In Re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation , 55 F.3d 768 ( 1995 )


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  •                                                                                                                            Opinions of the United
    1995 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    4-17-1995
    In Re: General Motors Corp.
    Precedential or Non-Precedential:
    Docket 94-1064
    Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1995
    Recommended Citation
    "In Re: General Motors Corp." (1995). 1995 Decisions. Paper 98.
    http://digitalcommons.law.villanova.edu/thirdcircuit_1995/98
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    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _______________________
    Nos. 94-1064, 94-1194, 94-1195
    94-1198, 94-1202, 94-1203, 94-1207
    94-1208 and 94-1219
    ___________
    IN RE: GENERAL MOTORS CORPORATION
    PICK-UP TRUCK FUEL TANK PRODUCTS
    LIABILITY LITIGATION
    Jack French, Robert M. West, Charles E. Merritt,
    Gary Blades, Dawn and Tracey Best, Gary and
    Jackie Barnes, Betty Marteny, John and Mary
    Southands, Edmund Berning, Dale W. Plummer,
    Edmund and Anneta Casey, John and Connie Yonki,
    Carl and Kathryn Corona, Dallas and Patricia
    Nelson, Mynard and Mildred Duncan, Kirby L.
    Stegman, DeWayne Anderson, Morris and Barbara Betzold,
    Appellants in No. 94-1064
    Rudolph Jenkins, William D. Cunningham,
    Mather Johnson, Forrest Charles Ginn,
    Buren William Jones and Martin D. Parkman,
    Appellants in No. 94-1194
    (Civ. No. 92-cv-06450)
    _______________________________
    Parish of Jefferson,
    Appellant in No. 94-1195
    The State of New York
    Appellant in No. 94-1198
    Elton Wilson, individually, and
    Frank I. Owen, individually and on
    behalf of the residents of the
    State of Alabama
    Appellants in No. 94-1202
    City of New York
    Appellant in No. 94-1203
    Betty Youngs, Barbara Phillips,
    Margaret Engel, Larry Swope,
    Robbin Maxwell and Center for
    Auto Safety
    Appellants in No. 94-1207
    Betty Youngs, Barbara Phillips,
    Margaret Engel, Larry Swope,
    Robbin Maxwell and Center for
    Auto Safety
    Appellants in No. 94-1208
    Commonwealth of Pennsylvania,
    Department of Transportation
    Appellant in No. 94-1219
    (Civ. No. MDL-961)
    _________________________________________
    On Appeal From the United States District Court
    For the Eastern District of Pennsylvania
    ___________________________________
    Argued: August 11, 1994
    Before:   BECKER, ALITO, and GIBSON,*
    Circuit Judges.
    (Filed April 17, 1995)
    JAMES A. SCHINK, ESQUIRE (ARGUED)
    J. ANDREW LANAGAN, ESQUIRE
    ROBERT B. ELLIS, ESQUIRE
    Kirkland & Ellis
    200 East Randolph Drive
    Chicago, Illinois 60601
    GEORGE J. LAVIN, JR., ESQUIRE
    FRANCIS P. BURNS, III, ESQUIRE
    *
    . Honorable John R. Gibson, United States Circuit Judge for the
    Eighth Circuit, sitting by designation.
    Lavin, Coleman, Finarelli & Gray
    12th Floor Penn Mutual Tower
    510 Walnut Street
    Philadelphia, PA 19106
    LEE A. SCHUTZMAN, ESQUIRE
    E.D.WARD C. WOLFE
    General Motors Corporation
    New Center One Building
    3031 West Grand Blvd.
    P.O. Box 33122
    Detroit, Michigan 48232
    Attorneys for General Motors
    Corporation, Appellee
    ANDREW M. HUTTON, ESQUIRE
    DEREK S. CASEY, ESQUIRE
    PAUL Benton WEEKS, III, ESQUIRE
    Michaud, Hutton, Fisher & Anderson
    8100 East 22nd Street North
    Building 1200
    Wichita, Kansas 67226-2312
    Attorneys for Jack French, Robert M.
