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In Re: Mercedes-Benz Tele Aid Contract Litigation

September 9, 2011

IN RE: MERCEDES-BENZ TELE AID CONTRACT LITIGATION


The opinion of the court was delivered by: Debevoise, Senior District Court Judge

NOT FOR PUBLICATION

OPINION

The Court has held a Final Approval Hearing to determine if the proposed Settlement of this class action should be approved as fair, reasonable and adequate, to consider proposed stipends to each of twelve class representatives and to consider Class counsel's application for an award of attorneys' fees and expenses.

I. Background

Plaintiffs filed a series of independent actions throughout the United States alleging that Defendant, Mercedes-Benz USA, LLC ("MBUSA") violated applicable consumer protection laws, breach of warranty and unjust enrichment. Certain of these actions were presented to the Judicial Panel for Multi-District Litigation ("JPML") for consolidation and transfer pursuant to 28 U.S.C. § 1407. On February 26, 2008, the JPML issued an order transferring these actions to this Court for coordinated pretrial proceedings. It subsequently transferred additional tag-along actions for consolidated pretrial proceedings.

The Court appointed Interim Co-Lead Class Counsel and Interim Plaintiffs' Liaison Counsel. Plaintiffs filed a Consolidated Class Action Complaint on May 2, 2008, asserting claims against MBUSA for violation of the New Jersey Consumer Fraud Act, breach of implied warranty and unjust enrichment.*fn1 The Consumer Fraud Act claim was in connection with analog-based Tele Aid equipment installed in certain Mercedes-Benz vehicles. The Consolidated Complaint alleged that MBUSA violated the New Jersey Consumer Fraud Act, N.J. Stat. Ann. §§ 56:8-1, et seq. by selling vehicles with Tele Aid equipment that required an analog cellular signal to function, when MBUSA was aware, but failed to disclose, that the analog cellular signal would be discontinued at the end of 2007.

MBUSA filed an answer to the complaint, Extensive class action and merits discovery ensued. On April 27, 2009 the Court granted Plaintiffs' motion for certification of a nationwide Class of persons or entities who purchased or leased a Mercedes-Benz vehicle equipped with an analog-based Tele Aid system after August 8, 2002, who either (1) "subscribed to Tele Aid service until being informed that such series would be discontinued at the end of 2007", or (2) "purchased an upgrade to digital equipment." The Court of Appeals denied MBUSA's Petition for Appeal of the Class certification order.

On August 31, 2009, MBUSA moved to decertify the Class and moved to clarify the Class definition. On March 15, 2010, the Court denied the motion to decertify the Class, but modified the Class definition by (1) changing the beginning date of the Class period from August 8, 2002, to August 22, 2002, and (2) excluding "those who purchased or leased a pre-owned Mercedes-Benz vehicle in December 2006 or thereafter" to which stickers were affixed informing potential purchasers of changes to "the FCC Rule [the Federal Communications Commission Rule regarding the provision of analog wireless service] and the impending obsolescence of analog Tele Aid." The Court of Appeals denied MBUSA's petition for leave to appeal the decision on MBUSA's motion to decertify the Class. This Court denied MBUSA's motion for reconsideration.

Thereafter, settlement discussions began. They were conducted in party-to-party negotiations and in mediation sessions with Professor Eric Green of Resolutions, LLC. At the conclusion of the November 18, 2010 mediation, agreement on all material terms of a Class settlement was reached. Thereafter the parties began discussion of attorneys' fees and expenses and incentive awards for the Class Representatives.

Further in-person discussion and mediation with Magistrate Judge Shipp took place with respect to fees and incentive awards, and on February 15, 2011 agreement was reached.

II. The Settlement Agreement

The Settlement provides remedies for three different groups of Class Members.

Group 1 consists of Class Members who paid for an upgrade of the analog Tele Aid system in their vehicle so that it could operate on digital signals. Class Members in this group will automatically receive a Dual Use Certificate which may be used either as a $650 check or a $1,300 New Vehicle Certificate good toward the purchase or lease of a new Mercedes-Benz vehicle from an authorized Mercedes-Benz dealer. Group 1 Class Members are not required to submit a Claim Form.

Group 2 Class Members are those who did not pay for an upgrade and still own their Mercedes-Benz. They may file a claim to receive an Upgrade Certificate having a value of $650 or a $750 New Vehicle Certificate good toward the purchase or lease of a new Mercedes-Benz from an authorized Mercedes-Benz dealer.

The Upgrade Certificate entitles the holder to obtain a digital upgrade unit (a $650 cost) from an authorized dealer along with a "flash" of the upgrade unit (a $35 cost) at no cost to the holder. A dealer's labor charges for installation of the digital upgrade unit must be paid for by the Class Members. The Class Member will also be required to pay MBrace subscription fee to activate mBrace service. MBrace is the emergency response system that succeeded Tele Aid. If all the 28,500 available digital upgrade units have been distributed to other Claimants, the Class Member will receive a $750 New Vehicle Certificate.

Group 3 Class Members are those who no longer own or lease their Mercedes-Benz and did not purchase an upgrade. Upon submission of a claim form they will receive a $750 New Vehicle Certificate.

In exchange for the foregoing benefits Class Members who have not previously excluded themselves from the Class or who do not opt out of the Settlement in response to the Settlement Notice will provide a release of their claims in this case. They will release MBUSA and "Released Persons" (as defined in the Settlement Agreement) from any liabilities, claims, causes of action, damages, expenses, attorneys fees, losses or demands "relating to the sale or lease of any Mercedes-Benz vehicle equipped with an analog-based Tele Aid System" after August 22, 2002, until the date of the Final Approval of the Settlement Agreement.

As part of the Settlement MBUSA agrees to pay Class Counsel's attorneys' fees and expenses in the total amount of $6,250,000, subject to Court approval of Class Counsel's petition for attorneys' fees and expenses in an amount no greater than that. Court approval of the Settlement shall not be affected by its failure to award attorneys' fees and expenses in the amount requested.

The Settlement Agreement provides that Class Counsel shall petition the Court for a Class Representative Incentive Award of $5,000 per individual to be paid by MBUSA to LeRoy Browning, Jama Giotis, Richard Hankins, Jack D. Kelley, Karen Marcus, Christian Andress Pellegrinis, Mark Russell, Ashish Sen, Colleen Sen, Michael Leslie Shin, Lois A. Stowers and Susan Tuteur. Failure of the Court to ...


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