Carter v. Forjas Taurus, S.A.

Citation: 701 F. App'x 759Docket: No. 16-15277 Non-Argument Calendar

Court: Court of Appeals for the Eleventh Circuit; June 29, 2017; Federal Appellate Court

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Troy Scheffler, Richard Jordan, and Steven Glaviano, unnamed class members, are appealing the district court's approval of a class-action settlement and attorney’s fee award related to a lawsuit filed by Chris Carter against Forjas Taurus, S.A. and its affiliates. Carter alleged that certain Taurus pistol models, including his Taurus PT140 Millennium PRO, had safety defects, specifically a "false safety defect" where guns could fire even with the manual safety engaged, and a "drop-fire defect" due to the absence of a trigger blade safety. The lawsuit included multiple claims such as violations of state and federal trade practices, negligence, and strict liability.

Initially, the litigation was contentious, with Taurus resisting service and attempting to dismiss the case. Following extensive discovery and mediation, a settlement was reached. The settlement provides class members the option to either surrender their guns for a cash payment up to $200 (capped at $30 million total) or exchange them for a new model with a trigger blade safety. The cash option is limited to a four-month claims period, while the warranty option is available indefinitely. Additionally, Taurus agreed to pay up to $9 million in attorney’s fees and expenses, which was later modified to $8.3 million, and a $15,000 incentive award to Carter. The district court dismissed the objections from Scheffler, Jordan, and Glaviano, affirming the settlement.

On June 23, 2015, a preliminary approval hearing was held, during which Taurus acknowledged that the class guns lacked trigger blade safety. The district court preliminarily approved the settlement and class notice, certified the settlement class, and appointed the class representative, class counsel, and claims administrator. The court found that the class satisfied the requirements of Federal Rule of Civil Procedure 23(a) and (b)(3), set deadlines for opt-out and objection submissions, and scheduled a final approval hearing. 

Before the final hearing, an expert affidavit from Dr. Andrew Safir estimated the settlement's value at $239.1 million if fully participated, with a reduced estimated value of $29.9 million to $73.6 million based on a 10 to 25 percent claim rate. For the enhanced warranty, he assessed an average value of $235 per replaced gun, resulting in a total worth between $20.9 million and $52.3 million. For the cash option, claimants could receive between $158 and $170 per gun, with a total estimated value of $9 million to $21.3 million. 

Additionally, testimony from Taurus’s Chief Customer Service Representative indicated that under the original warranty, Taurus did not replace guns due to the drop-fire defect. Objections to the settlement were raised by Scheffler, Jordan, and Glaviano. The final approval hearing on January 20, 2016, was delayed due to these concerns, leading to a supplemental notice being sent. At the continued hearing on July 18, 2016, Taurus admitted manual safeties could be incorrectly positioned but attributed this to user error. 

On August 3, 2016, the district court approved the settlement and attorney's fees, overruling the objections. Scheffler, Jordan, and Glaviano appealed the decision. The court must determine if they, as non-named class members, possess the right to appeal. Generally, only parties to a lawsuit can appeal, but the Supreme Court's ruling in Devlin v. Scardelletti allows non-named class members who timely objected during the fairness hearing to appeal without intervening. This principle is applied to the current case despite differences from Devlin.

The objector in Devlin was part of a mandatory class certified under Rule 23(b)(1) with no opt-out rights, making an appeal the only means of protection against being bound by the settlement. In contrast, the current class is certified under Rule 23(b)(3), allowing members like Scheffler, Jordan, and Glaviano to opt out. However, persuasive authority applies Devlin’s rule, stating that a party remains a party until opting out, thus permitting these objectors to appeal. 

The court reviews de novo whether named plaintiffs have standing and reviews class action settlement approvals for clear abuse of discretion. Proponents of such settlements must demonstrate fairness, reasonableness, and adequacy in distribution. The court also reviews attorney's fees and expert testimony admissibility for abuse of discretion.

Regarding standing, the district court must ensure that the class representative, Carter, shares the same interests and injuries as class members. Glaviano challenges Carter's standing, claiming he lacks an actual injury. However, Carter asserts he owns a class gun with the same defects, establishing commonality of injury with other class members. 