    West, Charles E. Merritt, Gary Blades,
    Dawn Best, Tracey Best, Gary Barnes,
    Jackie Barnes, Betty Marteny, John
    Southards, Mary Southards, Edmund
    Berning, Dale W. Plummer, Edmund Casey,
    Anneta Casey, John Yonki, Connie Yonki,
    Carl Corona, Kathryn Corona, Dallas
    Nelson, Patricia Nelson, Mynard Duncan,
    Mildred Duncan, Kirby L. Stegman,
    Dewayne Anderson, Morris Betzold,
    Barbara Betzold, Dennis Acuma,
    Appellants
    DIANE M. NAST, ESQUIRE (ARGUED)
    WILLIAM E. HOESE, ESQUIRE
    Kohn, Swift & Graf, P.C.
    1101 Market Street, Suite 2400
    Philadelphia, PA 19107-2927
    ELIZABETH J. CABRASER, ESQUIRE (ARGUED)
    MICHAEL F. RAM, ESQUIRE
    Lieff, Cabraser & Heimann
    275 Battery Street, 30th Floor
    San Francisco, CA 94111-3339
    Attorneys for Dennis Acuma,
    John E. Martin,
    Plaintiff Class/Appellees
    JOHN W. BARRETT, ESQUIRE
    Barrett Law Offices
    404 Court Square North
    P.O. Box 631
    Lexington, MS 39095
    Attorney for John Mayhall, Brendan
    Hayes, Jimmy Benson, Jimmy Haddock,
    Dennis Nabors, Marcia Baldwin,
    Appellees
    WILLIAM S. LERACH, ESQUIRE
    Milberg, Weiss, Bershad, Hynes
    & Lerach
    600 West Broadway
    Suite 1800
    San Diego, CA 92101
    Attorneys for William A. Lewis,
    David Grubbs, Raymond Carver,
    Johnny S. Martinez, Robert A. Flowers,
    Stone Ridge Agri, Inc., James McKinnish,
    Douglas A. Livingston,
    Appellees
    RICHARD S. SCHIFFRIN, ESQUIRE
    Schiffrin & Craig
    Three Bala Plaza East
    Suite 500
    Bala Cynwyd, PA 19004
    Attorneys for Johnny S. Martinez,
    Joseph St. Clair,
    Appellees
    PATRICIA J. CLANCY, ESQUIRE
    Senior Deputy County Counsel
    County of Santa Barbara
    105 East Anapamu Street, Suite 201
    Santa Barbara, CA 93101
    Attorney for City of Los Angeles,
    Alameda City, Santa Barbara City,
    Utah City, Washington, City,
    Amicus-Appellee
    JAMES E. BUTLER, JR., ESQUIRE (ARGUED)
    ROBERT D. CHEELEY, ESQUIRE
    PETER J. DAUGHTERY
    Butler, Wooten, Overby & Cheeley
    1500 2nd Avenue
    Columbus, GA 31902
    Attorneys for Rudolph Jenkins,
    William D. Cunningham, Mather Johnson,
    Forrest Charles Ginn, Buren William
    Jones, Martin D. Parkman,
    HANS J. LILJEBERG, ESQUIRE
    Jefferson Parish Attorney's Office
    New Courthouse Building
    Suite 527
    Gretna, LA 70053
    JERON J. LaFARGUE, ESQUIRE
    Jefferson Parish Attorney's Office
    1221 Elmwood Park Blvd.
    Room 701
    Harahan, LA 70123
    Attorneys for Parish of Jefferson,
    Appellant
    G. OLIVER KOPPELL, ESQUIRE
    Attorney General of the State
    of New York
    PETER H. SCHIFF, ESQUIRE
    Deputy Solicitor General
    NANCY A. SPIEGEL, ESQUIRE
    Assistant Attorney General
    ANDREA OSER, ESQUIRE
    Assistant Attorney General
    New York State Department of Law
    The Capitol
    Albany, NY 12224
    Attorney for State of New York,
    Appellant
    MICHAEL J. EVANS, ESQUIRE
    STEVEN D. KING, ESQUIRE
    Longshore, Evans & Longshore
    2001 Park Place
    650 Park Place Tower
    Birmingham, AL 35203
    Attorneys for Elton Wilson,
    individually, Frank I. Owen,
    individually and on behalf of the
    residents of the State of Alabama,
    Appellants
    JOHN HOGROGIAN, ESQUIRE
    New York City Law Department
    100 Church Street
    New York, NY 10007
    Attorney for City of New York,
    Appellant
    BRIAN S. WOLFMAN, ESQUIRE (ARGUED)
    DAVID C. VLADECK, ESQUIRE
    Public Citizen Litigation Group
    2000 P Street, N.W., Suite 700
    Washington, DC 20036
    C. RAY GOLD, ESQUIRE
    Center for Auto Safety
    2001 S Street, NW
    Washington, DC 20009
    Attorneys for Betty Youngs, Barbara
    Phillips, Margaret Engel, Larry Swope,
    Robbin Maxwell, Center for Auto Safety,
    Appellants
    STEPHEN F.J. MARTIN, ESQUIRE (ARGUED)
