girard gibbs llp united states district court notice of ... · authorities, declaration of eric h....

MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT CASE NO. 5:10-CV-05246-JF

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Eric H. Gibbs (State Bar No. 178658) [email protected] Dylan Hughes (State Bar No. 209113) [email protected] Geoffrey A. Munroe (State Bar No. 228590) [email protected] GIRARD GIBBS LLP 601 California Street, 14th Floor San Francisco, CA 94108 Telephone: (415) 981-4800 Facsimile: (415) 981-4846

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JONAS SUGARMAN and QUANG LE, on behalf of themselves and all others similarly situated, Plaintiffs, vs. DUCATI NORTH AMERICA, INC., Defendant.

Case No. 5:10-cv-05246-JF NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT; AND PLAINTIFFS’ MEMORANDUM IN SUPPORT Date: September 16, 2011 Time: 9:00 A.M. Judge: Hon. Jeremy Fogel

Case5:10-cv-05246-JF Document68 Filed08/26/11 Page1 of 26

1 MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT

CASE NO. 5:10-CV-05246-JF

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NOTICE OF MOTION AND MOTION

PLEASE TAKE NOTICE that on September 16, 2011, at 9:00 a.m. before the Honorable

Jeremy Fogel in Courtroom 3, 5th Floor of the United States District Court for the Northern District of

California, San Jose Division, located at 280 South 1st Street, San Jose, California 95113, Plaintiffs

Jonas Sugarman and Quang Le will and hereby do move for an order granting preliminary approval of

the parties’ proposed class settlement, conditionally certifying a settlement class, appointing Plaintiffs

as class representatives and their attorneys as class counsel, directing dissemination of the proposed

class notice, and setting a fairness hearing to determine whether the settlement should be granted final

approval.

Plaintiffs’ motion is based on this notice; the accompanying Memorandum of Points and

Authorities, Declaration of Eric H. Gibbs and all attachments thereto (including the Settlement

Agreement), and Proposed Order Granting Preliminary Approval of Class Settlement, Proposed Long

Form Notice to the Settlement Class; and all other papers filed and proceedings had in this action.

DATED: August 26, 2011 Respectfully submitted, GIRARD GIBBS LLP By: /s/ Eric H. Gibbs Eric H. Gibbs

Dylan Hughes Geoffrey A. Munroe 601 California Street, 14th Floor San Francisco, CA 94108 Telephone: (415) 981-4800 Facsimile: (415) 981-4846



i TABLE OF CONTENTS

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TABLE OF CONTENTS Page

I. INTRODUCTION ......................................................................................................................... 1 II. SUMMARY OF THE LITIGATION AND SETTLEMENT ........................................................ 2

A. Plaintiffs’ Complaint .......................................................................................................... 2 B. Investigation, Litigation, Discovery, and Settlement Negotiations ................................... 2

1. Plaintiffs’ Pre-suit Investigation & Pre-suit Demand Letters ................................ 2 2. Ducati’s Motion to Dismiss ................................................................................... 3 3. Discovery and Settlement Negotiations ................................................................. 3

C. Overview of the Settlement ............................................................................................... 5

1. The Settlement Class.............................................................................................. 5 2. The Extended Warranties ....................................................................................... 6

a) Extended Warranty Periods ....................................................................... 6 b) Repairs for Non-Cosmetic Problems ......................................................... 7 c) Repairs for Cosmetic Problems ................................................................. 9 d) Related Parts and Accessories ................................................................... 9 e) Transferability of Extended Warranties ..................................................... 9 f) Dispute Resolution Process ........................................................................ 9

3. Notice of Fuel Tank Issues and Proposed Settlement .......................................... 10 4. Mutual Release ..................................................................................................... 10 5. Attorneys’ Fees, Expenses, and Service Awards ................................................. 10

III. ARGUMENT ............................................................................................................................... 11

A. Overview of the Class Action Settlement Process .......................................................... 11 B. The Settlement Should be Preliminarily Approved ........................................................ 11


ii TABLE OF CONTENTS

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1. The Role of Preliminary Approval ...................................................................... 11 2. The Proposed Settlement Merits Preliminary Approval ...................................... 12

C. The Proposed Settlement Class Should be Certified for Settlement Purposes and

Plaintiffs’ Counsel Appointed As Class Counsel ............................................................ 14 1. The Proposed Settlement Class Meets the Requirements of Rule 23(a) ............. 14 2. The Proposed Settlement Class Meets the Requirements of Rule 23(b)(3) ......... 16 3. Plaintiffs’ Counsel Meet the Requirements of Rule 23(g). .................................. 17

D. The Court Should Order Dissemination of the Proposed Class Notice .......................... 17

1. The Settlement Agreement Provides for the Best Method of Notice

Practicable Under the Circumstances .................................................................. 17 2. The Proposed Form of Notice Adequately Informs Class Members of the

Litigation and Their Rights in Connection with the Settlement .......................... 18 3. Notice of the Settlement will be Provided to Appropriate Federal and State

Officials................................................................................................................ 18 E. The Court Should Set a Schedule for Final Approval ..................................................... 19

IV. CONCLUSION ............................................................................................................................ 20


iii TABLE OF AUTHORITIES

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TABLE OF AUTHORITIES Case Page Amchem Prods. v. Windsor, 521 U.S. 591 (1997) ............................................................................................................... 14, 15 Brothers v. Hewlett-Packard Co., No. 06-2254, 2007 WL 485979 (N.D. Cal. Feb. 12, 2007) ......................................................... 13 Daffin v. Ford Motor Co., 458 F.3d 549 (6th Cir. 2006) ....................................................................................................... 16 Daughtery v. American Honda Motor Co., 144 Cal. App. 4th 824 (2006) ...................................................................................................... 14 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) ......................................................................................... 15, 16, 17 Harris v. Vector Marketing Corp., No. C-08-5198, 2011 WL 1627973 (N.D. Cal. April 29, 2011) ............................................ 11, 12 Iorio v. Asset Mktg., No. 05CV633 IEG (CAB), 2006 U.S. Dist. LEXIS 94948 (S.D. Cal. July 25, 2006) ................ 16 Limandri v. Judkins, 52 Cal. App. 4th 326 (1997) ........................................................................................................ 14 Morgan v. Harmonix Music Sys., Inc., C08-5211BZ, 2009 WL 2031765 (N.D. Cal. July 7, 2009)................................................... 13, 14 Oestreicher v. Alienware Corp., 544 F. Supp. 2d 964 (N.D. Cal. 2008) ......................................................................................... 14 Parkinson v. Hyundai Motor Amer., Inc., 258 F.R.D. 580 (C.D. Cal. 2008) ................................................................................................. 16 Rannis v. Recchia, 380 F. App'x. 646 (9th Cir. 2010) ................................................................................................ 18 Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) ................................................................................................................. 15 Wolin v. Jaguar Land Rover N. Am., 617 F.3d 1168 (9th Cir. 2010) ..................................................................................................... 16


