In re GENERAL MOTORS CORPORATION ENGINE INTERCHANGE LITIGATION. Appeal of Betty OSWALD, on her own behalf and on behalf of all other persons similarly situated, and Phil Miller and Eileen Miller, on their behalf and on behalf of all other persons similarly situated, Plaintiffs-Appellants, v. GENERAL MOTORS CORPORATION, Defendant-Appellee.
No. 78-2036.
United States Court of Appeals, Seventh Circuit.
Argued Sept. 28, 1978. Decided Feb. 26, 1979.
594 F.2d 1106 | 3 Fed. R. Evid. Serv. 992
Lawrence Walner, Chicago, Ill., for plaintiffs-appellants.
William J. Scott, Atty. Gen. of Illinois, Springfield, Ill., for plaintiff-appellee State of Illinois; Donald G. Mulack, Chicago, Ill., of counsel.
Charles E. Clark, Birmingham, Ala., for plaintiffs-appellees.
Thomas A. Gottschalk, Kirkland & Ellis, Chicago, Ill., for defendant-appellee.
Before FAIRCHILD, Chief Judge, and BAUER and WOOD, Circuit Judges.
HARLINGTON WOOD, Jr., Circuit Judge.
1. In 1976 the defendant, General Motors (GM), began substituting engines produced by its Chevrolet Division in many of the 1977 model year cars produced by its Oldsmobile Division. The discovery of the engine switch culminated in the commencement of a plethora of lawsuits against GM in the state and federal courts. The Judicial Panel on Multidistrict Litigation transferred those actions which had been filed in the federal courts to the United States District Court for the Northern District of Illinois for consolidated pretrial proceedings with several actions which were already pending there. See
2. This appeal is from the order of the district court approving the subclass settlement. Although the facts are lengthy, the litigation‘s history complex, and the resolution of the issues difficult, the issues may be stated with relative simplicity:
3. First, is the district court‘s order approving the subclass settlement appealable?
4. Second, should counsel prosecuting the appeal be limited to representing the interests of those class members who objected to the settlement before the district court?
5. Third, did the district court err by refusing to permit appellants’ counsel to inquire into the conduct of the negotiations that led to the settlement?
6. Fourth, did the district court err by dismissing with prejudice the federal claims of those class members who declined to release their state law claims pursuant to the settlement agreement?
7. We find that this court does have jurisdiction to entertain the appeal and hold that the trial court erred in approving the subclass settlement. Consequently, we reverse and remand the order of the district court with instructions.
A. The Engine Interchange Litigation
8. Beginning in 1974, GM planners began considering the manufacturing requirements for GM cars for the 1977 model year. By 1976 various GM management committees began planning for extensive interdivisional engine exchanges. Because the Chevrolet Division had a significant surplus production capacity, GM planners decided to rely on Chevrolet produced engines to meet part of the engine requirements of GM‘s Buick, Oldsmobile and Pontiac Divisions.
9. To institute the engine interchange in the Oldsmobile Division, GM used codes to identify the different engines that would be used in its 1977 Oldsmobiles. The Rocket 350 V-8 engine produced by Oldsmobile, for example, was given the code name “L34“; the Chevrolet engine used in place of the Rocket was given the code “LM1.”1 Moreover, GM, over some objections by the Chevrolet Division, decided to adopt a common engine color for all of its engines. Thus, the distinctive red Chevrolet engine became blue. Despite the planned Oldsmobile-Chevrolet engine change, GM‘s advertising, EPA gas mileage disclosures and communications to Oldsmobile dealers referred to the changes by the use of the codes.
10. The switch from standard components to different components in Oldsmobiles was not confined to engines. GM used different components than it had used in previous years for other parts of the power train (the engine, transmission, and drive axle) in some of its Oldsmobiles. For reasons which do not appear with clarity in the record, GM decided in 1976 to install in all 1977 Oldsmobile Delta 88 coupes and sedans the THM 200 transmission instead of the THM 350, the transmission traditionally used in those cars. The THM 200, like the THM 350, is produced by GM‘s Turbohydramatic Division. The THM 200, originally designed for use in the subcompact Chevette, was used in all 1977 Delta 88 coupes and sedans regardless of whether they contained Oldsmobile or Chevrolet engines. The appellants maintain that GM‘s advertising materials nevertheless indicated that the THM 350 was standard equipment in all 1977 Deltas.
11. The case before this court is a subset of the Oldsmobile litigation spawned by the discovery of the engine interchange. After filing suit in the Cook County Circuit Court alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act,
12. On July 22, 1977, the district court entered an order adopting an agreement of the numerous counsel for the plaintiffs in the consolidated cases. The order created an executive committee of six attorneys to represent the plaintiffs in all pretrial proceedings. See generally Manual for Complex Litigation §§ 1.92-1.93.5 Although the committee was given broad power in the pretrial proceedings, the order provided that the committee could conduct settlement negotiations only with the consent of all counsel for the named plaintiffs.
13. On October 13, 1977, the district court certified the consolidated cases as a class action. The order defined the class as “(a)ll persons . . . who purchased 1977 Oldsmobile automobiles which without their knowledge or consent, contained V-8 engines manufactured by the Chevrolet Motor Division . . .” The court dismissed all federal claims except the Magnuson-Moss claim and declined to exercise its power to take pendent jurisdiction over the related state law claims. The trial court recognized that parallel state court actions were pending, but rejected GM‘s position that the state proceedings should prevent class certification on the Magnuson-Moss claim. Despite the certification of the class, no notice to class members was mailed to inform them of the pendency of the class action at that time.
14. Sometime during the fall of 1977, General Motors entered into settlement negotiations with representatives of the various state Attorneys General who had filed or were contemplating filing actions against GM.6 A representative of the Illinois Attorney General who was also a member of the executive committee participated in the negotiations without leave of the district court or other counsel for the plaintiffs in the federal class action. On December 13, 1977, one of the counsel for the plaintiffs received word that a tentative settlement agreement had been reached by GM and the Attorneys General. The attorney, in essence, requested the district court to order immediate disclosure of the progress of the settlement negotiations or any agreements that had been reached. The trial court, however, regarded the motion as premature. Unwilling to interfere with communications between GM and the Attorneys General before an agreement was reached, the district court declined to order the requested relief. The trial judge remarked that he believed he had sufficient power over the approval of any settlement to protect the interests of class members.
