On May 31, 2012, the United States Court of Appeals for the Third Circuit reversed a lower court decision approving a class action settlement with Volkswagen and Audi over leaky sunroofs in Dewey v. Volkswagen AG, Appeal No. 10-3618(3d Cir. May 31, 2012).

The settlement attempted to resolve legal claims that Audi and VW’s sunroofs were defective in that they leaked if they were not properly maintained, e.g., by removing pollen and plant debris on a periodic basis.  Plaintiffs sued over the defect design with legal claims under the New Jersey Consumer Fraud Act, negligent misrepresentation, fraud, and other state law claims.

The Third Circuit reversed the lower court’s order on the grounds that the class representatives were inadequate under Federal Rule of Civil Procedure 23(a)(4) (“representative parties will fairly and adequately represent the interests of the class”).

Specifically, the class settlement allowed certain class members who belonged to a “reimbursement group” (who already suffered sunroof damage) to file claims for reimbursement from an $8 million settlement fund but required class members who belonged to a “residual group” (who had not yet suffered sunroof damage) to wait until the first group received reimbursement before they could file their own claims for damages.

The Third Circuit held that the Class Representatives of the “reimbursement group” were not adequate representatives for the “residual group.”  Rule 23(a)(4) requires a Class Representative to pursue the best interests of class members.  The full text of the Third Circuit opinion is available at this link.

This decision is not likely to be the end of this class action. Plaintiffs will continue to litigate and, likely, will reach another class settlement with terms that are more favorable for the “residual class” members.  In fact, the Third Circuit gave some possible solutions of its own, writing that the plaintiffs should “simply do away with the distinction between the reimbursement group and the residual group and allow all members of the class to submit reimbursements with no difference in priority.”  Such a solution will, of course, require the agreement of defendants and approval by the lower court after a fairness hearing.  Owners of vehicles that are a part of this litigation should monitor the litigation and be alert for any future class settlement.

The class members in the United States class action who belong to the “reimbursement group” own the following cars: the 2001-2007 VW New Beetle; the 2001-2005 VW Jetta A4 Sedan; the 2001-2005 VW Jetta Wagon A4; 2001-2006 VW Golf A4 and Golf GTI A4; 2005-2007 VW Jetta A5; 2006-2007 VW Golf/GTI A5; 1995-2005 VW Passat B5; 1997-2006 Audi A4; and 1998-2005 Audi A6 C5.  The class members in the “residual group” are those who own the following cars: 1998-2000 and 2007-2009 VW New Beetle; 1997-1999 VW Jetta A3; 1999-2000 VW Jetta A4s; 2008-2009 VW Jetta A5s; 1997-1999 VW Golf/GTI A3; 2008-2009 VW Golf/GTI A5; 1998 VW Passat B5; 1997 VW Passat B4; 2006-2009 VW Passat B6; 2004-20 VW Touareg; 2005-2008 Audi A4 B7 Platform; 1997 Audi A6 C4; 2005-2009 Audi A6 C6; 1997-2009 Audi A8.

In Europe, similar claims could be filed and even aggregated in a class action in one of those Member States (e.g., Italy, Poland, Sweden, Denmark, Norway) that allows for opt-in class actions.  At this point, it is not clear whether any individual claims over leaky sunroofs have even been filed in European courts over Volkswagen and Audi’s allegedly defective sunroofs.  The Dewey litigation suggests similar claims might be viable in Europe.