iv TABLE OF AUTHORITIES

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Statutes Fed. R. Civ. P. 23 ............................................................................................................. 11, 15, 16, 17, 18 Miscellaneous 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions (4th ed. 2002) ............................ 11, 12 Class Action Fairness Act, 28 U.S.C. § 1715 .......................................................................................... 18 Manual for Complex Litigation (Fourth) (2004) ..................................................................... 1, 11, 12, 14




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I. INTRODUCTION

Plaintiffs Jonas Sugarman and Quang Le filed this class action lawsuit to address the

unexpected expansion of the plastic fuel tanks on their respective Ducati motorcycles. Based on a

review of over 300 complaints to the National Highway Traffic Safety Administration (NHTSA),

numerous detailed interviews with Ducati owners who have contacted Plaintiffs’ counsel, and other

sources, Plaintiffs’ counsel initially identified three primary concerns with fuel tank expansion. First,

fuel tanks on certain models were leaking fuel. Second, expanding tanks could potentially interfere

with the full range of steering on certain models. And third, expanding tanks could come loose from

their front mounting brackets on certain models. Plaintiffs and other Ducati owners across the nation

were concerned about what was happening to their tanks, the potential safety implications and the need

for meaningful information about the issue.

Plaintiffs’ counsel and Ducati North America, Inc. (“Ducati”) have negotiated a settlement that

addresses the three primary concerns identified by Plaintiffs, as well as additional issues identified

since the filing of the case. If approved by the Court, the settlement will provide Ducati owners with

(1) notice of the fuel tank expansion issues, (2) prompt repairs to address all identified problems

potentially associated with fuel tank expansion and (3) an extended warranty program for the repairs

that will also include an additional warranty for the fixes themselves. In the event that a class member

is unsatisfied with Ducati’s response under the settlement, the settlement also incorporates an

individualized dispute resolution process that class members may pursue.

Plaintiffs and their counsel believe the settlement provides favorable relief to class members in

a timely manner and therefore seek to begin the settlement approval process outlined in the Manual for

Complex Litigation (Fourth) §§ 21.632-35. They respectfully request that the Court review the parties’

Class Settlement Agreement and Release (“Settlement Agreement”), (Gibbs Decl., Exh. 1), and enter

an order:

1. Granting preliminary approval of the settlement;

2. Certifying provisionally the proposed class for settlement purposes;

3. Appointing Plaintiffs Jonas Sugarman and Quang Le as class representatives and their

counsel, Girard Gibbs LLP, as class counsel;




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4. Directing that notice be disseminated to the class as proposed; and

5. Setting a hearing date and briefing schedule for final approval of the settlement and

consideration of Plaintiffs’ fee application.

II. SUMMARY OF THE LITIGATION AND SETTLEMENT

A. Plaintiffs’ Complaint

Plaintiffs filed their initial complaint in November 2010 and the currently operative First

Amended Complaint (“FAC”) in January 2011. (See Dkt. No. 1 (Compl.); Dkt. No. 23 (FAC).)

Plaintiffs alleged that the plastic material used in certain Ducati motorcycles’ fuel tanks is incompatible

with the motorcycles’ fuel. (FAC ¶ 13.) This incompatibility was alleged to cause the fuel tanks to

degrade and deform, leading to fuel leakage, interference with the full range of steering, and

destabilized weight distribution as the tanks become loose on the motorcycle’s frame. (Id. ¶¶ 14-16.)

On behalf of a proposed class of individuals who purchased Ducati motorcycles equipped with

plastic fuel tanks, Plaintiffs claimed that Ducati had violated consumer protection laws by concealing

the fuel tank defect from class members and sought a corrective disclosure. (Id. ¶ 4.) Plaintiffs also

claimed that Ducati breached its general 2-year limited warranty and its 5-year emissions warranty by

failing to adequately repair class members’ deformed fuel tanks and instead installing replacement

tanks made of the same material subject to the same risk of deformation. (Id. ¶¶ 56, 58, 66, & 68.) For

relief, Plaintiffs requested that Ducati install replacement tanks that would not degrade or deform upon

contact with the motorcycles’ fuel. (Id. ¶¶ 59-60, 69-70, & 81.)

B. Investigation, Litigation, Discovery, and Settlement Negotiations

1. Plaintiffs’ Pre-suit Investigation & Pre-suit Demand Letters

In the course of investigating class claims against Ducati, Plaintiffs’ counsel has reviewed

hundreds of complaints lodged by Ducati owners with NHTSA about their expanding fuel tanks.

(Gibbs Decl. ¶ 7.) Plaintiffs’ counsel has also interviewed approximately 150 Ducati motorcycle

owners about their Ducati fuel tank problems. (Id.) The complaints to NHTSA and Plaintiffs’ counsel

reflect the owners’ safety and other concerns, and frustration that Ducati has not provided a permanent

fix, clarified what warranties apply, or explained what is happening to the tanks.