15. Six days later on December 19, the Illinois Attorney General in his capacity as one of the class counsel moved that the district court consider the settlement agreement between GM and all but five of the fifty state Attorneys General.7 The proposed settlement provided that GM would provide to each consumer who had purchased a 1977 Oldsmobile, Buick or Pontiac equipped with a Chevrolet engine on or before April 10, 1977, $200 plus a 36-month or 36,000-mile extended warranty on the power train. In return each purchaser would be required to sign a release of all state and federal claims concerning the substitution of engines, components, parts, and assemblies in the car. GM also agreed to disclose the source of all engines of new GM cars for the next three years. The Attorneys General, in turn, promised to secure dismissals with prejudice of all actions prosecuted by them.
16. The district court showed itself willing to consider the agreement as a basis for settling the class action. Although the court afforded private counsel time to conduct discovery to determine whether the settlement was fair, it denied the motion of some of plaintiffs’ counsel for discovery into the negotiations between the Attorneys General and GM. The court maintained that the negotiation process was irrelevant to the central issue of the fairness of the settlement.
17. Furthermore, the district court entertained GM‘s motion to redefine the class to include only those Oldsmobile purchasers to whom the settlement agreement contemplated payment. The class originally included all 1977 Oldsmobile purchasers who bought their cars before October 13, 1977, without knowledge that the cars had Chevrolet engines. The settlement agreement contemplated narrowing the class to purchasers before April 11, 1977. In an order dated March 14, 1978, the trial court denied GM‘s motion to redefine and narrow the class. The court did, however, designate “for purposes of sending the settlement notice” a subclass of pre-April 11 purchasers.8 Notices informing class members of the pendency of the class action were sent out shortly thereafter. The notice to settlement subclass members, in addition to informing them of the pendency of the action, informed them of the proposed settlement and gave them the opportunity, Inter alia, to opt-out of the action or to object to the proposed settlement. The notice to class members not in the settlement subclass merely provided notice of the action and the opportunity to opt-out.
18. In May 1978, pursuant to its authority under
19. On July 17, 1978, after considering post-hearing memoranda of the various sides in the litigation, the district court entered an order approving the subclass settlement as fair. Adopting GM‘s proposed findings of fact almost verbatim, the district court found that the engines and other parts included in the Oldsmobiles were “comparable” to those warranted. Resolving most of the other contested issues in favor of GM, the district court ordered the action dismissed as to all members of the subclass and directed GM to send an approved notice of settlement to each member of the subclass. Before the notice could be mailed, however, some of the plaintiff-objectors prosecuted this appeal.9
20. The plaintiff-objectors prosecuting this appeal and GM agree that this court has jurisdiction to hear this appeal. The attorney for one of the plaintiffs and an objector to the settlement before the trial court, however, maintains that the trial court‘s order approving the settlement is neither a final decision nor a collateral order within the meaning of
21. There is only one apparent obstacle to our hearing this appeal. The trial court‘s division of the class into two subclasses arguably makes this a multi-party action subject to the requirements of
22. The Supreme Court has taken an “intensely practical” approach when deciding whether judgments are appealable. Mathews v. Eldridge, 424 U.S. 319, 331 n. 11 (1976). In close cases the determination must be made by balancing the “inconvenience and costs of piecemeal review” against “the danger of denying justice by delay.” Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53 (1964). We are cognizant that the federal policy against piecemeal review admits no exception merely because the judgment appealed from affects the conduct of a class action. See Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978) (striking the death knell for the death knell doctrine); Weit v. Continental Illinois National Bank & Trust, 535 F.2d 1010 (7th Cir. 1976) (order requiring notice to class members is not a collateral order). We believe, however, that although the federal courts have narrowly interpreted the collateral order doctrine established in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949), that this case falls within “that small class which finally determine claims of right separable from, and collateral to, rights asserted in the action, too important to be denied review and too independent of the cause itself to require that appellate consideration be deferred until the whole case is adjudicated.” Id. at 546.
23. The first requirement of the collateral order doctrine is that the matter appealed from must have been finally determined by the district court.13 This does not require that the trial court be without power to reverse its ruling; it only requires that no further consideration be likely. 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3911 at 470 (1976). The record amply indicates the trial judge‘s resolve not to reconsider the fairness of the subclass settlement. After the long fairness hearing, the trial court approved the settlement in an order with fairly extensive findings of fact. The order purported to immediately dismiss the claims of all subclass members. Afterward, the trial court on two occasions declined to reconsider its decision. Moreover, although the trial court retained jurisdiction over the settlement subclass action to supervise the implementation of the settlement, this left the trial court with only the ministerial task of executing its judgment. The trial court‘s order, therefore, is not tentative and it finally determines the matter appealed to this court.
25. Although in Norman the court maintained that appellate review of the initial determination of the settlement‘s fairness was completely divorced from the merits of the claim, adequate review of the fairness of a settlement necessarily requires some examination of the underlying cause of action. 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3911 at 385 (1976); See Manual for Complex Litigation § 1.46 at 56. See also Coopers & Lybrand v. Livesay, 437 U.S. at 469 (“the class determination generally involves considerations that are ‘enmeshed in the factual and legal issues comprising the plaintiff‘s cause of action’ “). Nevertheless, several factors bring this appeal within the separateness requirement. First, the Supreme Court has not applied the requirement that the issue be “separate” from the merits to require the precise division of the issues presented on appeal and the elements of the underlying cause of action that a semanticist might expect. See National Socialist Party v. Village of Skokie, 432 U.S. 43 (1977). Moreover, to the extent that this appeal raises issues about the regularity of the conduct of the settlement negotiations or the fairness hearing, consideration of the merits of the plaintiffs’ cause of action is unnecessary. Similarly, because appellate courts will reverse a trial court‘s determination on the fairness of a settlement only if there is a clear abuse of discretion, consideration of the merits is necessarily something less than penetrating.
26. Finally, the order approving the settlement is, in one sense, completely separate from the merits of the action. The trial court‘s approval of the settlement precludes any decision on the merits of the settlement subclass’ claim because the claim will never go to trial.
