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White v. General Motors Corporation11/3/2000
des you with a Certificate for a discount off the purchase price of any new GM light-duty truck or automobile ..., or allows you to transfer your interests in your Certificate to a third party." The cash option letter goes on to inform the settlement class member that, rather than receive a certificate, he may receive a check for $100.00 from an entity identified as "Certificate Redemption Group" (CRG). At the bottom of the cash option letter is a detachable "$100 CASH OFFER" form which allows the settlement class member to receive $100.00 instead of his $1,000.00 certificate as follows:
To receive $100.00 instead of a Certificate, complete, sign and date the "Application for Certificate" and this "Cash Offer", and return thi s form together with the signed "Application for Certificate" form in the enclosed postage paid reply envelope. I elect to receive $100.00 instead of a Certificate and I hereby irrevocably: (1) instruct that my Certificate be delivered to Chase Bank of Texas, N.A.; (2) acknowledge that I am transferring my entire interest in the Certificate and this Settlement in exchange for a CRG check for $100.00 issued on Chase Bank of Texas, N.A.; and (3) authorize CRG, or its designee, to endorse my Certificate and send me a $100.00 check. (Bolding and underscoring in original.)
Following the May 24, 1999 hearing, counsel for GMC inquired about the existence of any agreements between Class counsel and CRG regarding the cash option being offered to settlement class members in the cash option letter. By letter dated June 8, 1999, Class counsel informed counsel for GMC that CRG had previously agreed to reimburse Class counsel $1.55 million.
Involvement of CRG as a "Market-Maker"
The record indicates Class counsel and CRG have had an ongoing relationship for several years during this class action litigation. In 1995, the Third Circuit Court of Appeals set aside a settlement agreement, similar to that at issue herein, reached in a multi-district litigation proceeding involving the same parties herein, because the settlement was "not fair, reasonable, or adequate." In re: General Motors Corporation Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768, 818 (3rd Cir. 1995), cert. denied, 516 U.S. 824, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995). One of the reasons the settlement was found deficient was due to a lack of proof as to whether a settlement class member's option to transfer his $1,000.00 certificate was of any value. The federal court noted the value of the transfer option depended on the development of a secondary market for the certificates, and that the terms of the then settlement agreement precluded the "development of a market-making clearing house mechanism." Id., 55 F.3d at 809.
When the nationwide litigation was brought to the Louisiana court system, the settlement agreement was revised to increase the transferability of the certificates and to facilitate the development of a secondary market. At a fairness hearing held on November 6, 1996, Class counsel referred to an offer allegedly received by Class counsel from an entity known as "ICMC investors" to purchase all certificates issued within the first 75 days after issuance of the proof of claim for $100.00. Apparently, "ICMC investors" is another name for CRG.
The record does not contain an agreement between Class counsel and CRG regarding the cash option offer. However, by including the cash option letter containing CRG's alleged offer, Class counsel sought to further develop the secondary market by making CRG the court approved "market maker" who would buy the certificates from settlement class members and then market them to willing buyers.
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