On class certification, Glaviano argues that issues specific to individual members predominate over common issues, which is necessary for Rule 23(b)(3) certification. The court clarifies that the focus is on whether common questions predominate, not on the merit outcomes. The district court found that the class guns share common defects, thus rejecting Glaviano's challenge.

Glaviano contends that the district court improperly certified the class due to the anticipated challenges of managing a nationwide class, citing Fed. R. Civ. P. 23(b)(3)(D). However, the Supreme Court's ruling in Windsor indicates that for settlement-only class certifications, the district court is not required to assess potential management difficulties if the case were to go to trial. Therefore, the court acted within its discretion in certifying the class.

Regarding settlement approval, Glaviano challenges the fairness of the settlement, claiming that Taurus can replace class guns with inferior models instead of repairing them under the enhanced warranty. He also argues that the cash option is unfair, allowing Taurus to pay claimants only half of their original purchase price. A district court must ensure that a class action settlement is fair, adequate, and reasonable, and not a product of collusion. The district court found no merit in Glaviano’s argument that his class gun is superior to the new model, noting an expert's assessment that class guns are valued, on average, $235 less than the new models. 

Additionally, the court dismissed Glaviano’s objection regarding Taurus avoiding its warranty obligations, citing deposition testimony indicating that the alleged defect was not covered by the original warranty. The court also determined that the cash payment was reasonable, given that most class guns are over ten years old and should not be valued at their original prices. Settlements are inherently compromises, which the court found applicable in this case.

Scheffler and Jordan raised concerns about potential collusion between class counsel and Taurus, specifically referencing a "clear-sailing agreement" that could diminish class counsel's incentive to negotiate a better settlement. However, these claims lacked support in the record. The district court had reviewed the settlement for signs of collusion and noted that the settlement resulted from extensive, arm's-length negotiations over six mediation sessions, alongside over a year of litigation involving significant expert analysis and discovery disputes. Thus, the district court did not err in approving the settlement despite the clear-sailing agreement.

Scheffler and Jordan contest the district court's $8.3 million attorney’s fee award, arguing it should be based on the actual payout to the class, which they claim will be less than the potential $30 million due to Taurus retaining unclaimed funds. However, precedent does not mandate this approach; instead, a benchmark of 20-30% of the common fund is established for fee awards in this circuit. The district court's award represents 27.7% of the $30 million fund and is deemed reasonable, considering the estimated total settlement value exceeds $239 million when including an enhanced warranty. The court acknowledged the substantial work by class counsel, who logged nearly 8,100 hours, and highlighted the settlement's benefits in public safety and addressing defective products. 

Additionally, Glaviano challenges Dr. Safir's qualifications and methodology for valuing the guns involved, particularly disputing the use of manufacturer’s suggested retail prices (MSRP). The district court, however, found Dr. Safir’s expert opinion credible, as he employed a method involving auction sale prices for used guns and MSRPs for new replacements. Glaviano's alternative valuations were deemed unreliable, based on unverified online postings. The court's reliance on Dr. Safir's expertise was upheld, as judges have significant discretion in evaluating expert testimony and determining its reliability.

Glaviano's Second Amendment challenge to the settlement agreement is rejected, as he argues it infringes on class members' rights to keep their guns by permitting Taurus to confiscate guns returned for repairs. The court finds no precedent supporting the idea that the Second Amendment protects against actions taken by gun manufacturers, despite its applicability to the states. Consequently, Glaviano's challenge is deemed unsuccessful. 

The court affirms that the objections to the class settlement and attorney's fee award lack merit. Glaviano is representing himself, and Taurus withdrew its motion to dismiss after a response was filed. The defendants subsequently answered the complaint, noting that Taurus ceased production of the class guns in 2013 in favor of models with trigger blade safeties, primarily manufactured between 1997 and the mid-2000s. 

During the July 2016 final approval hearing, the district court sought clarity on the specifics of the order it was drafting. The court had previously held a final approval hearing in January, where objectors expressed their concerns, prompting the court to issue a supplemental notice and delay final approval. The court carefully considered the written objections before the July hearing and addressed them in the approval order. The court acted within its discretion in preparing a draft order for the final approval hearing. The legal precedent established in Bonner v. City of Prichard further supports the court's actions.