27. The third requirement of the collateral order doctrine is that the rights asserted would be lost, probably irreparably, if review were delayed until the conclusion of proceedings in the district court. It is unlikely that the claims of the post-April 10, 1977, Oldsmobile purchasers will be decided any time soon. GM has made clear its intention not to settle with that subclass. Therefore years of litigation before the entire class action is concluded is possible. In the meantime, the settlement, if executed, contemplates the release of state and federal claims by those class members who accept the settlement package and dismissal of the Magnuson-Moss claims for those who do not. If the settlement is later undone on appeal, ordering reimbursement by those who accepted the $200 and received benefits under the mechanical insurance policy would be practically impossible.16 Those signing releases might also lose their state claims against GM because of the running of the statutes of limitation. Conversely, those who decline to sign the release, may file and pursue state claims. Any judgment in the state courts may possibly bar subsequent action on their Magnuson-Moss claims.
28. We conclude that “delay of perhaps a number of years in having (their) rights determined might work a great injustice” to the subclass members. Gillespie v. United States Steel Corp., 379 U.S. 148, 153 (1964). They “cannot make important decisions about . . . further participation in this suit without having (their) rights determined now.” Diaz v. Southern Drilling Corp., 427 F.2d 1118, 1123 (5th Cir.), Cert. denied, 400 U.S. 878 (1970).17 The possibility that later appellate review would be effective is simply too slight.
30. In conclusion, the trial court‘s order is not tentative; it is capable of review without extensive examination of the merits; it raises issues which could not be effectively reviewed later; and it presents important, unresolved legal questions for consideration by this court. We hold that the trial court‘s order approving the subclass settlement is an appealable collateral order.
III. Motion to Limit the Appeal
31. Before oral argument, the attorney representing the State of Alabama in this litigation presented to this court a “motion to limit appeal to certain named appellants.” The motion seeks to have the effect of this court‘s decision limited to (1) only the named plaintiffs, Oswald and Miller, the plaintiff-objectors prosecuting this appeal or, alternatively, (2) only those class members who filed objections to the proposed settlement in the district court. We consider the arguments in support of the second alternative first.
32. It is argued that this court‘s decision in Research Corp. v. Asgrow Seed Co., 425 F.2d 1059 (7th Cir. 1970), compels this court to restrict the representative standing of the named plaintiffs who prosecute this appeal to those class members who objected to the settlement in the trial court. In Research, the appellants were members of a defendant class represented in the district court by numerous named defendants. Despite adequate notice, the appellants failed either to request exclusion from the defendant class or to object to a proposed settlement negotiated by the named defendants; the appellants attacked the fairness of the settlement for the first time on appeal. This court held that the failure of the appellants to intervene in the action foreclosed their right to appeal. Here it is argued by analogy that each individual subclass member who failed to object to the settlement before the trial court has waived the right to appeal and the right to be represented by others on appeal. We think the argument is without merit.
33. There is no doubt that the named plaintiffs, Oswald and Miller, preserved the right to appeal. They are parties to the lawsuit; intervention was obviously unnecessary. Moreover, through their attorneys they vigorously objected to the settlement in the district court and created a record adequate for appellate review. Thus, the issue raised by the motion may be refined to whether Oswald and Miller through their counsel may represent the interests of absent subclass members on this appeal.
34. We would be reluctant to hold that absentee class members waive appellate review merely because they failed to take affirmative action when their interests were already being adequately represented by participants in the lawsuit. Cf. Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30, 32-33 (3d Cir. 1971) (objectors’ failure to opt-out of a class action does not preclude appellate review). To do so would unnecessarily restrict the representational character of all class actions. We need not reach the issue here, however, because the notice of the proposed subclass settlement informed subclass members that if they neither opted out of the subclass nor intervened in the lawsuit that “attorneys for the named plaintiffs will represent your interest in these suits.” We think subclass members who received the notice could reasonably rely on class counsel to protect their interests by prosecuting an appeal from the judgment of the district court if necessary. See Gonzales v. Cassidy, 474 F.2d 67 (5th Cir. 1973) (failure to appeal approval of an unfair settlement constitutes inadequate representation). We therefore decline to hold that absentee subclass members waived their right to have the settlement reviewed by this court.
36. We question initially the premise that it is the attorney, not the named plaintiff, who possesses the power to appeal the approval of a settlement. “(T)he decision to appeal a class action judgment must rest with the class plaintiffs,” not class counsel. Pettway v. American Cast Iron Pipe Co., 576 F.2d 1157, 1177-78 (5th Cir. 1978), cert. denied, 439 U.S. 1115 (1979). Since the pretrial order did not purport to restrict the representative capacity of the named plaintiffs prosecuting this appeal, it would seem that the argument misses the mark. The court in Pettway, however, acknowledged that “no clear concept of the allocation of decision-making responsibility between the attorney and the class members has yet emerged.” Id. at 1176. Consequently, assuming Arguendo the premise that the class attorney is the Dominus litus, we consider and reject the argument that the pretrial order prohibits counsel for Oswald and Miller from representing the interests of the class before this court.
37. The pretrial order does not on its face vest the power to appeal in the executive committee. The order itself only lists the committee‘s various duties and powers relating to pretrial proceedings. We would be extremely reluctant to imply a provision that restricts the right to appeal decisions of the trial court. Furthermore, even if the pretrial order contemplated giving the executive committee the power to prohibit individual attorneys from appealing, whether the executive committee has done so is unclear. The minutes of the committee meeting show that the committee did pass a motion that no appeal be taken from the trial court‘s approval of the settlement. Nevertheless, those minutes also indicate that before passage of the motion “(t)he chair ruled that the motion does not proclude (Sic ) anyone from appealing but states the position of the majority of plaintiffs’ counsel.”
38. We believe that the question of whether an appeal should be made and the scope of that appeal should be answered by determining the best interests of the class. The plaintiff-proponents maintain that the settlement is fair, that the approval of the trial court is correct, and that the matter is best left unreviewed by this court. Plaintiff-objectors, of course, disagree. The purpose of
40. We conclude that the best interests of the class warrant that this court review the fairness of the settlement as it affects the entire class. Consequently, we consider the merits of the objections to the trial court‘s approval of the proposed settlement.
IV. Conduct of the Settlement Negotiations
41. The plaintiff-objectors challenge the refusal of the trial court to permit them to conduct discovery into the settlement negotiations. They contend that the trial court‘s order prohibiting discovery and the court‘s limitation of examination of the Assistant Illinois Attorney General during the fairness hearing prevented them from being able to determine whether the proposed settlement was fair, reasonable and adequate. The trial court‘s order limiting discovery evidences its belief that how the settlement was reached was irrelevant to the issue of the fairness of the settlement.19 The court‘s findings of fact, although finding the irregular method of negotiating the settlement did not prejudice subclass members, reaffirmed the court‘s belief that the objection was irrelevant to the adequacy of the settlement “and would not constitute sufficient grounds to withhold an otherwise fair settlement from consideration by the subclass members.”