    Assistant Counsel In-Charge
    STEVEN I. ROTH, ESQUIRE
    Assistant Counsel
    ROBERT J. SHEA, ESQUIRE
    Assistant Chief Counsel
    JOHN L. HEATON, ESQUIRE
    Chief Counsel
    Office of Chief Counsel
    Department of Transportation
    521 Transportation & Safety Bldg.
    Harrisburg, PA 17120
    Attorneys for Commonwealth of
    Pennsylvania, Appellant
    TABLE OF CONTENTS
    I. FACTS, PROCEDURAL HISTORY, AND STANDARD OF REVIEW ..................    15
    A. General Background..............................             15
    B. The Settlement Agreement........................             18
    C. Approval of the Settlement and Fees.............             20
    D. The NHTSA Investigation.........................             23
    E. Standard of Review..............................             24
    II. ANATOMY    OF THE   CLASS CLAIMS ................................... 25
    III. RULE 23 - RELEVANT FUNDAMENTAL PRINCIPLES ...................... 27
    IV. SETTLEMENT   CLASSES ..........................................        33
    A.     Nature of the Device............................         33
    B.     Perceived Problems of Settlement Classes........         35
    C.     Arguments Favoring Settlement Classes...........         44
    D.     Are Settlement Classes Cognizable Under
    Rule 23?.......................................         50
    E. Are the Rule 23(a) and (b) Findings
    Required for Settlement Classes? Does
    Finding the Settlement to Be Fair and
    Reasonable Serve as a Surrogate for the
    Findings?......................................         55
    F. Can There be a Valid Settlement Class
    That Would Not Serve as a Valid
    Litigation Class?..............................         64
    V. IS   THE   SETTLEMENT CLASS PROPER HERE? ............................   69
    A. Were There Adequate Findings Under Rule
    23(a)?.........................................       69
    B. Could the Class Requisites Have Been Met
    On The Current Record?.........................       70
    1. Numerosity, Commonality, and
    Typicality...........................     70
    2. Adequacy of Representation.................        71
    a.   The Situation of the Fleet
    Owners........................ 71
    b.   Did Counsel Adequately
    Represent the
    Interests of the Entire Class? 73
    VI.   Is the Settlement Fair, Reasonable, and Adequate?........ 82
    A. Adequacy of Settlement - General
    Principles..................................... 87
    1. Valuation of the Settlement -
    Introduction......................... 88
    a. Plaintiffs' Witness Dr.
    Itmar Simonsen................ 89
    b. Inability of Class Members
    to Use Certificates........... 91
    c. Value of the Transfer
    Option........................ 94
    d. GM's Implicit Valuation of
    the Claim..................... 96
    2. Valuing This Settlement Relative to
    The Relief Requested................. 98
    a. The Retrofit Issue............... 99
    b. Availability of Other
    Remedies......................100
    B. Complexity of the Suit..........................102
    C. Reaction of the Class...........................103
    D. Stage of Proceedings............................106
    E. Risks of Establishing Liability.................109
    F. Risks of Establishing Damages...................113
    G. Risks of Maintaining Class Status................116
    H. Ability to Withstand Greater Judgment...........120
    I. Summary.........................................120
    VII. APPROVAL   OF THE   ATTORNEYS' FEE AWARD ...........................122
    VIII. OTHER ISSUES; CONCLUSION ...................................131
    _____________________________
    OPINION OF THE COURT
    _____________________________
    BECKER, Circuit Judge.
    This is an appeal from an order of the District Court
    for the Eastern District of Pennsylvania approving the settlement
    of a large class action following its certification of a so-
    called settlement class.    Numerous objectors challenge the
    fairness and reasonableness of the settlement.      The objectors
    also challenge:    (1) the district court's failure to certify the
    class formally; (2) its denial of discovery concerning the
    settlement negotiations; (3) the adequacy of the notice as it
    pertained to the fee request; and (4) its approval of the
    attorneys' fee agreement between the defendants and the attorneys
    for the class, which the class notice did not fully disclose,
    thereby (allegedly) depriving the class of the practical
    opportunity to object to the proposed fee award at the fairness
    hearing.
