On this date in 1995, the Third Circuit Court of Appeals decided In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liab. Litig., 55 F.3d 768 (3d Cir. 1995). The opinion, written by Judge Becker, was a seminal decision when written and remains an important ruling today.
Among the issues carefully analyzed in this lengthy opinion are (a) the appropriateness of settlement-only class certification (it is appropriate, but must be accompanied by “the rigorous applications of the Rule 23 requisites by the courts at the approval stages”), (b) whether a determination that a proposed class action settlement is fair, reasonable and adequate can substitute for findings under Rule 23 (it cannot), (c) whether settlement classes must be measured by the same Rule 23 standards as litigated classes or by a liberalized standard (the same standard is applicable, though the Supreme Court of the United States would later say, in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), that settlement classes need not meet the manageability component of Rule 23(b)(3), since the proposal is that there be no trial), and (d) how attorneys’ fees for class counsel are to be calculated (in cases under fee-shifting statutes, or where it is difficult to value the settlement, a lodestar analysis based on the number of hours reasonably billed by class counsel multiplied by a reasonable hourly rate, is normally appropriate, while in “common fund” cases, which result in a pool of money on which class members can make claims, a “percentage of the fund” analysis is usually called for).
The Third Circuit concluded that the standards of Rule 23 were not met, so that a settlement class should not have been certified. Moreover, the settlement itself was not fair, reasonable and adequate under the standards of Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), and the district court’s award of attorneys’ fees was also flawed. All that required a remand for further proceedings.
Though subsequent cases have further clarified the law in these areas, anyone who is involved in any way with class actions in the Third Circuit still needs to be aware of the GM Trucks opinion. This seventeenth anniversary of that ruling is as good a time as any to review this lengthy and important decision.