42. We think that the conduct of the negotiations was relevant to the fairness of the settlement and that the trial court‘s refusal to permit discovery or examination of the negotiations constituted an abuse of discretion.20 In addition, we do not think that the record adequately supports the court‘s conclusion that the seemingly irregular conduct of the negotiations did not prejudice the interests of the class. We must, therefore, reverse the trial court‘s order approving the settlement.
44. The Manual for Complex Litigation provides that inquiry into the conduct of settlement negotiations is pertinent to the court‘s examination of the settlement. Manual for Complex Litigation § 1.46 at 53-54.22 It recommends that before sending a notice to class members of a proposed settlement and before considering the substantive fairness of the settlement, the trial court should conduct a preliminary hearing to determine whether the proposed settlement is “within the range of possible approval.” Id. Among the questions which merit judicial examination at the “probable cause hearing,” the Manual lists: Who were the negotiating parties and to what extent were they authorized to proceed with the settlement of their class’ claims and possibly those of other classes?23
45. Among the reasons for examining whether settlement negotiations were authorized is the danger of defendant “attorney-shopping.”
46. (A) person who unofficially represents the class during settlement negotiations must be under strong pressure to conform to the defendants’ wishes . . . . (A) n individual, lacking official status, knows that a negotiating defendant may not like his “attitude” and may try to reach a settlement with another member of the class.
47. Id. at 59 Quoting Ace Heating & Plumbing Co. v. Crane Co., 453 F.2d 30, 33 (3d Cir. 1971). Thus, unauthorized settlement negotiations create the possibility of negotiation from a position of weakness by the attorney who purports to represent the class.24 In addition, the prestige attendant upon negotiating a large settlement against a corporate defendant and thereby acquiring reputations as consumer advocates may place public attorneys in a situation analogous to private counsel who hope to win large fee awards.25 The possibility of such a conflict of interest as a general rule warrants judicial scrutiny of unauthorized settlement negotiations. Furthermore, settlement negotiations with less than all class counsel weaken the class’ tactical position even if the attorney who enters into the negotiations attempts to represent the class’ interests vigorously.26
49. The record before this court contains facts which cast some doubt on the adequacy of the representation of the class during the settlement negotiations and the fairness of the resulting settlement. These facts warranted in this instance more probing into the conduct of the settlement negotiations than the trial court permitted.
50. The record establishes that the settlement presented to the court by the Illinois Attorney General was either (1) negotiated without the permission of the other class counsel in the federal action as required by the court‘s first pretrial order or (2) negotiated by the Attorney General‘s office in a capacity other than class counsel In this action. The pretrial order prohibited the class counsel executive committee from entering into settlement negotiations without the consent of all plaintiffs’ attorneys. The Attorney General‘s Assistant was a member of the committee and therefore subject to the pretrial order‘s restrictions. Nevertheless, he participated in negotiations with GM without the consent of other counsel.
51. If the negotiations did proceed in violation of the trial court‘s pretrial order,29 we think that the plaintiff-objectors were entitled to discovery to determine whether the negotiations may have prejudiced the interests of the class. Moreover, even if discovery failed to reveal identifiable prejudice, the exclusion of the private counsel from the settlement negotiations should weigh heavily against approval of the settlement. “(T)he excluded plaintiff might well have improved the settlement terms, and while this may be hard to demonstrate, the proponents of the compromise should not be helped by a difficulty of proof created by their improper conduct.” Haudek, The Settlement and Approval of Stockholders’ Actions Part II: The Settlement, 23 Sw.L.J. 765, 770 (1969).30
52. The Assistant Illinois Attorney General maintains, however, that his participation in negotiations between the state Attorneys General and GM did not violate the pretrial order because he was not negotiating as a class representative in the action in the federal court but rather was negotiating as a representative of the State of Illinois in the parallel state proceedings in the Circuit Court of Cook County.31 The motion of the Illinois Attorney General for leave to file the settlement took this position also, although the motion‘s first paragraph based the Attorney General‘s capacity to present the motion on his status as counsel for the State of Illinois, one of the designated class representatives in the federal action. Also consistent with his position that he did not participate in the settlement negotiations as a federal class representative, the Assistant Attorney General admitted during the fairness hearing that the Illinois Attorney General‘s office did not obtain consent to the settlement from the over 100 named private plaintiffs that the Illinois Attorney General represented in the federal action.
54. Several additional facts suggest that the representation of the class during the negotiations was less than vigorous. The class settlement was reached relatively early in the course of the action.35 The federal action had been filed about nine months before; the class had been certified only two months before; and notice to class members of the pendency of the action had not even been mailed. Although discovery had commenced, GM‘s answers to many of the requests were less than completely responsive. Moreover, because the proposed settlement contemplated the release of all claims relating to component substitutions, not just the engine interchanges, the range of possible damages to class members was unclear. It is not possible to tell from the record how fully informed the Attorneys General may have been about the value of the claims they were surrendering.36
55. Not only was the settlement arguably hasty, but also the settlement agreement contemplated the abandonment of the prosecution of the claims of post-April 10 class members.37 The settlement agreement entered into by the Attorneys General obligated them to seek settlement of the entire class action even though the agreement obligated GM to offer payments to only part of the certified class. The agreement contemplated narrowing the class certified to those who purchased Oldsmobiles before April 11, 1977, despite the original certification of the class to include those who purchased before October 13. GM subsequently formally moved the court for such a revised class definition to conform to the settlement agreement. The court denied GM‘s motion, but did decide to create a subclass for settlement purposes. Although the abandonment by the Attorneys General of the claims of post-April 10 purchasers does not by itself warrant the reversal of the settlement of the claims of the pre-April 11 purchasers, it does indicate that the representation during the negotiations may have been inadequate as to all Oldsmobile purchasers who constituted the original class.38
57. Aside from some doubt about whether Attorneys General who, of course, are compensated by the public may ever recover attorneys’ fees and expenses,42 we believe that the method by which the GM-Attorneys General agreement contemplates payment of private attorneys’ fees and expenses is questionable. The Manual condemns settlement agreements which provide
58. that the fees and sometimes expenses of plaintiffs’ counsel are to be paid separately by the defendant(s) over and above the settlement. Frequently, the amount thereof is not disclosed at the time the settlement is proposed. Such an arrangement should not be permitted. All amounts to be paid by the defendant(s) are properly part of the settlement funds and should be known and disclosed at the time the fairness of the settlement is considered.