    The class members are purchasers, over a 15 year
    period, of mid- and full-sized General Motors pick-up trucks with
    model C, K, R, or V chassis, which, it was subsequently
    determined, may have had a design defect in their location of the
    fuel tank.    Objectors claim that the side-saddle tanks rendered
    the trucks especially vulnerable to fuel fires in side
    collisions.    Many of the class members are individual owners
    (i.e., own a single truck), while others are "fleet owners," who
    own a number of trucks.   Many of the fleet owners are
    governmental agencies.    As will become apparent, the negotiated
    settlement treats fleet owners quite differently from individual
    owners, a fact with serious implications for the fairness of the
    settlement and the adequacy of representation of the class.
    While all the issues we have mentioned are significant
    (except for the discovery issue), the threshold and most
    important issue concerns the propriety and prerequisites of
    settlement classes.   The settlement class device is not mentioned
    in the class action rule, Federal Rule of Civil Procedure 23.1
    1
    .   Rule 23 provides, in pertinent part:
    (a) Prerequisites to a Class Action. One or more members of
    a class may sue or be sued as representative parties on behalf of
    all only if (1) the class is so numerous that joinder of all
    members is impracticable, (2) there are questions of law or fact
    common to the class, (3) the claims or defenses of the
    representative parties are typical of the claims or defenses of
    the class, and (4) the representative parties will fairly and
    adequately protect the interests of the class.
    (b) Class Actions Maintainable. An action may be maintained
    as a class action if the prerequisites of subdivision (a) are
    satisfied, and in addition:
    (1) the prosecution of separate actions by or against
    individual members of the class would create a risk of
    (A) inconsistent or varying adjudications with
    respect to individual members of the class which would establish
    incompatible standards of conduct for the party opposing the
    class, or
    (B) adjudications with respect to individual members
    of the class which would as a practical matter be dispositive of
    the interests of the other members not parties to the
    adjudications or substantially impair or impede their ability to
    protect their interests; or
    (2) the party opposing the class has acted or refused
    to act on grounds generally applicable to the class, thereby
    Rather it is a judicially crafted procedure.   Usually, the
    request for a settlement class is presented to the court by both
    plaintiff(s) and defendant(s); having provisionally settled the
    case before seeking certification, the parties move for
    simultaneous class certification and settlement approval. Because
    this process is removed from the normal, adversarial, litigation
    mode, the class is certified for settlement purposes only, not
    for litigation.   Sometimes, as here, the parties reach a
    settlement while the case is in litigation posture, only then
    moving the court, with the defendants' stipulation as to the
    (..continued)
    making appropriate final injunctive relief or corresponding
    declaratory relief with respect to the class as a whole; or
    (3) the court finds that the questions of law or fact
    common to the members of the class predominate over any questions
    affecting only individual members, and that a class action is
    superior to other available methods for the fair and efficient
    adjudication of the controversy.    The matters pertinent to the
    findings include: (A) the interest of members of the class in
    individually controlling the prosecution or defense of separate
    actions; (B) the extent and nature of any litigation concerning
    the controversy already commenced by or against members of the
    class; (C) the desirability or undesirability of concentrating
    the litigation of the claims in the particular forum; (D) the
    difficulties likely to be encountered in the management of a
    class action.
    (c) Determination by Order Whether Class Action to be
    Maintained; Notice; Judgment; Actions Conducted Partially as
    Class Actions.
    (1) As soon as practicable after the commencement of an
    action brought as a class action, the court shall determine by
    order whether it is to be so maintained.     An order under this
    subdivision may be conditional, and may be altered or amended
    before the decision on the merits. . . .
    (e) Dismissal or Compromise.    A class action shall not be
    dismissed or compromised without the approval of the court, and
    notice of the proposed dismissal or compromise shall be given to
    all members of the class in such manner as the court directs.
    class's compliance with the Rule 23 requisites, for class
    certification and settlement approval.    In any event, the court
    disseminates notice of the proposed settlement and fairness
    hearing at the same time it notifies class members of the
    pendency of class action determination.   Only when the settlement
    is about to be finally approved does the court formally certify
    the class, thus binding the interests of its members by the
    settlement.
