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In re Sony Sxrd Rear Projection Television Class Action Litigation

May 1, 2008

IN RE SONY SXRD REAR PROJECTION TELEVISION CLASS ACTION LITIGATION,


The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.

This Document Relates to:

OPINION AND ORDER ALL ACTIONS.

On October 23, 2007, this Court preliminarily approved a proposed settlement agreement between Plaintiffs and Defendants in the above-captioned class action. The parties now seek final approval of the proposed settlement agreement. Plaintiffs also move for certification of the settlement class and apply for an award of attorneys' fees and reimbursement of expenses. For the reasons stated below, the proposed settlement agreement is approved, the settlement class is certified, and the application for the fee award is granted.

BACKGROUND

A. The Class Action

Plaintiff Michael Cook filed this case as a putative national class action on July 7, 2006. An identical complaint was filed by Plaintiff Paul Krasnoff on September 29, 2006. The Court consolidated the two actions on December 22, 2006, and Plaintiffs filed a consolidated complaint thereafter. After Defendants moved to dismiss the consolidated complaint, Plaintiffs filed a First Amended Consolidated Class Action Complaint (the "Complaint") dated February 19, 2007, which added sixteen new plaintiffs.*fn1

The Complaint alleges a design defect in all rear projection, high-definition SXRD televisions with the model numbers KDS-R50XBR1 and KDS-R60XBR1 (the "Televisions"), manufactured and marketed by Defendants Sony Corporation, Sony Corporation of America, and Sony Electronics, Inc. (collectively "Sony") beginning in September 2005. The design defect (the "Defect") is alleged to exist in a component known as the "Optical Block," the central component of a projection television that projects the video image onto the screen. The Complaint alleges that the Defect causes a green haze in the middle of the screen (the "green issue"), a yellow stain appearing at the edge of the screen and expanding over time (the "yellow issue"), or other color anomalies on the screens of the Televisions. The Complaint further alleges that Sony was unable to permanently repair the Defect, and that consumers were forced to pay for replacement Optical Blocks at a cost of more than $1500.00 if the Defect manifested after the one-year manufacturer's warranty had expired.

The Complaint posits a class consisting of "all end user consumers in the United States who purchased or received as gifts the Televisions." (Settlement § 3.1.) Excluded from the class are Sony, its affiliates, and their employees and immediate family members, persons who purchased or acquired a Television for commercial sale or resale, persons who are claims aggregators, persons who claim to be an assignee of rights associated with the Televisions, and persons who timely and validly opted to exclude themselves from the class. (Id. § 3.2.) The Televisions were sold by Sony from approximately September 2005 to July 2006. As defined, the class has approximately 172,000 to 175,000 members.*fn2

The Complaint asserts nine causes of action, including statutory and common law claims for breach of warranty, a claim of unjust enrichment, and statutory consumer protection claims under the law of California, the laws of 44 other states and the District of Columbia. On March 21, 2007, Sony filed a motion to dismiss for failure to state a claim and based on the inapplicability of California consumer protection law under the choice-of-law rules. (Mulligan Decl., Ex. 2.) Without responding to Sony's motion, Plaintiffs continued negotiations with Sony, and the parties entered into mediation in April 2007.

B. Sony's Improvements to Correct the Defect

Sony claims that by September 2006, all of the Optical Blocks-including those manufactured for new Televisions and those available to be used as replacements for defective Optical Blocks-contained improvements that had been made on a rolling basis to resolve both the green and yellow issues at the heart of Plaintiffs' complaint. The green issue, which manifests itself immediately (Guillou Decl. ¶ 5; Hr'g Tr. at 36:25-37:3), was for the most part resolved within one month of the Televisions entering the market. By October 2005, Sony determined that the green issue was primarily due to temperature fluctuations at the calibration stage of the assembly line and made appropriate adjustments to guarantee temperature uniformity. (Guillou Decl. ¶ 5; Hr'g Tr. at 30:19-23.) Because only about 7000 Televisions had been manufactured at that point, the great majority of Televisions manifesting the green issue were among the first 7000 produced. (Guillou Decl. ¶ 5.) Sony also recognized that there were other possible causes of the green issue, which were relatively minor and resolved by January 2006. (Guillou Decl. ¶ 6; Hr'g Tr. at 31:2-4.)

The yellow issue, which appears over time, took a relatively longer time to resolve. Sony discovered that the yellow issue was caused by the introduction of a microscopic material into one of the panels of the liquid crystal layer of the Television, which disrupted the uniformity of the liquid crystal layer when exposed to the ultraviolet radiation from the lamp that illuminates the whole Television. (Guillou Decl. ¶8; Hr'g Tr. at 31:9-20.) The extent of the yellow discoloration that resulted depended on how much of the microscopic material was present, which varied from set to set, and on how frequently the consumer used the Television. Between January 2006 and September 2006, Sony made two types of improvements to resolve the yellow issue: reduction of the amount of ultraviolet exposure and reduction of the amount of microscopic material introduced into the liquid crystal panel. (Guillou Decl. ¶ 9; Hr'g Tr. at 32:8-17.)