59. The effect of such an arrangement is to neutralize the court‘s power and responsibility to pass upon the reasonableness of the amounts to be paid to plaintiffs’ counsel since any reduction by the court in the amount counsel agree upon after the class settlement has been approved will simply go to reduce the aggregate amount defendant(s) will pay and will not increase the amount to be paid to the plaintiffs. As a result, there is little incentive for the judge to reduce the agreed upon fees. On the other hand, the effect of such an arrangement may be to cause counsel for the plaintiffs to be more interested in the amount to be paid as fees than in the amount to be paid to the plaintiffs. Only if the aggregate of all payments to be made by defendants is disclosed in the proposed settlement can the class members and the court make any intelligent judgment as to the fairness and reasonableness of a proposed settlement.
60. Manual for Complex Litigation § 1.46 at 62. This court has previously declined to upset a settlement agreement merely because some problems regarding fees and expenses remained unresolved. See McDonald v. Chicago Milwaukee Corp., 565 F.2d 416, 426 (7th Cir. 1977). We do not overrule that decision, but do regard the questionable provision made for expenses and attorneys’ fees as one factor requiring examination of the settlement negotiations.
62. We do not hold that irregular settlement negotiations may never form the basis for a judicially acceptable class action settlement. In fact, a prior decision of this court has approved a settlement negotiated in somewhat similar circumstances. See McDonald v. Chicago Milwaukee Corp., 565 F.2d 416 (7th Cir. 1977).43 We realize that the system of state and federal courts often generates simultaneous litigation over the same subject matter. We recommend that an attorney who is counsel in both state and federal actions request leave of court before entering into settlement negotiations. In addition, the trial court should probably require as a condition to such leave at least that the attorney inform other counsel in the proceedings of the matters discussed during the separate negotiations. Although this practice is preferable, the failure to follow it is not necessarily reversible error if the record clearly indicates that representation of the class during the negotiations was adequate and that the settlement itself is fair.44
63. Similarly, we do not hold that the failure of the trial court to hold a preliminary hearing prior to the mailing of the notice of the proposed settlement is inevitably reversible error.
Although we believe such a hearing is better practice and the Manual for Complex Litigation recommends it, this court has gone as far as to affirm the approval of a settlement when no evidentiary hearing on its fairness was held before or after the notice to the class. See Patterson v. Stovall, 528 F.2d 108 (7th Cir. 1976). We do hold the record in this case raises so many questions about the adequacy of representation during the settlement negotiations that we cannot say the record clearly supports the trial court‘s conclusion that the negotiations did not prejudice the interests of the settlement subclass.45 64. We noted in McDonald v. Chicago Milwaukee Corp., 565 F.2d 416, 422 (7th Cir. 1977), that “Per se rules often represent the abdication of judicial discretion rather than its informed exercise.” Consequently, this court has declined to adopt Per se rules rigidly confining the trial court‘s exercise of its discretion in the supervision of class actions. This does not relieve us, however, of our duty to reverse the trial court‘s judgment when we are convinced that there has been a clear showing of an abuse of that discretion. On the facts of this case, the irregular conduct of the negotiations, the failure of the trial court to examine the irregularities thoroughly, and the evidence in the record indicating that the irregularities may have damaged the interests of the class convince us that such a clear showing has been made. The judgment of the trial court approving the settlement, accordingly, must be reversed.V. Form of the Settlement
65. Even if we were not constrained to reverse the trial court‘s approval of the settlement because of the circumstances surrounding its negotiation, we would have to find the settlement defective in another respect. Although the defect may affect only a small portion of those to whom GM‘s offer would be extended, convenience and expediency cannot justify the disregard of the individual rights of even a fraction of the class. As an appellate court we are without power to rewrite the settlement of the parties. We only have the authority to approve or disapprove the settlement in the form it is presented to us.46 66. The settlement order gives subclass members two options. If the subclass member signs a release he will receive the settlement package and his Magnuson-Moss claim will be dismissed.47 But even if the subclass member refuses to accept GM‘s offer and refuses to sign the release, the order nevertheless dismisses With prejudice the subclass member‘s federal claim.48 The subclass member is presented with an accept-or-else situation: if he does not accept, his federal claim is lost even though he cannot receive the benefits of the settlement package. We have searched the reported decisions in vain for precedent for such a settlement. Finding none and being of the opinion that the dismissal of the action is fundamentally unfair to nonconsenting subclass members, we cannot permit the settlement in its present form to stand. 67. GM argues that the form of the settlement is not unusual. It argues that nonconsenting class members are bound by a class settlement even if it is approved over their objections. Moreover, it argues, the very purpose of the 1966 amendments to Rule 23 was to eliminate the spurious class action in which potential class members could obtain the rewards of a favorable suit, but escape being bound by an unfavorable outcome. Thus, GM would have us hold that the dismissal of the Magnuson-Moss claims of nonconsenting subclass members is permissible. Finally, GM goes on to argue that “(t)he settlement does allow class members, even at this late stage, to reject it and pursue state law remedies. To the extent nonconsenting class members are allowed to pursue any future litigation rights by the settlement . . . it is more favorable to them than federal law or policy require.” We do not disagree with GM‘s arguments in the abstract. In the context of the particular settlement here which attempts to settle both state and federal claims, however, we must disagree. 68. We consider GM‘s last argument first. A fundamental characteristic of the federal courts is their limited jurisdiction. In the same pretrial order in which the trial court certified the class, it also expressly declined to take pendent jurisdiction over the state claims presented by the pleadings. Therefore GM‘s contention that the settlement was more favorable than federal law requires presumably because the trial court could have forced subclass members to accept the settlement package in return for all state and federal claims is without merit. The trial court, having declined jurisdiction over the state claims, was without power to extinguish them. The form of settlement with its unusual use of individual releases was apparently agreed to by GM and the Attorneys General in recognition of the federal court‘s inability to settle the state claims of subclass members.49 The opt-out provision which permits nonconsenting subclass members to pursue state remedies is a necessary consequence of the limited jurisdiction of the federal courts. 69. We do not disagree with GM‘s statement that class members can be bound by a settlement over their objections and that the same is true of objecting named plaintiffs.50 Similarly, we agree thatVI. Directions on Remand