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Plaintiffs initially believed that the most logical way of addressing deforming tanks was to

provide tanks made of a different material that is more compatible with fuel. Plaintiffs also realized

that many Ducati owners were unaware of the fuel tank problems and thus not examining their

motorcycles for deformation or the alleged attendant safety hazards. Accordingly, in demand letters

sent to Ducati pursuant to the California Consumers Legal Remedies Act in October and December

2010 and in their Complaint and First Amended Complaint, Plaintiffs requested that Ducati provide

notice of the fuel tank issue to all affected owners and install replacement tanks that do not degrade or

deform when in contact with the motorcycles’ fuel. (Gibbs Decl. ¶ 4.) In response to the second pre-

suit letter, Ducati contended that it was honoring its warranties when any customer presented a fuel

tank problem described in the Amended Complaint, and noted that a new type of tank fitting had

become available for SportClassic motorcycles that would keep expanding fuel tanks securely attached

to the frame. (Id.) Plaintiffs recognized that the new fittings and potential similar repairs might

adequately address their safety concerns without altering the tank material and expressed their

willingness to discuss such solutions. (Id.)

2. Ducati’s Motion to Dismiss

Ducati filed a motion to dismiss Plaintiffs’ claims in February 2011, and requested a partial

stay of discovery until that motion was resolved. (Dkt. No. 37 (Mot. to Dismiss); Dkt. No. 40 (Mot. for

Limited Stay).) In the parties’ Joint Case Management Statement, Ducati did acknowledge that

ethanol, which has been increasingly added to fuel in the United States in recent years, can, in certain

combinations of conditions, cause its thermoplastic fuel tanks to expand slightly in surface size, with

such expansion generally measured in just millimeters. (Dkt. No. 42 (JCMS) 2.) Ducati nevertheless

maintained (and continues to maintain) that (1) its thermoplastic fuel tanks are compatible with the fuel

sold in the United States, (2) any fuel tank expansion is minimal and does not affect rider safety in any

way, (3) any problems are limited to a very small percentage of motorcycles, and (4) it had fairly

treated its customers by fully honoring its applicable warranty obligations. (Id.) The motion to dismiss

has been fully briefed by both sides.

3. Discovery and Settlement Negotiations

In a court conference on March 3, 2011, the parties were able to resolve Ducati’s motion to stay




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discovery by an in-court stipulated compromise that allowed for immediate, targeted discovery. (Gibbs

Decl. ¶ 5.) As Ducati began to produce documents, including documents it had provided to NHTSA, it

became increasingly apparent that the issue Plaintiffs were grappling with was best characterized as

plastic fuel tank expansion caused by, at least in part, the increasing amount of ethanol in gasoline sold

in the United States. (Id. ¶ 8.) Furthermore, it became apparent that the expansion leads to different

problems in different models because of variations in the shape, size, and configuration of fuel tanks

across Ducati’s motorcycle models. (Id.) Hoping to identify effective repairs for each model, Plaintiffs

reiterated their willingness to discuss possible remedies that would dispel their safety concerns,

including solutions that would not require altering the fuel tank material. Ducati continued to assert its

positions as expressed in the Joint Case Management Statement that fuel tank expansion does not affect

rider safety in any way and that it had fairly treated its customers in addressing their concerns regarding

fuel tank expansion, but nonetheless agreed to explore possible repairs that would remedy any

identified problems. Ducati further contended that NHTSA’s finding on February 28, 2011 – that

Ducati Multistrada fuel leaks did not appear to result from fuel tank expansion and that Ducati Monster

models had “fail[ed] to exhibit a current safety defect trend” – supported its position that fuel tank

expansion does not present a safety risk. (Dkt. No. 58 (Defs. Mot. to Dismiss Reply) 5 n.3.)

By late April 2011, Ducati had provided Plaintiffs’ counsel detailed warranty data about fuel

tank claims. (Gibbs Decl. ¶ 9.) The parties were able to closely match the warranty data to the

complaints reported to both NHTSA and Plaintiffs’ counsel and thus pinpoint the concerns relevant to

the different motorcycle models. In connection with their on-going discussions, Plaintiffs’ and defense

counsel, accompanied by expert consultants, met at Ducati’s Italian production facility on May 9 to

discuss model-specific fuel tank problems, whether or not directly related to fuel tank expansion, and

possible fixes. (Id. ¶ 10). By this time, Ducati noted that its testing and measurements indicated that

fuel tank expansion would cease at a maximum point and had begun developing improved parts to

accommodate potential fuel tank expansion caused by ethanol. Ducati presented a number of model-

specific proposed repairs that it believed would resolve Plaintiffs’ concerns, including all of the

concerns that Plaintiffs framed as potentially safety-related, although Ducati disputes there being any

safety issue.




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After careful consideration and expert review of the proposed repairs along with past warranty

claims, consumer complaints, and mechanical data, Plaintiffs’ counsel ultimately concluded that the

repairs developed by Ducati appropriately address the alleged fuel tank expansion problems, whether

allegedly safety-related or not. This conclusion was guided by input from an experienced materials

engineering expert retained by Plaintiffs who was involved throughout the case. (Gibbs Decl. ¶¶ 7 &

10.) Valuable information was also gleaned from three in-depth inspections of Class member vehicles

exhibiting fuel tank expansion and an electronic scan of a fourth Class member’s expanded fuel tank.

The three inspections took place in Florida, Illinois, and California and were attended by counsel and

expert consultants for each side. (Id. ¶ 7.)

Having identified effective repair solutions, the parties began negotiating terms to implement

the repairs, as required, on a classwide basis. (Id. ¶ 11.) While Ducati maintained that the fuel tank

expansion problems were subject only to the standard 2-year Limited Warranty, Plaintiffs’ counsel

were able to negotiate a significant warranty extension to cover the identified repairs. In addition,

Plaintiffs’ counsel negotiated a warranty extension for purely cosmetic distortions on the surface of

painted, exposed fuel tanks1 despite the relative difficulty of legal claims based on these non-safety

related imperfections.

C. Overview of the Settlement

1. The Settlement Class

The Settlement Agreement provides benefits to a class defined as: All residents of the

United States who, as of [the date of the preliminary approval order], own any Ducati 2003-2011

Monster, Multistrada, SportClassic, Streetfighter, Superbike or Hypermotard model family

motorcycle manufactured with a plastic fuel tank (collectively, “Class Vehicles”), including but

not limited to the following model and model year motorcycles:

2003-2008 Monster 620, 620 dark, 620 i.e. dark, 620 i.e., M 695, M 695 dark, 800, S2R, S4R, S4R S Tricolore, S2R dark, S2R1000, and S4RS motorcycles;

1 In 2007, Ducati began producing models on which the plastic fuel tanks are covered by separate painted panels. Because these “covered” fuel tanks are not readily visible, they are left unpainted and no cosmetic issues are presented by them. Ducati continues to produce some models with painted, exposed tanks and other models with “covered” unpainted tanks.