    The first Manual for Complex Litigation [hereinafter
    MCL] strongly disapproved of settlement classes.   Nevertheless,
    courts have increasingly used the device in recent years, and
    subsequent manuals (MCL 2d and MCL 3d (in draft)) have relented,
    endorsing settlement classes under carefully controlled
    circumstances, but continuing to warn of the potential for abuse.
    This increased use of settlement classes has proven extremely
    valuable for disposing of major and complex national and
    international class actions in a variety of substantive areas
    ranging from toxic torts (Agent Orange) and medical devices
    (Dalkon Shield, breast implant), to antitrust cases (the beef or
    cardboard container industries).   But their use has not been
    problem free, provoking a barrage of criticism that the device is
    a vehicle for collusive settlements that primarily serve the
    interests of defendants -- by granting expansive protection from
    law suits -- and of plaintiffs' counsel -- by generating large
    fees gladly paid by defendants as a quid pro quo for finally
    disposing of many troublesome claims.
    After reflection upon these concerns, we conclude that
    Rule 23 permits courts to achieve the significant benefits
    created by settlement classes so long as these courts abide by
    all of the fundaments of the Rule.   Settlement classes must
    satisfy the Rule 23(a) requirements of numerosity, commonality,
    typicality, and adequacy of representation, as well as the
    relevant 23(b) requirements, usually (as in this case) the (b)(3)
    superiority and predominance standards.   We also hold that
    settlement class status (on which settlement approval depends)
    should not be sustained unless the record establishes, by
    findings of the district judge, that the same requisites of the
    Rule are satisfied.   Additionally, we hold that a finding that
    the settlement was fair and reasonable does not serve as a
    surrogate for the class findings, and also that there is no lower
    standard for the certification of settlement classes than there
    is for litigation classes.   But so long as the four requirements
    of 23(a) and the appropriate requirement(s) of 23(b) are met, a
    court may legitimately certify the class under the Rule.
    In this case the district judge made no Rule 23
    findings, and significant questions remain as to whether the
    class could have met the requisites of the rule had the district
    court applied them.   Principally at issue is adequacy of
    representation.   In particular, the objectors contend that there
    is a conflict between the positions of individual owners on the
    one hand and fleet owners on the other hand.   The disparity in
    settlement benefits enjoyed by these different groups, objectors
    argue, creates an intra-class conflict that precludes the finding
    of adequacy of representation required by the rule.     Moreover,
    they submit, the large number of different defenses available
    under the laws of the several states involved also creates a
    potentially serious commonality and typicality problem.
    We conclude that the objectors' adequacy of
    representation claim probably has merit.   At all events, the
    district court did not properly evaluate the differential impact
    of the settlement on individual fleet owners, and should
    determine on remand whether the conflicts among class members are
    so great as to preclude certification (or at least sufficient to
    require the creation of subclasses).   The district court should
    also focus on the commonality and typicality problems, to
    determine whether the national scope of the class litigation and
    the plethora of defenses available in different jurisdictions
    prevent these requirements from being met.
    For the reasons that follow at some length, we conclude
    that, although settlement classes are valid generally, this
    settlement class was not properly certified.   We also conclude
    that the settlement is not fair and adequate; more precisely, we
    hold that the district court abused its discretion in determining
    that it was, primarily because the district court erred in
    accepting plaintiffs' unreasonably high estimate of the
    settlement's worth, in over-estimating the risk of maintaining
    class status and of establishing liability and damages, and in
    misinterpreting the reaction of the class.              Finally, although our
    disposition of the foregoing issues makes it unnecessary for us
    to pass on the approval of the attorneys fees, we clarify the
    governing standards for these fee awards to guide the district
    court on remand.     We therefore reverse the challenged order of
    the district court and remand for further proceedings.
    I. FACTS, PROCEDURAL HISTORY,   AND   STANDARD   OF   REVIEW
    A.   General Background
    Between 1973 and 1987, General Motors sold over 6.3
    million C/K pickup trucks with side-mounted fuel tanks.2                   In late
    October 1992, after the public announcement of previously
    undisclosed information regarding the safety of the fuel tank
    placement in GM pickups, consumer class action lawsuits were
    filed in several jurisdictions.       The National Highway Traffic
    Safety Administration ("NHTSA") commenced an investigation of the
    alleged defects relating to side-impact fires on these trucks,
    and    consumer advocacy groups sought a recall.3
    On November 5, 1992, plaintiffs in one action sought to
    enjoin allegedly misleading communications to putative class
    2
    .      The class includes both mid-and full-size trucks with
    chassis model types C, K, R, or V.