83. In response to a question from the bench at oral argument, GM represented to the court that even if the Settlement of the federal class action is not effectuated, GM may still seek to extend its Offer to individual members of the class.56 Local Rule 22 appears to require the trial court‘s approval of any such communication.57 The question thus presented is whether the trial court can approve the communication of the offer, despite our reversal of the court‘s order approving the settlement. 84. We think that the trial court can. GM‘s offer to settle, if accepted by individual class members, would not amount to a settlement of the class action itself. Individual class members would be free to reject it and continue to have their interests represented in the federal class action. Thus, the communication falls outside the language and the purpose ofVII. Conclusion
87. Our reversal of the district court‘s approval of the proposed settlement is a decision that we reach with considerable reluctance. We do not seek to discourage a full settlement of this litigation. More than a year has passed since the Illinois Attorney General presented the settlement agreement to the district court for its consideration. Most likely little has been done since then, aside from some additional discovery, to advance toward a trial on the merits. In the meantime, members of the settlement subclass must be wondering whatever became of the $200 and the mechanical insurance policy each had been promised. Our reluctance to unscramble on review what has been accomplished in the trial court, however, must yield when what has been done not only creates a substantial doubt about whether the interests of the class were adequately represented during the settlement negotiations, but also unjustifiably prejudices the rights of individual members of the class. We believe that approval of what has been done here would establish a precedent inconsistent with the proper functioning of the class action device. 88. We do not question in the least the good faith of the group of state Attorneys General who negotiated the settlement. We are well aware of the increasingly important role that state Attorneys General have taken in protecting consumers’ rights.64 We are also acutely aware of the difficulties which confront litigants attempting to settle consumer class actions based on the Magnuson-Moss Act. The Act by adopting in substantial part, but not preempting state law remedies provides a legal environment conducive to competing state and federal court actions. The myriad lawsuits make settlement desirable, but simultaneously make achieving an acceptable settlement extraordinarily difficult for all concerned. We hold merely that the method of reaching a settlement that GM and the Attorneys General chose warranted greater scrutiny than the trial court permitted and that the form of effecting the settlement permitted by the trial court was unauthorized. Accordingly, the order of the district court is 89. Reversed.The trial court‘s order creating the settlement subclass did not conform to the requirements of
The uncertainty about the viability of the subclass action on behalf of class members who purchased their cars after April 10, 1977, is significant. The notice to these subclass members informing them of the pendency of the action has been sent out. The subclass members, therefore, may rely on the federal class action to vindicate their interests. If it is later determined that the action cannot be maintained, the statutes of limitation may preclude individual lawsuits in the state courts.
The questions raised about the viability of the subclass action if the settlement of the other subclass action is executed illustrate the inadvisability of creating tentative subclasses for settlement purposes without careful examination of the adequacy of the representation of Each subclass. Cf. Manual for Complex Litigation § 1.46 at 59-61 (condemning tentative classes for settlement purposes).
Notes
Judgment Upon Multiple Claims or Involving Multiple Parties. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.
The history of the negotiations, the sequence of proposals, the persons present, the statements made, and the personal motivations of the negotiators are all irrelevant to the central and only issue before the court, which is the fairness of the proposed settlement.
Manual for Complex Litigation § 1.46 at 53-54.The court must also be concerned with the possibility of a “buy-off” in which the defendants may settle with the named plaintiffs on terms that are more favorable than those available to other class members in order to avoid a class-wide liability. (A similar problem can arise in a “sweetheart” settlement in which the class’ counsel agrees to a less-than-adequate settlement for the class in exchange for a handsome fee.) . . . (E)ach of these situations may involve a breach of the fiduciary duty which the named plaintiffs and their counsel owe to the absent class members.
456 F.2d at 900. Here the problem is that some of the Attorneys General, including the Illinois Attorney General, moved to settle the class action over the objection of their own clients (the 100 plus named plaintiffs in the federal action) and without the consent of the other named plaintiffs and their counsel.We are willing to go along with the provision (Rule 23(e)) that a class action shall not be dismissed or compromised without the approval of the court even though the representative had been an expert in the subject matter and has been represented by counsel of his own choosing. But this does not mean that an attorney can use his control of the action and the court‘s approval to effect a settlement over the objections of the named plaintiff who brought the action for his own benefit and that of the class which he represents.
Manual for Complex Litigation § 1.46 at 54.The court should keep in mind that the inherent danger of collusion is increased when the settlement is negotiated prior to class action determination, for at that point the counsel who is compromised may be only a self-appointed representative of the class.
The notice to subclass members merely stated:If the settlement is approved, General Motors will pay $150,000 to the several Attorneys General for their costs and expenses. General Motors will also pay such additional amounts as the Court may determine for the services and expenses of other counsel for the plaintiffs. No part of the settlement payment to any subclass member will be used to pay such costs, expenses or fees.
As part of the Agreement with the Attorneys General, General Motors agreed to pay an aggregate amount of $150,000, to be divided among those Attorneys General, including the Attorney General of Illinois, accepting the Agreement, in payment for expenses claimed to have been incurred in connection with the subject matter of their litigation. The amount of any attorneys’ fees, costs or expenses to be paid to the attorneys for the private plaintiff purchasers in the class litigation will be subject to the review and approval by the Court. Any award of costs, expenses and/or fees to the private plaintiff purchasers and their counsel in the class litigation will be in addition to, and Not deducted from, the $200.00 offered by General Motors per automobile purchased as part of the proposed settlement.
Manual for Complex Litigation § 1.46 at 62. See Manual for Complex Litigation § 1.46 at 54 (Consideration 7)all amounts to be paid by the defendant(s) are properly part of the settlement fund and should be known and disclosed at the time the fairness of the settlement is considered.
In McDonald the objectors to a settlement contested, Inter alia, the negotiations conducted in connection with a related state court action. The negotiations had begun prior to the commencement of the federal action which was filed only after the negotiations broke down, 565 F.2d at 420. Negotiations resumed prior to class certification, but largely because the trial court delayed certification of the class during the negotiations. Significantly, the trial court was never afforded an opportunity to pass on the issue of the propriety of the negotiations because the objector failed to raise the issue there
In this case, a pretrial order expressly limited the conduct of settlement negotiations. The objectors raised the issue before the trial court by seeking discovery and by questioning the Assistant Illinois Attorney General during the fairness hearing. The trial court when given a chance to consider the conduct of the negotiations ruled that the matter was irrelevant. Finally, the record contains some evidence suggesting that the settlement negotiations prejudiced the class.
