Mo., on a statewide basis.

In addition, Stueve filed in California on a nationwide basis. After a one-day hearing in Orange County, the defendants filed for a recusal under a procedural rule, he said. Stueve countered by filing a writ of mandamus — but the California Court of Appeals ultimately denied the writ.

Meanwhile, Stueve had amended the Jackson County complaint to include a nationwide component. A third three-day class certification hearing was set in Jackson County, he said, when the parties began "meaningful" settlement negotiations the end of April and received preliminary approval on May 27.

Settlement

According to Stueve, the settlement provided that all class members who experienced deformed rims during the three-year warranty period and replaced those rims would receive cash reimbursement of 75 percent of the retail price of the wheels. Those class members who have not yet replaced deformed rims will also be entitled to 75 percent of the retail price of the replacement rims. Based on current retail prices, the settlement translates into cash reimbursements of up to $205 per replacement for Eclipse owners and up to $275 per replacement for Avenger and Sebring owners.

Class members who leased the subject vehicles will also receive cash reimbursement of 75 percent of the retail price for all deformed rims replaced during the lease term. In addition, all lessees who paid penalties for deformed rims at the end of the lease are entitled to receive cash reimbursement for 75 percent of the penalties incurred — which Stueve said could reach up to $600.

In addition to an estimated $27 million in reimbursements, Stueve said Mitsubishi and Chrysler agreed to a one-year extended warranty on all new rims purchased. The companies also agreed to pay class counsel $6 million in attorneys' fees and $211,000 in expenses.

Notice of the settlement was mailed to class members the end of August and published in USA Today on three days in early September. Jackson County Circuit Court Judge Marco Roldan approved the settlement on Oct. 4.

Winning the war

"Class certification is where the war is won or lost," Stueve said, noting that his firm has used its extensive experience in both prosecuting and defending class actions to select only those product defect cases they believe are strong cases for class certification on a nationwide or state-wide basis.

"Sophisticated defendants know that if they can defeat class certification, they can avoid any liability for the product defect because it is unlikely that any individual plaintiff will pursue an expensive product defect case on an individual basis," he said. "For example in this case, the likely recovery for each class member was in the $1,200 range and — even though the customer would continue to experience low tire pressure, flat tires and a rough ride with the deformed rims — it is highly unlikely that many car owners could afford to take on the defendants."

In product defect cases, class certification is most likely to be granted in those cases "where the defect is common to a large number of products, the manufacturer is uniformly denying responsibility for the defect, and the defect falls within the warranty applicable to all affected products," he said. "All those factors were present in this case."

However, he noted that some courts will still deny class certification on a nationwide basis due to "manageability issues" in applying different state laws to consumers in 50 states — which he said was the basis for denial in Johnson County, Kan.

"Because we believed strongly in our case we continued to pursue class certification on a nationwide basis in Orange County, California, state court — where Mitsubishi was headquartered and where we learned through discovery that the wrongful conduct at issue occurred," he explained. "We argued that several California cases made clear that where a California corporation engaged in the wrongful conduct in California, California courts had applied California law to all class members, thus eliminating the alleged manageability issues identified in the Kansas case."

He added that they filed the statewide class action case in Jackson County, Mo., "to make clear to the defendants that even if class certification was denied on a nationwide basis we would pursue state-by-state class certifications where the defendants' manageability arguments would be much weaker."

Battle of the experts

A critical step in the prosecution of the case was the selection of a well-qualified rim expert who tested the rims to confirm that the defect would manifest itself the same way in all the affected vehicles, Stueve said. "Through this expensive testing, our expert was able to effectively respond to many of the defenses asserted by the defendants — defenses that are frequently used in defeating class certification issues."

Since product defect class actions often become a battle of the experts, he said it is crucial to develop expert testimony before seeking class certification. "If you don't, defendants will overwhelm the trial court with a parade of reasons why class certification should not be granted with expensive experts to back them up."

Finally, Stueve stressed that communication with class members is also critical.

"When we select a case to prosecute on a class-wide basis we keep in regular contact with our clients and attempt to identify and contact as many other class members as possible to ensure that the product defect that we have identified, as well as the defendant's denial of responsibility, is in fact widespread," he said. "We also get input from the class concerning settlement negotiations and make sure that all of the issues identified by our class members are covered in any class-wide settlement."

When the settlement is implemented, Stueve said their firm insists on having a third-party administer the settlement if the case involves hundreds of thousands of class members — as it did in this case. But even in such huge cases, he emphasized that the firm insists on personally returning all calls from class members.

"In this case, our staff has answered over 1,400 calls from our clients in the first few weeks," he said, which ensures that all their questions are answered accurately and timely. "The overwhelmingly positive response we have received during these telephone calls — as well as e-mails that we received from our clients — is the most gratifying part for our lawyers and staff that worked on this case."

Facts of the case

Type of Action: Product defect class action

Type of Injuries: Economic

Court/Case Number/Date: Jackson County Circuit Court/4CV218903/Oct. 4, 2005

Caption: Daily, et al. v. DaimlerChrysler Motors Company LLC, et al.

Judge, Jury or ADR: Judge

Name of Judge: Marco Roldan

Verdict or Settlement: $33 million settlement

Special Damages: N/A

Allocation of Fault: N/A

Last Offer: N/A

Last Demand: N/A

Attorneys for Plaintiffs: Patrick Stueve, Norm Siegel, Todd Hilton and Todd McGuire, Stueve Siegel Hanson Woody LLP, Kansas City

Insurance Carrier: N/A

Plaintiffs’ Expert: Robert F. Harold, Venice, Fla. (wheel design expert)

Defendants’ Experts: Lee Carr, Houston (engineer); Edward Caulfield, Naperville, Ill. (engineer); Don Ivey, College Station, Texas (research engineer); Doug Limbert, Phoenix (design engineer); Michele Vogler, Novi, Mich. (engineer)

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