    3
    .     See note 5 infra.
    members and filed an application for expedited discovery.      On
    November 8 and 9, 1992, GM filed notices of removal of this and
    other state court actions, and a motion with the Judicial Panel
    on Multidistrict Litigation ("MDL Panel") to transfer and
    consolidate all actions for pretrial purposes under 28 U.S.C.
    § 1407.   The MDL Panel transferred all related actions to the
    District Court for the Eastern District of Pennsylvania on
    February 26, 1993.    Ultimately, dozens of actions were filed in
    various courts throughout the United States on behalf of consumer
    classes; the federal cases were dismissed, remanded to state
    court, or transferred to the Eastern District of Pennsylvania.
    On March 5, 1993, pursuant to an order of the
    (transferee) District Court, plaintiffs filed a Consolidated
    Amended Class Action Complaint seeking equitable relief and
    damages that consolidated all of the actions under the MDL
    caption and listed nearly 300 representative plaintiffs,
    including both individual and fleet owners.    The Complaint
    alleged violations of two federal statutes; the Magnuson-Moss Act
    and the Lanham Trademark Act; a variety of common law and
    statutory claims, including negligence, fraud, breach of written
    and implied warranty; and violations of various state consumer
    statutes.    The complaint sought, inter alia, an order remedying
    the alleged abnormally high incidence of fuel-fed fires following
    side-impact collisions by requiring GM to recall the trucks or
    pay for their repair. (JA 37, 93.) GM answered this complaint,
    denying all substantive allegations and raising numerous
    affirmative defenses.
    Also on March 5, 1993, plaintiffs filed a consolidated
    motion for nationwide class certification.     The court set July
    19, 1993, the hearing date on this motion.      On March 30, 1993, GM
    moved to stay this litigation pending the outcome of the NHTSA
    investigation, initiated in December 1992.      This motion was
    denied on June 4, 1993.    Pursuant to a scheduling order issued by
    the court, discovery during the spring of 1993 focused on class
    certification issues.     (JA1824-27.)   During this discovery, GM
    produced more than 100,000 pages of documents from prior C/K
    pickup product liability lawsuits and GM's responses to NHTSA
    information requests.     Plaintiffs also had access to the
    depositions and trial testimony in other cases involving the fuel
    tank design of C/K pickups, including the jury trial in Moseley
    v. GM, No. 90-V-6276 (Fulton County, Ga.).      Plaintiffs consulted
    with their own experts to evaluate this information.      In
    addition, depositions were taken of some GM personnel and certain
    named plaintiffs.   Discovery on the merits of the case had been
    postponed until autumn 1993.     Nothing in the record indicates
    that, as of the spring of 1993, counsel had identified expert
    witnesses for trial or deposed GM's engineering experts.
    In the midst of these proceedings, the parties began
    exploring a possible settlement of the litigation.      These
    discussions intensified in June 1993, at which time face-to-face
    and telephonic meetings, both between the parties and among
    plaintiffs' counsel, took place on virtually a daily basis.     On
    July 19, 1993, the parties reached a settlement in principle,
    reduced the terms to writing, and informed the district court.4
    For purposes of settlement only and without prejudice to GM's
    substantial opposition to class certification, the named parties
    agreed to the certification of a settlement class of C/K pickup
    owners, described below.
    B.   The Settlement Agreement
    In general terms, the settlement agreement provides for
    members of the settlement class to receive $1,000 coupons
    redeemable toward the purchase of any new GMC Truck or Chevrolet
    light duty truck.   Settlement certificates are transferable with
    the vehicle.   They are redeemable by the then current owner of
    the 1973-86 C/K and 1987-91 R/V light duty pickup trucks or
    chassis cabs at any authorized Chevrolet or GMC Truck dealer for
    a fifteen month period.    Settlement class members do not have to
    trade in their current vehicle to use the certificate, and the
    4
    .   GM reached a substantially identical agreement with counsel
    representing a class of C/K pickup truck purchasers who are Texas
    residents in Dollar v. General Motors, No. 92-1089 (71st Judicial
    District, Marshall, Tex.)(JA1708, 1746).     That settlement was
    approved in November 1993, but was overturned on appeal on June
    22, 1994.   See Bloyed v. General Motors Corporation, Dollar et
    al., 
    881 S.W. 422
    (6th App. Dist., Tex. June 22, 1994), discussed
    infra at VI(I). The Texas Supreme Court granted GM's Application
    for Writ of Error on February 16, 1995 and set the case for oral
    argument on March 21, 1995.
    certificates can be used in conjunction with GM and GMAC
    incentive programs.