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2009-2011 Monster 696, 696+, 696+ ABS, 796, 796 ABS, 1100, 1100S, 1100 ABS, 1100 evo ABS, 1100S ABS, M696, M1100, and M1100S motorcycles;

2003-2009 Multistrada 1000, 1000S, 1000 DS, 1000S DS, 1100 DS, 1100S DS, 620, 620 dark, MTS 1000, MTS 1000S, MTS 1100 and MTS 1100S motorcycles;

2010-2011 Multistrada 1200, 1200S Sport, 1200S Touring and 1200S Pikes Peak motorcycles;

2006-2010 SportClassic Sport 1000, Paul Smart 1000, Paul Smart 1000 LE, GT Touring, GT 1000, GT 1000 Touring, GT 1000 Bicolore, Sport 1000S, Sport 1000 Biposto and Sport 1000 Monoposto motorcycles;

2009-2011 Streetfighter and Streetfighter S motorcycles;

2007-2011 Superbike 848, 848 NH, 848 Hayden Limited, 848 evo, 1098, 1098S, 1098 Tricolore, 1098R, 1098R Bayliss, 1198R, 1198, 1198S, 1198R corse SE, 1198S corse SE and 1198SP motorcycles; and

2007-2011 Hypermotard 796 matt, 796 red, 1100, 1100 evo, 1100 evo SP, 1100S, 1100E and 1100SP motorcycles.

Excluded from the Settlement Class are Ducati; any affiliate, parent, or subsidiary of Ducati; any entity

in which Ducati has a controlling interest; any officer, director, or employee of Ducati; any successor or

assign of Ducati; anyone employed by counsel for Plaintiffs in this action; and any Judge to whom this

case is assigned as well as his or her immediate family. (Settlement Agreement II.11.)

The class encompasses approximately 35,000-40,000 registered vehicles. (Gibbs Decl. ¶ 12.)

2. The Extended Warranties

a) Extended Warranty Periods

Ducati will extend its standard 2-year Limited Warranty for Class Vehicles to cover the agreed

upon plastic fuel tank repairs for both non-cosmetic issues (including those related to Plaintiffs’ alleged

safety concerns) and for purely cosmetic issues unrelated to any safety concerns. The extended

warranties will cover non-cosmetic repairs until the longer of 6 years after the date of original new

motorcycle purchase from Ducati, or until 18 months after the settlement’s effective date. (Settlement

Agreement III.B.1.) In addition, any non-cosmetic repairs made under the extended warranty will

themselves be warranted for 12 months. (Id.) Purely cosmetic repairs will be covered until the longer

of 5 years after the date of original new motorcycle purchase or until 18 months after the settlement’s




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effective date; and any repairs made under the cosmetic extended warranty will themselves be

warranted for 6 months. (Id. III.B.2.)

b) Repairs for Non-Cosmetic Problems

Ducati will provide the following repairs during the extended warranty period for non-cosmetic

fuel tank problems. The repairs are specified by motorcycle model because the fuel tanks, though made

of the same material, come in different shapes, sizes, and configurations to fit the different models,

which can result in different potential fuel tank problems.

2004-2008 Monster Class Vehicles: Fuel tank expansion on these models with painted, exposed

tanks can on some motorcycles cause steering interference at a full turn, pressure against the ignition

unit, impeded access to the tank latch, and difficulty raising and lowering the fuel tank.2 As necessary

to address any such problem, Ducati will (i) adjust the steering stoppers to prevent any interference

with the handlebars; (ii) reposition the tank with a new fitting kit to provide sufficient space for

expansion while keeping the tank firmly attached and aligned with the frame; and if necessary (iii)

install a shorter seat to accommodate the repositioned tank without affecting rider comfort. In addition,

in any cases of fuel leakage where the fuel pump connects to the tank, Ducati will replace the O-ring

installed at the fuel pump flange seal with an X-ring designed to prevent leakage. (Settlement

Agreement I.6.a.; III.C.)

2009-2011 Monster Class Vehicles: The unpainted, covered fuel tanks on some of these

motorcycles have leaked fuel where the fuel pump connects to the fuel tank. For vehicles presented

with fuel leakage caused by an original manufacturing defect or any functional interference between the

fuel tank and any other motorcycle part due to fuel tank expansion, Ducati will provide the appropriate

repairs or tank replacement. (Id. I.6.f.; III.H.)

2003-2009 Multistrada Class Vehicles: The painted, exposed fuel tanks on these models can

leak fuel where the fuel pump connects to the tank. In accordance with a previously-issued recall,

Ducati will replace the O-ring installed at the full pump flange seal with an X-ring designed to prevent

leakage. (Id. I.6.b.; III.D.)

2 The fuel tank on some Monster models is designed to pivot on the rear tank mount to allow access to other components. A latch at the front of such tanks locks them in place for normal operation. If a fuel tank expands forward toward the ignition unit, it can become difficult to properly latch the tank.




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2010-2011 Multistrada Class Vehicles: The fuel tanks on these models are unpainted and

covered by separate panels. For vehicles presented with fuel leakage caused by an original

manufacturing defect or any functional interference between the fuel tank and any other motorcycle

part due to fuel tank expansion, Ducati will provide the appropriate repairs or tank replacement. (Id.

I.6.h.; III.H.)

2006-2010 SportClassic Class Vehicles: Fuel tank expansion on these models can on some

motorcycles cause (1) the painted, exposed fuel tanks to come loose from one or both front mounting

brackets and (2) contact between the fuel tank and the handlebar switch gear at a full turn. As

necessary to address existing problems, Ducati will install a new fastener kit at the front mounting

brackets to keep expanding tanks fully attached at the front mounting brackets and will adjust the

steering stoppers or the handlebar to prevent any interference with the handlebar switch gear. (Id.

I.6.c.; III.E.)

