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Jeep Cherokee transmission settlement could be a clunker for consumers

Plaintiffs lawyers and consumer advocates now warn that a proposed settlement to the case would be a bad deal for certain Fiat Chrysler owners, who could potentially earn much more money by bringing individual claims.

The 2014 Jeep Cherokee was recalled for transmission issues in 2016.
The 2014 Jeep Cherokee was recalled for transmission issues in 2016.Read moreNational Highway Traffic Safety Administration (custom credit)

The closest call was when Peter Lugaro tried to pass an Amish buggy on Route 896, a hilly road that he drove from Lancaster to West Grove.

His Jeep Cherokee’s transmission failed while alongside the horse-drawn carriage, losing power as an oncoming car approached. Unable to accelerate, he thankfully had enough momentum to climb a steep hill, coast around the buggy, and pull over into safety, barely avoiding an accident.

Lugaro’s 2014 Cherokee, which for a moment had less horsepower than a one-horse carriage, is one of hundreds of thousands of cars that manufacturer Fiat Chrysler recalled in 2016 for faulty transmissions that unexpectedly shifted into neutral. The vehicles are part of a nationwide class-action case in the U.S. District Court of New Jersey.

Plaintiffs lawyers and consumer advocates now warn that a proposed settlement to the case would be a bad deal for car owners, who could potentially earn much more money by bringing individual claims. They say the settlement would effectively wipe out a host of lemon law cases at a minimal cost to the manufacturer.

“These sorts of settlements create an informal precedent for depriving consumers who have been sold a defective vehicle their full measure of compensation,” said Jason Levine, executive director of the Center for Auto Safety, a Washington-based pro-consumer group founded by Ralph Nader. He said his group typically supports auto class actions, but finds this proposed settlement to be particularly “lacking."

The settlement, which could receive final court approval as soon as February, would award qualifying consumers up to $2,000 cash or $4,000 toward a trade-in, depending on how many transmission complaints a consumer can document. It would also extend a warranty for the troublesome transmissions by one year, to six years or 100,000 miles.

But Lugaro’s wife, Lindsay, did better when she pursued her own case against Fiat Chrysler over their Jeep Cherokee’s transmission. She won $10,000 cash plus attorneys’ fees in arbitration, pending an appeal, according to the July award. She had four documented repair attempts, her complaint said. That could have earned her $800 cash or $2,000 toward a trade-in under the proposed settlement.

“Whoever is proceeding with this [class-action] case is more concerned with what they’re going to make for themselves instead of their clients,” Peter Lugaro, 37, of Lancaster, said last week.

Lawyers representing class members — Jordan Lurie and Tarek Zohdy of Los Angeles-based Capstone Law and Howard Gutman of Mount Olive, Morris County — did not return requests for comment. They will ask the court to award them up to $1.26 million in attorneys’ fees and costs, according to court filings.

In a statement, Fiat Chrysler noted the settlement was preliminarily approved by a judge as “fair and reasonable." The company also accused the law firm representing Lugaro — Ambler-based Kimmel & Silverman — of being motivated by money in urging consumers to opt out of the settlement.

“The court noted that the settlement was adequate and that the parties acted in good faith,” the statement said. “This effort seems to be motivated more by the plaintiff’s firm’s interest in enriching itself than helping our customers.”

The proposed settlement would affect anyone who bought or leased a new 2014 and 2015 Jeep Cherokee, 2015 Jeep Renegade, 2015 Chrysler 200, and 2015 ProMaster City. Class members have until Jan. 2 to opt out or object to the settlement. Those who don’t opt out will lose their rights to sue Fiat Chrysler over the issue.

To opt out, consumers must send a letter by U.S. mail including their full name and current address; the vehicle’s model, year, and vehicle identification number; and approximate date of purchase or lease. Exclusion requests must be mailed to “Granillo v. FCA US Exclusions c/o Dahl Administration” at P.O. Box 3614 in Minneapolis.

Under Pennsylvania and New Jersey lemon laws, consumers can win full refunds or replacement vehicles if manufacturers can’t fix new cars after a reasonable number of repair attempts, usually considered at least three tries.

That’s similar to the threshold needed to qualify for money under the proposed Fiat Chrysler settlement. Consumers must document at least three transmission-related complaints to receive the minimum benefits: $400 cash or a $1,000 trade-in voucher. Four to five complaints would get consumers $800 cash or $2,000 toward a trade-in, while six or more complaints would produce the maximum payout of $2,000 cash or $4,000 toward a trade-in. The documented complaints must have been made to a Fiat Chrysler dealer and be validated by the manufacturer.

Kimmel & Silverman, the law firm representing Lindsay Lugaro, says it has won Cherokee owners much more money than what’s being offered in the settlement, with victims getting anywhere from $3,500 to a full repurchase of the vehicle.

Lawyer Robert Silverman said the proposed settlement is among other recent auto class actions that produced little benefit for consumers, but earned attorneys hundreds of thousands of dollars. He pointed to a 2016 settlement with Subaru over excessive oil consumption, a deal that gave consumers an extended warranty and reimbursements for oil changes and related costs.

But he said this deal is worse because Fiat Chrysler won’t have to buy back cars with potentially dangerous defects, as state legislatures intended when passing lemon laws. Those statutes also prevent manufacturers from reselling the cars unless they disclose to consumers that the vehicles were bought back under lemon laws.

“The lemon law is designed for two purposes. Not just to compensate consumers and allow attorneys to make money, [but also] to title brand the vehicle and take the vehicle off the road,” Silverman said. “That’s never going to happen here.”

Unlike this proposal, a 2017 class-action settlement with Ford over transmission problems did provide an avenue for class members to get their cars bought back. That class was represented by Capstone Law, the same firm representing class members in this case.