Although the trial court concluded that the settlement of the subclass action was fair, our discussion of the conduct of the settlement negotiations necessarily casts doubt upon that conclusion. Moreover, that matter aside, we are not convinced that the court‘s conclusion finds clear support in the record
The most important factor relevant to the fairness of a class action settlement is the strength of plaintiff‘s case on the merits balanced against the amount offered in the settlement. Manual for Complex Litigation § 1.46 at 56. Conceptually, this requires a comparison of the amount offered with the product of (1) the probability of plaintiff‘s prevailing on the merits times (2) the present value of probable damages plaintiff would recover if he did prevail. We do not expect the trial court‘s conclusions to be set forth with mathematical precision. A fairness hearing is not a trial on the merits. The trial court, however, does have a duty to members of the class and to the reviewing court to assess, if not decide, the issues of law which weigh heavily in the above calculus and to consider the most probative evidence bearing on those issues.
The trial court‘s findings contain no express discussion of the merits of the Magnuson-Moss claim. Indeed, with respect to the alleged transmission switch in Delta 88s, the court apparently misapprehended the nature of the objectors’ claims. The court noted that all Delta 88 coupes and sedans contained the THM 200 regardless of whether they had Chevrolet or Oldsmobile engines. The gist of objectors’ claim, as we understand it, is that the transmissions used simply were not those warranted. Thus, the fact that all Delta 88 sedan and coupe purchasers received the smaller transmission is irrelevant. If objectors’ contention is correct, GM breached its warranty to all Delta purchasers, not just those who received Chevrolet engines.
On the issue of compensatory damages, the trial court framed the issue as the “comparability” of the Oldsmobile engines allegedly warranted and those Chevrolet engines received. The findings then recite a mass of technical data indicating that the durability, performance and fuel economy of the Chevrolet and Oldsmobile engines were not materially different. The evidence on these technical issues was conflicting, but we are more concerned by the district court‘s failure to apply the ordinary measure of damages for breach of warranty: “the difference . . . between the Value of the goods accepted and the Value they would have had if they had been as warranted. . . .”
Finally, we question the court‘s resolution of the possibility of recovering punitive damages against GM. The court declined to consider whether punitive damages are recoverable under the
We do not decide here that an award of punitive damages is appropriate under the Magnuson-Moss Act or that if it were that class members would be entitled to them. We do believe, however, that the possibility of such a recovery is not insubstantial and that this possibility as well as the probable compensatory damages were given insufficient weight by the trial court in the calculus of the fairness of the settlement.
GM maintains that the plaintiff-objectors waived this issue by failing to recall the Assistant Illinois Attorney General after being given the opportunity to do so. The record, however, clearly indicates that, given the trial court‘s limitation on the scope of examination, any further questioning by the objectors would have been futile. The objectors brought the issue to the attention of the trial court and cannot be deemed to have waived it.
Thus, we do not hold that the representation of the class members during the negotiations was in fact inadequate. The record simply does not provide any basis for us to tell. We do note, however, that this is not the first class action in which the State of Illinois has negotiated a settlement without the participation of other counsel representing the class. See Liebman v. J. W. Petersen Coal & Oil Co., 73 F.R.D. 531 (N.D.Ill.1973)4 The action on behalf of subclass members who accept and receive the settlement shall be and is hereby dismissed as to defendant General Motors with prejudice
5 The action on behalf of subclass members who do not accept the settlement shall be and is hereby dismissed as to defendant General Motors. Dismissal as to those persons shall be without prejudice solely to their rights to pursue such other remedies as may be otherwise available to them
Haudek, The Settlement and Approval of Stockholders’ Actions Part II: The Settlement, 23 Sw.L.J. 765, 771-72 (1969).
In a brief amicus curiae the Congressional sponsors of the Magnuson-Moss Act, Senator Warren G. Magnuson and Representative John E. Moss, also attack the form of the settlement approved by the trial court. The Congressional sponsors maintain that the class members’ federal rights under the Act cannot be settled or compromised by a class representative without each class member‘s individual consent. They would have us hold that to the extent that
The
The Act itself refers to
The legislative history of the Act also fails to evince a Congressional desire to prohibit class action settlements without the consent of every class member. That history instead suggests that Congress had precisely the opposite intention.
Generally speaking, with specific exceptions set forth in the bill, the procedures are to utilize
Rule 23 of theFederal Rules of Civil Procedure . For instance, in negotiating the use of any complying informal dispute settlement procedure or any other settlement procedure the representative party would negotiate on behalf of the 100 named plaintiffs and any other class members.
Wolfram, The Antibiotics Class Actions, 1976 A.B. Foundation Research J. 251, 264.
Although we note the similarity of our reasoning with that of the Eisen opinion, we express no opinion on whether the fluid class recovery technique itself is inconsistent with the Rules Enabling ActIt is little comfort to objector Frackman that Plaintiffs’ counsel may have examined the documents sought by objector during the course of . . . discovery. As an objector, Frackman was in an adversary relationship with both plaintiffs and defendants and was entitled to at least a reasonable opportunity to discovery against both.
See also National Conference of Commissioners on Uniform State Laws, Proposed Uniform Class Action Act § 12(c)(4) Reprinted in 32 Bus.Law. 83, 94 (1976) (notice of proposed settlement to class members shall include “a description and evaluation of alternatives considered by representative parties“).
Because the bulk of the class consists of individual consumers, this case is unlike State of West Virginia v. Chas. Pfizer & Co., 314 F.Supp. 710, 743 (S.D.N.Y.1970), Aff‘d, 440 F.2d 1079 (2d Cir.), Cert. denied, 404 U.S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115 (1971), in which the court stated that support by class members was entitled to “great weight.” Many of the class members in Pfizer were large public or private institutions with large stakes in the litigation. Thus, they could be expected to come forward to protect their interests. The Pfizer settlement, however, may not have been in the best interest of those individual consumers represented in the action. See In re Coordinated Pretrial Proceedings in Antibiotic Antitrust Actions, 410 F.Supp. 706 (D.Minn.1975) (approving subsequent settlement offering consumers substantially higher payments). See generally Wolfram, The Antibiotics Class Actions, 1976 A.B. Foundation Research J. 251After the submission of the proposed settlement agreement, six of the private counsel in the federal action did agree to support the settlement. The district court relied on the plaintiff-proponents’ support as a factor indicating both the absence of prejudice from the circumstances of the settlement‘s negotiation and the settlement‘s fairness. See Manual for Complex Litigation § 1.46 at 53 (Consideration 5). The support of some private counsel after being presented with the agreement as a Fait accompli does not amount to a ratification of the conduct of the negotiations. As noted Supra, class counsel should know the options considered and the topics discussed during the negotiations before supporting a settlement as fair. In the absence of such familiarity of counsel with the conduct of the settlement negotiations, the inference of fairness to be drawn from their support is weak. Cf. id. at 64 (“a plan should not be approved simply because counsel on both sides recommend it“).