2009-2011 Streetfighter Class Vehicles: Fuel tank expansion on these models can on some

motorcycles cause the painted, exposed tanks to contact the upper triple clamp3 and the radiator cap.

As necessary to address any such problem, Ducati will install a newly-designed fuel tank with slightly

reduced dimensions to accommodate expansion and prevent such contact. (Id. I.6.d.; III.F.)

2007-2011 Superbike Class Vehicles: Fuel tank expansion on these models can on some

motorcycles cause the painted, exposed tanks to contact the steering damper support.4 As necessary to

address such problems, Ducati will install a newly-designed fuel tank with slightly reduced dimensions

to accommodate expansion and prevent contact with the steering damper support. Additionally, due to

an unrelated and now corrected defect in the metal fittings for the fuel overflow hose, very small

amounts of fuel can on some motorcycles leak beneath the motorcycle. For motorcycles presented with

this problem, Ducati will install a replacement fuel tank. (Id. I.6.e.; III.G.)

2007-2011 Hypermotard Class Vehicles: The fuel tanks on these models are unpainted and

covered by separate panels. For motorcycles presented with fuel leakage caused by an original

3 The upper triple clamp attaches the handlebars to the motorcycle’s fork.

4 The steering damper is a hydraulic component that helps stabilize the handlebars against sudden movements. The support attaches the steering damper to the motorcycle frame and is not a moving part. Fuel tank expansion does not interfere with the steering damper itself.




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manufacturing defect or any functional interference between the fuel tank and any other motorcycle

part due to fuel tank expansion, Ducati will provide the appropriate repairs or tank replacement. (Id.

I.6.g.; III.H.)

c) Repairs for Cosmetic Problems

The fuel tanks on Ducati models with painted, exposed plastic fuel tanks can exhibit purely

cosmetic distortions such as blistering, bubbling, rippling, dimpling, flattening or spreading due to fuel

tank expansion or other original manufacturing defect. These cosmetic problems do not appear on the

models with unpainted tanks covered by separate panels. If the fuel tank on a Class Vehicle exhibits

cosmetic problems during the cosmetic extended warranty period, Ducati will replace the tank under

the following conditions: (i) the cosmetic problems are the result of fuel tank expansion or an original

manufacturing defect; (ii) the cosmetic problems are greater than three millimeters in size and easily

and clearly visible to a passerby; and (iii) the fuel tank has not suffered some greater damage not

caused by fuel tank expansion or an original manufacturing defect (such as damage from an accident,

fall, other impact or wear and tear). (Settlement Agreement III.I.)

d) Related Parts and Accessories

In addition to the repairs identified above for non-cosmetic and purely cosmetic fuel tank

problems, during the applicable extended warranty period Ducati will also repair or replace Ducati-

brand parts and accessories that are damaged or no longer fit on a Class Vehicle due to fuel tank

expansion. (Id. III.J.)

e) Transferability of Extended Warranties

In the event that a Settlement Class Member transfers title to his/her motorcycle during the

extended warranty periods, Ducati will honor the extended warranties for the transferee, provided that

the transferee agrees to be subject to all of the other terms of the settlement. (Id. III.B.3.)

f) Dispute Resolution Process

The extended warranty program is designed to address the expansion related problems observed

in class vehicles, NHTSA reports, customer feedback, and warranty data, among other things. The

parties nonetheless recognize that some class members may be dissatisfied with the repairs provided (or

not provided) by a Ducati dealer under the extended warranties. The settlement thus provides for a




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dispute resolution process to protect class members in those situations. As an initial step, Ducati will

make a good faith effort through its customer service department to resolve disputes relating to the

extended warranties. After contacting Ducati customer service, a class member may initiate binding

arbitration by BBB Auto Line of any unresolved disputes about the application of the Settlement

Agreement. Class counsel will be notified of any arbitration requests and will be available to assist

class members seeking arbitration. (Settlement Agreement III.L.)

3. Notice of Fuel Tank Issues and Proposed Settlement

Class members will be notified by first class mail of the settlement and the repairs available to

them under the extended warranty. (Id. III.A.1; IV.B.) The notice will, among other things, explain to

class members that their fuel tanks may expand and describe how fuel tank expansion can affect their

motorcycles. A settlement website will also be available to class members and will contain information

about the settlement, the extended warranties, and available repairs. (Id. IV.B.4.)

4. Mutual Release

In exchange for the benefits provided by Ducati under the Settlement Agreement, class

members will release Ducati and its related entities from all known and unknown claims that relate to

the fuel tank problems alleged or that could have been alleged in the complaint or identified in the

Settlement Agreement. (Id. IV.D.1.) Ducati will in turn release Plaintiffs and class counsel from any

claims related to this litigation or settlement. (Id. IV.E.)

5. Attorneys’ Fees, Expenses, and Service Awards

Ducati will pay any award of attorneys’ fees, expenses, or service awards, and such awards will

not in any way reduce the benefits provided to the class. (Id. IV.F.1 & 3.) The parties negotiated

attorneys’ fees, expenses, and service awards only after reaching agreement on relief for the class.

(Gibbs Decl. ¶ 11.) Subject to Court approval, Ducati has agreed to pay up to, and Class Counsel has

agreed not to seek nor accept more than, $835,000 in attorneys’ fees and expenses and $1,500 in

service awards for each named plaintiff and each class member who provided a declaration and

submitted to a vehicle inspection. (Settlement Agreement IV.F.1.)

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III. ARGUMENT

A. Overview of the Class Action Settlement Process

A class action settlement like the one proposed here must be approved by the Court to be

effective. See Fed. R. Civ. P. 23(e). The process for court approval is comprised of three principle

steps:

1. A preliminary approval hearing, at which the court considers whether the proposed

settlement is within the range of reasonableness possibly meriting final approval;

2. Dissemination of notice of the proposed settlement to class members for comment; and

3. A formal “fairness hearing,” or final approval hearing, at which the Court decides

whether the proposed settlement should be approved as fair, adequate, and reasonable to

the class.

See Manual for Complex Litigation (Fourth) §§ 21.632-34 (2004).

By this motion, the Plaintiffs ask the Court to take the first step in the settlement approval

process and grant preliminary approval of the settlement. Plaintiffs further request that the Court

provisionally certify the class set forth in the Settlement Agreement, appoint Plaintiffs as class

representatives and their attorneys as class counsel, order dissemination of notice to class members, and

establish a schedule for the final approval process.

