Nissan Brakes Settlement Denied Over Excessive Attorney Fees

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On Nov. 30, a U.S. District Court judge failed to approve a proposed settlement to resolve claims over allegedly faulty braking systems in Nissan vehicles. The judge ruled that “the grossly disproportionate amount of attorneys’ fees is problematic.”

The settlement proposed a total of $3.4 million in attorney fees and approximately $278,056 to be paid out to about 1,500 Class Members who owned the Nissan vehicles with allegedly defective braking systems. $20,000 total was set aside for four plaintiffs serving as Class representatives, and another $542,508 was allotted to pay the settlement administrator. The total settlement was calculated at $4.27 million.

According to the court documents, nearly 264,000 vehicles were affected by the alleged braking system defect, but only 1,472 Class Members filed claims.

U.S. District Judge Phyllis J. Hamilton ruled, “Simply put, a proposed settlement where 93.5 percent of the total payout foes to those directly participating in the litigation (i.e., class counsel, the settlement administrator and the class representatives) creates the impression that the proposed settlement has been negotiated for their benefit, at the expense of unnamed class members.”

Judge Hamilton summarized her view on the disproportionate attorney fees by saying, “Put another way, where 6.5 percent of the payout goes to the class members and 80.2 percent goes to the attorneys purporting to represent those class members, the tail is clearly wagging the dog.”

The initial Nissan brakes class action lawsuit was filed in April 2011 by husband and wife Brandon and Erin Banks, and the proposed settlement was announced last December. The plaintiffs claimed that certain Nissan vehicles were equipped with a delta stroke sensor that was prone to failure. This component allegedly caused the braking systems on the vehicles to malfunction, rendering the plaintiffs unable to stop their vehicles safely.

Erin said her brakes failed when she tried to stop at a red light in her Nissan Titan, causing her car to go through the red light at the intersection. When she and her husband took the vehicle in to get it fixed, it cost them $967 to replace the sensor, and the Nissan dealer and Nissan’s consumer affairs department refused to reimburse the couple for the repairs.

The proposed Class in the lawsuit included owners of 2004-2008 Nissan Titans, Nissan Armadas and Infiniti QX56 trucks and SUVs. The proposed class action settlement included a tiered payout structure based on the mileage of the vehicle at the time the delta stroke sensor was repaired, ranging from $20 for vehicles with over 120,000 miles to $800 for vehicles with less than 48,000 miles.

The average payout to those who submitted claims was to be $180, and more than a third of claimants would receive $60 or less in the settlement. The repair costs for the sensor, however, reportedly approximated $1,000.

Judge Hamilton explained, “The parties’ methodology of tying reimbursement amounts to vehicle mileage has the effect of allowing defendant to profit from their sluggishness in fixing the DSS failures. As some customers were being told that the problem could not be diagnosed, or that a reprogram would solve the problem their reimbursement totals were dropping, from a maximum of $800, potentially all the way down to $200.”

Since the final settlement approval was denied, the next step in the class action lawsuit may come to a jury trial in California.

Plaintiffs are represented by Michael F. Ram and Karl Olson of Ram Olson Cereghino & Kopcyznski LLP, F. Jerome Tapley and Hirlye R. Lutz III of Cory Watson PC, Kirk J. Wolden and Clifford L. Carter of Carter Wolden Curtis LLP and James C. Wyly and Sean F. Rommel of Wyly-Rommel PLLC.

The Nissan Brakes Class Action Lawsuit is Banks, et al. v. Nissan North America Inc., et al., Case No. 4:11-cv-02022, in the U.S. District Court for the Northern District of California.
UPDATE: The Nissan brake defect class action settlement is now open! Click here to file a claim!