GM‘s brief indicates that only 26 individuals wrote to the trial court to express their approval of the settlementwhile failure by (the district) court to allow General Motors to make such offer to such offerees shall relieve General Motors of the obligation under this Agreement to make such offer, failure by such court to approve settlement of such action . . . shall not relieve General Motors of such obligation if the court has nevertheless allowed General Motors to make such offer in exchange for a Release. . . .
(T)he Attorney General filed a State Court action . . . in the Circuit Court of Cook County, on March 7th of 1977. . . . (T)wo weeks later we filed the Federal Action. So as I told the Court, on several occasions, as we had appeared here during the motions on behalf of the class certification, I was wearing two hats and the Attorney General of Illinois was, likewise, wearing two hats; one as a plaintiff, under the State Court action, under the Consumer Fraud Act, in the Circuit Court of Cook County, and the other as a punitive class representative in the Federal Court Action. . . .
I was perfectly aware of the limitations in Pre-Trial Order No. 1, that prohibited either myself or any representative of the Attorney General‘s office from taking part in nationwide negotiations on this particular class action. With that particular concern and that understanding, I had approached the posture of the overall negotiations.
Now, attendant at those meetings were Assistant Attorneys General literally from every state that had a major action going against General Motors. Each of those Attorneys General were there in their state capacity only they were only concerned about their state lawsuits, as I was concerned, only, about my state lawsuit.
At the opening salvo the opening introductions of the settlement negotiations as people were being introduced, and from which state they attended, and as General Motors’ attorneys were being introduced, as I was being introduced, I made this caveat on the record, that “I‘m here only as an Assistant Attorney General on behalf of the State of Illinois case; I am not here, at all, as any class representative, or on behalf of the nationwide action; and if any discussions are brought up about the nationwide class action, I cannot participate, because that is not my function.” With that caveat, we proceeded to discuss those particular matters attendant to the settlement.
We note that the written settlement agreement between GM and the Attorneys General devoted much space and went into considerable detail reciting the rights and obligations of the parties to the negotiations with respect to the settlement of the Federal action. For example, the agreement, mentioning the Magnuson-Moss class action by name, required the Attorneys General, Inter alia, to seek amendment of the class certification to conform with that group of consumers to whom GM would extend its offer, to represent to the trial court that the proposed settlement was fair and reasonable, and to recommend that the court approve the settlement of the entire action in accordance with the terms of the agreement.
Local Rule 22 of the Northern District of Illinois, captioned “For Prevention of Potential Abuse of Class Actions,” provides:
In every potential and actual class action under
Rule 23, FRCivP , all parties thereto and their counsel are hereby forbidden, directly or indirectly, orally or in writing, to communicate concerning such action with any potential or actual class member not a formal party to the action without the consent of and approval of the communication by order of the Court. Any such proposed communication shall be presented to the Court in writing with a designation of or description of all addressees and with a motion and proposed order for prior approval by the Court of the proposed communication and proposed addressees. The communications forbidden by this rule, include, but are not limited to, (a) solicitation directly or indirectly of legal representation of potential and actual class members who are not formal parties to the class action; (b) solicitation of fees and expenses and agreements to pay fees and expenses, from potential and actual class members who are not formal parties to the class action; (c) solicitation by formal parties to the class action of requests by class members to opt out in class actions under subparagraph (b)(3) ofRule 23, FRCivP ; and (d) communications from counsel or a party which may tend to misrepresent the status, purposes and effects of the action, and of actual or potential Court orders therein, which may create impressions tending, without cause, to reflect adversely on any party, any counsel, the Court, or the administration of justice. The obligations and prohibitions of this rule are not exclusive. All other ethical, legal and equitable obligations are unaffected by this rule.This rule does not forbid (1) communications between an attorney and his client or a prospective client, who has on the initiative of the client or prospective client consulted with, employed or proposed to employ the attorney, or (2) communications occurring in the regular course of business or in the performance of the duties of a public office or agency (such as the Attorney General) which do not have the effect of soliciting representation by counsel, or misrepresenting the status, purposes or effect of the action and orders therein.
The rule was adopted in accordance with the Manual‘s recommendation for preventing unauthorized communications with class members, See Manual for Complex Litigation § 1.41, and follows almost verbatim the local rule contained in the Manual‘s appendix. See id., Appendix § 1.41. (Suggested Rule No. 7). See also Dole, The Settlement of Class Actions for Damages, 71 Colum.L.Rev. 971, 993-97 (1971).
Questions concerning the district court‘s authority to promulgate the rule pursuant to
This case does not present the question, and we need not decide, whether
Predicting the number of class members who might accept GM‘s offer at this time is admittedly speculative, but even if enough named plaintiffs accept the offer to reduce the number of named plaintiffs below the jurisdictional prerequisite, See
Similarly, even if nearly all the offerees accepted GM‘s settlement offer a rather unlikely possibility since the offerees number approximately 70,000 those who rejected the offer would not be denied the benefit of class adjudication of their claims in federal court. Their claims could be adjudicated along with those of the 66,000 post-April 10, 1977, class members to whom GM will not extend the offer. Therefore, the class will not be decertified for lack of the numerosity required by
The class action, although it also provides a vehicle for furthering the substantive policies behind legislation, is primarily a device to vindicate the rights of individual class members. We also note that the Magnuson-Moss Act does provide that the United States Attorney General and the Federal Trade Commission may go to federal court to enjoin violations of the Act.
The trial court has broad discretion in determining whether to allow a class action to be maintained, Jimenez v. Weinberger, 523 F.2d 689 (7th Cir. 1975), Cert. denied, 427 U.S. 912 (1976), King v. Kansas City Southern Industries, Inc., 519 F.2d 20 (7th Cir. 1975), and must necessarily have an equally broad range of discretion in determining whether to create subclasses pursuant to