B. The Settlement Should be Preliminarily Approved

1. The Role of Preliminary Approval

At the final approval stage, after the class members have been notified of the proposed

settlement and had an opportunity to comment, the Court will be called upon to appraise whether the

parties have negotiated a settlement that is fair, reasonable, and adequate to the class. At this

preliminary approval stage, however, the Court determines only whether the proposed settlement “(1)

appears to be the product of serious, informed, non-collusive negotiations; (2) has no obvious

deficiencies; (3) does not improperly grant preferential treatment to class representatives or segments of

the class; and (4) falls within the range of possible approval,” such that it is worthwhile to give the class

notice of the settlement and proceed to a formal fairness hearing. Harris v. Vector Marketing Corp.,

No. C-08-5198, 2011 WL 1627973, at *7 (N.D. Cal. April 29, 2011); see also 4 Alba Conte & Herbert




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B. Newberg, Newberg on Class Actions § 11.25 (4th ed. 2002)

In other words, at the preliminary approval stage, the Court makes only a preliminary

determination of the settlement’s fairness, reasonableness, and adequacy, pointing out any settlement

terms that are so unacceptable at the outset that a formal fairness hearing would be a waste of time. See

Manual for Complex Litigation (Fourth) §§ 21.632 (2004); Conte & Newberg, Newberg on Class

Actions § 11.25.

2. The Proposed Settlement Merits Preliminary Approval

The proposed settlement is a product of arm’s length negotiations by Plaintiffs’ counsel well-

versed in automotive class actions and thus entitled to an initial presumption of fairness. See Harris,

2011 WL 1627973, at *8. The negotiations were aided by targeted discovery that resulted in an

exchange of information about fuel tank expansion problems and potential repairs, including owner

complaint, warranty, and mechanical data. (Gibbs Decl. ¶¶ 9 & 10.) In addition, Plaintiffs’ counsel

was assisted by an expert in materials science who reviewed the potential efficacy of the suggested

repairs. (Id. ¶ 10.)

In Plaintiffs’ counsel’s view, the settlement contains no obvious deficiencies: it provides class

relief to address all of the safety risks alleged in Plaintiffs’ complaint, as well as non-safety related

issues, and does not provide for attorneys’ fees at the expense of the class. Nor does the settlement

grant preferential treatment to the class representatives or any segment of the class. (Id. ¶ 11.) Each

class member is entitled to the same notice and disclosure, the same extended warranty periods, and the

same range of repairs. The repairs vary by model, but each is designed to alleviate all of the specific

and general fuel tank issues identified by the parties. And the settlement offers an alternative dispute

resolution process designed to address any class member dissatisfaction with the repairs provided (or

not provided) under the settlement.

Further analysis confirms that the settlement falls within the range of possible approval as it

accomplishes now—without the risk or prejudicial delay associated with further litigation, a trial, or

appeals—much of what Plaintiffs sought in the lawsuit. See Harris, 2011 WL 1627973, at *8 (to

evaluate the range of possible approval, courts primarily consider the value provided by the settlement

against the claims’ expected recovery if tried). Plaintiffs believe that their strongest claims were based




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on Ducati’s failure to disclose potential safety-related issues with its motorcycles. Even the cases that

take the narrowest view of the material facts a manufacturer is obliged to disclose under California

consumer protection law agree that a duty to disclose exists “when there are safety concerns associated

with the product’s use.” Morgan v. Harmonix Music Sys., Inc., C08-5211BZ, 2009 WL 2031765, at *4

(N.D. Cal. July 7, 2009) (citing cases). By settling now, class members who are unaware of the fuel-

tank expansion issues and the attendant safety risks alleged by Plaintiffs will be alerted sooner rather

than later. The remedy provided by the settlement is in this sense more valuable than could be obtained

through a trial, even without discounting for the possibility that Ducati could demonstrate (as it argues

in its pending motion to dismiss and has maintained throughout the parties’ negotiations) that (1) fuel

tank expansion does not pose any safety risk, (2) Ducati did not know of the alleged defect—safety or

otherwise—before selling most class members their motorcycles and (3) the Ducati fuel tank expansion

issue has been heavily publicized on the internet in recent years, thus negating any non-disclosure by

Ducati. (See Mot. to Dismiss at 2, 12-14.)

Plaintiffs believe that their breach of warranty claims that Ducati was obligated to conduct

warranty repairs of class members’ fuel tanks to alleviate alleged expansion-related safety risks were

also reasonably strong, though subject to even more opposing legal arguments from Ducati. Among

other things, Ducati was arguing that it was fully honoring its limited warranties to “repair or replace”

any part manifesting a defect during the warranty period (see id. at 6-8 (citing, among other cases,

Brothers v. Hewlett-Packard Co., No. 06-2254, 2007 WL 485979, at *4 (N.D. Cal. Feb. 12, 2007))),

and that class members’ fuel tanks are covered only by the Ducati 2-year limited warranty and not by

the federally mandated 5-year emissions warranty under its reading of the Clean Air Act and related

regulations (see id. at 7-8). Plaintiffs’ interpretation of Ducati’s 2-year warranty and of the Clean Air

Act might have prevailed at trial, but it is doubtful that Plaintiffs could have obtained longer warranties

or better warranty repairs than those offered under this settlement. The 2-year warranty claim hinges

on whether the offered repair or replacement is “appropriate” under the circumstances, and the 5-year

warranty emissions warranty hinges on whether the fuel tanks “result in any unsafe condition,” (see

Dkt. No. 54 (Pls. Opp. to Mot. to Dismiss) at 3-4, 7), or, as Ducati contends, whether the defect is

related to vehicle emissions (see Mot. to Dismiss at 10-11). Even if the repairs previously offered by




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Ducati did not meet those standards (a point which Ducati strenuously contests), the repairs it is now

providing under the settlement cure any potential safety defect and the length of the extended

warranties it is providing exceed both its 2-year limited warranty and even its 5-year emissions

warranty.