At the settlement hearing held by this Court on February 27, 2008, Plaintiffs' counsel stated that "we do think that Sony has successfully remanufactured the component." (Hr'g Tr. at 15:16-17.) The proof which satisfied them "that Sony had resolved this problem was the documents, the explanation of the engineers as to why the defect was manifesting itself in the first instance, how they overcame those problems to redesign the optical block, to assure themselves that the problem would not return, and the absence of consumer complaints that the defect had come back once the new optical block was installed." (Id. at 15:25-16:6.)*fn3

C. The Settlement Negotiations

Although both Plaintiffs and Sony believed firmly in the strength of their cases, the parties agreed to negotiate a possible resolution of the case to avoid the risks and expenses inherent in complex class action litigation. (Mulligan Decl. ¶ 5.) Beginning in November 2006 and continuing through May 2007, the parties conducted intensive arm's-length negotiations. (Mulligan Decl. ¶ 5.) The negotiations culminated in a face-to-face mediation session in April 2007 before Richard C. Neal, a retired justice of the California Court of Appeals and nationally known mediator of complex matters, followed by several telephonic mediation sessions. (Lax Affirm. ¶¶ 6, 7; Mulligan Decl. ¶ 5.)

Prior to and during negotiations, Plaintiffs conducted formal and informal discovery to be able to evaluate the strengths and weaknesses of their claims and set a factual predicate for a proposed resolution. (Lax Affirm. ¶ 8; Mulligan Decl. ¶ 6.) In particular, Plaintiffs conducted extensive review of key engineering documents produced by Sony, interviews of several Sony project engineers, consultation with experts, and due diligence discovery. (Lax Affirm. ¶ 9; Mulligan Decl. ¶ 6.) The discovery allowed the parties to establish the nature and cause of the green and yellow issues, the improvements Sony made to resolve those issues, the timing and efficacy of those improvements, and Sony's ability to replace defective Optical Blocks. (Lax Affirm. ¶ 8; Mulligan Decl. ¶ 6.)

Based on their discovery, investigation and evaluation of the facts and law relating to all of the matters alleged in the pleadings, Plaintiffs and Sony agreed to settle the action under the terms of the proposed settlement agreement (the "Settlement") in May 2007. (Lax Affirm. ¶ 10.) The parties then negotiated attorneys' fees, returning to California for another session with Justice Neal in mid-June 2007 for that purpose.

D. The Settlement's Terms

The Settlement is intended to ensure that class members are reimbursed for expenses they may have incurred for repairs relating to the green or yellow issue, and that class members whose Televisions manifest a green or yellow issue in the future can have the Optical Block replaced in-home without cost and with maximum convenience. The Settlement is also designed to reimburse class members for any expense they might incur prior to the effective date of the Settlement in connection with the repair of an Optical Block. Specifically to those ends, the Settlement provides as follows:

1. Extension of the Optical Block Warranty

Sony will extend its manufacturer's limited warranty on the Optical Blocks through June 30, 2009 with in-home service to correct the Defect. (Settlement § 4.2.) The Televisions came with one-year limited warranties which, for class members who purchased Televisions between September 2005 and July 2006, were scheduled to expire between September 2006 and July 2007.

2. Enhanced Warranty Fulfillment

During the warranty extension period, Sony will maintain a dedicated toll-free telephone number for settlement class members to obtain a telephone diagnosis from a technical representative who will arrange for in-home service and for any necessary parts shipments, if necessary. In the event Sony is unable to ship a replacement Optical Block, if necessary, within 14 days following the initial telephone diagnosis, the settlement class member will have the option of waiting for the repair or exchanging the Television for a remanufactured SXRD XBR1 television. The parties acknowledge that any such replacement television may have a lower retail selling price than the original Television. (Settlement § 4.3.)

3. Reimbursement of Expenses for Optical Block Repair

Upon timely submission of a valid proof of claim, Sony will reimburse any settlement class member who incurred out-of-pocket expenses prior to the effective date of the Settlement for the replacement of an Optical Block (including shipping costs) for all such expenses. (Settlement § 4.4.)

4. Reimbursement of Certain Extended Service Plans

Upon timely submission of appropriate documentation, Sony will reimburse settlement class members who purchased an extended service contract from Sony or Sony's extended service plan providers after July 15, 2006 and before the effective date of the Settlement, if they wish to cancel it. (Settlement § 4.5.)

5. Reimbursement of Certain Expenses Associated with SXRD Upgrades Prior to Effective Date

Any class member who required more than one Optical Block repair before the effective date of the Settlement and who elected to upgrade to an XBR2, A2000, or A2020 SXRD television will be reimbursed for the monies paid to Sony for the upgrade. (Settlement § 4.6.)

6. Litigation Costs

Sony will pay all costs of settlement administration, including notice, and will pay Plaintiffs' reasonable counsel fees and expenses as awarded by the Court, up to $1,600,000.00, in ...


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