Lastly, Plaintiffs claimed that Ducati was obligated to repair cosmetic distortions caused by fuel

tank expansion. Aesthetics are a central selling point for Ducati motorcycles, so Plaintiffs would argue

that a materials defect that is present at purchase and leads to noticeable blistering or distortion of the

fuel tank surface is an important fact that Ducati was obliged to either disclose or address through a

warranty repair that eliminates the possibility of further cosmetic distortions. See, e.g., Limandri v.

Judkins, 52 Cal. App. 4th 326, 337 (1997). While Plaintiffs believe that the better reading of California

warranty and consumer protection law would afford class members a recovery, a number of courts of

late have read the law to foreclose liability unless the defect is safety-related. See, e.g., Oestreicher v.

Alienware Corp., 544 F. Supp. 2d 964, 972 (N.D. Cal. 2008); Morgan, 2009 WL 2031765, at *4.

Despite the legal challenges presented by these cosmetic claims, the settlement’s extended warranty

offers repairs for cosmetic distortions that manifest up to five years after initial sale, which is three

years longer than repairs would otherwise be available under the Ducati 2-year limited warranty. See

Daughtery v. American Honda Motor Co., 144 Cal. App. 4th 824, 832 (2006) (finding warranty

coverage did not extend to latent defects that manifested outside the warranty period).

Given the favorable terms of the settlement and the manner in which they were negotiated, the

proposed settlement should be viewed, at least preliminarily, as a fair, reasonable, and adequate

compromise of issues in dispute and within the range of reasonableness meriting preliminary approval.

C. The Proposed Settlement Class Should be Certified for Settlement Purposes and Plaintiffs’ Counsel Appointed As Class Counsel

1. The Proposed Settlement Class Meets the Requirements of Rule 23(a)

Before granting preliminary approval of the settlement, the Court should determine that the

proposed settlement class provisionally meets the requirements of Rule 23. See Amchem Prods. v.

Windsor, 521 U.S. 591, 619-20 (1997); Manual for Complex Litigation §§ 21.632. The prerequisites

for certifying a class are (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of




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representation, each of which is satisfied here. See Fed. R. Civ. P. 23(a).

Numerosity: The parties’ proposed settlement class, set forth above in section II.C.1,

encompasses owners of approximately 35,000 to 40,000 currently registered Class Vehicles, (Gibbs

Decl. ¶ 12), with almost as many owners, and so readily satisfies the numerosity requirement. See

Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998) (“The prerequisite of numerosity is

discharged if ‘the class is so large that joinder of all members is impracticable.’”).

Typicality & Commonality: Each Plaintiff and each member of the class owns a Ducati

motorcycle equipped with a plastic fuel tank that can expand because it is allegedly incompatible with

fuel containing ethanol. The named Plaintiffs (and the two class members who submitted their bikes

for inspection) have had their Ducati plastic fuel tanks expand and consequently exhibit tank looseness,

possible steering interference, or fuel leakage, as well as superficial cosmetic distortions. The scope of

the expansion and the nature of the resulting problems experienced by the named Plaintiffs and the two

class members involved in expert inspections are similar to and typical of the fuel tank issues reported

by other class members. Plaintiffs thus satisfy the typicality requirement, as their warranty and

consumer protection claims arise from the same alleged incompatibility and subsequent expansion

experienced by members of the class. See Hanlon, 150 F.3d at 1020 (typicality satisfied where

plaintiffs’ claims are “reasonably coextensive with those of class members”). For similar reasons,

Plaintiffs’ claims also meet the commonality requirement in that they raise “questions of law or fact

common to the class,” including whether the fuel tanks’ plastic material is incompatible with the fuel

sold in the United States. See Fed. R. Civ. P. 23(a)(2); see Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct.

2541, 2551 (2011) (explaining that “[c]ommonality requires the plaintiff to demonstrate that the class

members ‘have suffered the same injury,’” and claims arising from that injury depend on a “common

contention . . . of such a nature that it is capable of classwide resolution.”).

Adequacy of Representation: The final requirement of Rule 23(a), adequacy of representation,

is also satisfied. Plaintiffs and their counsel have shown, through their prosecution of this action and

negotiation of this proposed settlement, that they “will fairly and adequately protect the interests of the

class.” Fed. R. Civ. P. 23(a)(4); see also Amchem Products, Inc. v. Windsor, 521 U.S. 591, 619-20

(1997) (the existence of a proposed settlement is relevant to class certification, including whether




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absent class members’ interests are being adequately represented).

2. The Proposed Settlement Class Meets the Requirements of Rule 23(b)(3)

“In addition to meeting the conditions imposed by Rule 23(a), the parties seeking class

certification must also show that the action is maintainable under Fed. R. Civ. P. 23(b)(1), (2), or (3).”

Hanlon, 150 F.3d at 1022. Here, the proposed class is maintainable under Rule 23(b)(3) as common

questions predominate over any questions affecting only individual members and class resolution is

superior to other available methods for a fair resolution of the controversy. See id. at 1022-23 (citing

Fed. R. Civ. P. 23(b)(3)).

Class members’ consumer protection claims involve predominantly common factual and legal

issues that can be fairly resolved for all through a class-wide settlement. As Plaintiffs have contended

throughout the litigation, the validity of these claims depends primarily on (i) whether the Ducati fuel

tanks were incompatible with fuel in the United States, (ii) what Ducati knew about fuel tank

expansion; (iii) when Ducati knew it; and (iv) whether a “reasonable consumer” would consider that

information material. Each of these issues can be addressed (in this case through settlement) for all

class members at once, justifying certification of these claims for settlement purposes. See, e.g., Wolin

v. Jaguar Land Rover N. Am., 617 F.3d 1168, 1173 (9th Cir. 2010) (finding consumer protection claims

arising from automotive manufacturer’s failure to disclose an allegedly inherent defect raised

predominantly common questions); Parkinson v. Hyundai Motor Amer., Inc., 258 F.R.D. 580, 596-97

(C.D. Cal. 2008) (same).

Class members’ warranty claims also satisfy the predominance requirement. At root, these

claims depend on issues of contract interpretation, which are particularly well suited to class-wide

resolution. See, e.g., Daffin v. Ford Motor Co., 458 F.3d 549, 552 (6th Cir. 2006) (upholding

certification of warranty claims that raised issues of contract interpretation); Iorio v. Asset Mktg., No.

05CV633 IEG , 2006 U.S. Dist. LEXIS 94948, at *21 (S.D. Cal. July 25, 2006) (“[C]ontroversies

involving widely used contracts of adhesion . . . are ‘ideal cases for class adjudication . . . .’”). The

extent of Ducati’s obligations to perform fuel tank repairs under its 2-year “repair or replace” warranty

presents an issue of contract interpretation that does not vary from class member to class member.

Similarly, whether class members’ fuel tanks are covered by Ducati’s 5-year emissions warranty




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requires an interpretation of its language and of the federal Clean Air Act regulations it references.

With all class members’ contract claims hinging on common questions of contract interpretation, it is

both fair and logical to resolve those questions through a class-wide settlement.

Turning lastly to Rule 23(b)(3)’s superiority requirement, there is little doubt that resolving all

class members’ claims jointly—particularly through a class-wide settlement negotiated on their behalf

by counsel well-versed in motor vehicle defect litigation—is superior to a series of individual lawsuits.

As the Ninth Circuit has stated: “From either a judicial or litigant viewpoint, there is no advantage in

individual members controlling the prosecution of separate actions. There would be less litigation or

settlement leverage, significantly reduced resources and no greater prospect for recovery.” Hanlon,

150 F.3d at 1023. Indeed, the terms of the settlement negotiated on behalf of the class, which provide

extended warranty relief for both the alleged safety-related problems and non-safety related problems,

demonstrate the advantages of a collective bargaining and resolution process.

3. Plaintiffs’ Counsel Meet the Requirements of Rule 23(g).

In connection with any order certifying a class, Rule 23(g) requires that the Court formally

appoint class counsel. This Court previously appointed Plaintiffs’ counsel to serve as interim class

counsel, finding that they met Rule 23(g)’s requirements for fairly and adequately representing the

putative class. (See Dkt. No. 63. (Order).) Plaintiffs’ counsel, which has a great depth of experience in

both consumer class action litigation generally and motor vehicle defect class action litigation in

particular, now request that the interim tag be lifted and that they be appointed to represent the certified

settlement class.

D. The Court Should Order Dissemination of the Proposed Class Notice

1. The Settlement Agreement Provides for the Best Method of Notice Practicable Under the Circumstances

The federal rules require that before finally approving a class settlement, “[t]he court must

direct notice in a reasonable manner to all class members who would be bound by the proposal.” Fed.

R. Civ. P. 23(e). Where the settlement class is certified pursuant to Rule 23(b)(3), the notice must be

the “best notice practicable under the circumstances, including individual notice to all members who

can be identified through reasonable effort.” Fed. R. Civ. P. 23(c)(2)(B).




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The parties have agreed on a notice plan that would provide class members with individual

notice by first class mail utilizing current vehicle owner registration address data for all States and the

District of Columbia, which will be obtained by R.L. Polk & Company for all States other than

Oklahoma and will be obtained by Ducati from Oklahoma directly. (See Settlement Agreement

IV.B.1.) Plaintiffs request that the Court approve this method of notice as the best practicable under the

circumstances. See, e.g., Rannis v. Recchia, 380 F. App'x. 646, 650 (9th Cir. 2010) (finding mailed

notice to be the best notice practicable where reasonable efforts were taken to ascertain class members

addresses).

2. The Proposed Form of Notice Adequately Informs Class Members of the Litigation and Their Rights in Connection with the Settlement

The notice provided to class members should “clearly and concisely state in plain, easily

understood language” the nature of the action; the class definition; the class claims, issues, or defenses;

that the class member may appear through counsel; that the court will exclude from the class any

member who requests exclusion; the time and manner for requesting exclusion; and the binding effect

of a class judgment on class members. Fed. R. Civ. P. 23(c)(2)(B). The form of notice proposed by the

parties complies with those requirements. (See Settlement Agreement, Exh. C.) It clearly and

accurately informs the class members of the material terms of the settlement and their rights pertaining

to it, including the right to opt out from or object to the settlement. Plaintiffs thus request that the Court

approve the form of notice as well.

3. Notice of the Settlement will be Provided to Appropriate Federal and State Officials

Notice of the proposed settlement will also be provided to the appropriate federal official and

the appropriate State officials of all 50 states, as required by the Class Action Fairness Act, 28 U.S.C.

§ 1715. (Settlement Agreement III.A.2.) Ducati will provide these government officials with copies of

all required materials—including the Settlement Agreement, Class Notice, and the amended

complaint—so that the states and federal government may make an independent evaluation of the

settlement and bring any concerns to the Court’s attention prior to final approval.




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E. The Court Should Set a Schedule for Final Approval

The next steps in the settlement approval process are to notify the class of the proposed

settlement, allow class members an opportunity to file any objections or opt-outs, and hold a final

approval hearing. Toward those ends, the parties propose the following schedule:

Deadline to disseminate class notice: 60 days after entry of Preliminary Approval Order

Deadline for filing briefs in support of motion for final approval and fee application:

14 days after class notice is mailed

Deadline for class members to file comments in support of or in objection to the settlement or fee application:


Deadline for class members to opt-out of the settlement:


Deadline for the parties’ replies to any class member objections:

10 days after the deadline for class members to file comments in objection to the settlement or fee application

Final Approval Hearing: 14 days after the deadline for the parties’ replies to any class member objections

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IV. CONCLUSION

For the foregoing reasons, Plaintiffs’ counsel respectfully requests that the Court enter the

accompanying Proposed Order granting preliminary approval of the proposed settlement, conditionally

certifying the settlement class, appointing Plaintiffs as class representatives and their attorneys as class

counsel, directing dissemination of the class notice, and setting a hearing for the purpose of deciding

whether to grant final approval of the settlement.

DATED: August 26, 2011 Respectfully submitted, GIRARD GIBBS LLP By: /s/ Eric H. Gibbs Eric H. Gibbs

Dylan Hughes Geoffrey A. Munroe 601 California Street, 14th Floor San Francisco, CA 94108 Telephone: (415) 981-4800 Facsimile: (415) 981-4846



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