    The class members can freely transfer the certificate
    to an immediate family member who resides with the class member.
    Class members can also transfer the $1000 certificate to a family
    member who does not reside with the class member by designating
    the transferee family member within sixty days, running from the
    date that GM mailed notice of the proposed settlement.
    Additionally, the $1000 certificate can be transferred with the
    title to the settlement class vehicle, that is, to a third party
    who purchases the class member's vehicle.
    In lieu of a $1,000 certificate, and without
    transferring title to the settlement class vehicle, a class
    member may instead request that a nontransferable $500
    certificate (counterintuitively known as the "transfer
    certificate") be issued to any third party except a GMC dealer or
    its affiliates.   This $500 certificate is redeemable with the
    purchase of a new C or K series GMC or Chevrolet full-size pickup
    truck or its replacement model.   The $500 certificate cannot be
    used in conjunction with any GMC or GMAC marketing incentive,
    must be used on the more expensive full size models, and is
    subject to the same fifteen-month redemption period as the $1,000
    certificates.   The class member must make a notarized request to
    GM, and GM will mail the $500 certificate to the transferee
    within 14 days of its receipt of the request for transfer.
    Under the terms of the agreement, the approval of the
    settlement and corresponding entry of final judgment would have
    no effect upon any accrued or future claims for personal injury
    or death, nor would it affect the rights of settlement class
    members to participate in any future remedial action that might
    be required under the National Traffic and Motor Safety Act of
    1966, 15 U.S.C. §§ 1381 et seq. (1995).5    (JA 1750, 1763-64.)
    The settlement agreement before us also provides that
    plaintiffs' counsel would apply to the district court for an
    award of reasonable attorneys' fees and reimbursement of
    expenses, both to be paid by GM.   GM reserved the right to object
    to any fees or expenses it deemed to be excessive and to appeal
    any amount awarded by the court over its objection. (JA 1750,
    1755-56.)    Plaintiffs' counsel filed their fee applications on or
    about September 15, 1993; the fee applications remained in the
    files of the clerk of the district court where class members
    could theoretically review them, but no information about
    attorneys' fees other than the fact that a fee application would
    be made was included in the class notice.    GM did not file any
    formal objections to the fee applications.
    5
    .   After   oral   argument   in  this   case,   United   States
    Transportation Secretary Federico Pena announced that NHTSA had
    settled the proceeding involving the C/K trucks at issue here
    without ordering a recall, finding an acceptable retrofit, or
    giving any compensation to the truck owners.      The settlement
    provided that GM would contribute $51 million to general safety
    programs unrelated to the trucks' alleged problems.           See
    Statement by Secretary Federico Pena on Dec. 2, 1994, Settlement
    Regarding DOT Investigation of General Motors C/K Pickup Trucks.
    C.   Approval of the Settlement and Fees
    The district court reviewed the substantive terms of
    the settlement on July 12, 1993 and made the preliminary
    determination, in Pretrial Order No. 7, entered July 20, 1993,
    that the proposed settlement appeared reasonable. (JA 1828-33.)
    Also in pretrial order no. 7, the court "provisionally" certified
    the class of GM truck owners as a settlement class (i.e., for
    settlement purposes only) pursuant to Rule 23(b)(3); however, the
    court did not make findings that the requisites of Rule 23(a) or
    23(b) were satisfied.   (JA 1828-33.)   The court approved the form
    of and dissemination to putative class members of the combined
    notice of the pendency of the action and the proposed settlement
    pursuant to Rules 23(c)(2) and 23(e).    The class definition
    included all persons and entities who purchased in the United
    States (except for residents of the State of Texas) and were
    owners as of July 19, 1993 of (1) a 1973-1986 model year General
    Motors full-size pickup truck or chassis cab of the "C" or "K"
    series; or (2) a 1987-1991 model year General Motors full-size
    pickup truck or chassis cab of the "R" or "V" series.    (JA 1828.)
    On August 20 and 21, 1993, GM mailed the notice to all registered
    owners of class vehicles (including nearly 5.7 million vehicles),
    and it published the full text of the notice in USA Today and The
    Philadelphia Inquirer on August 27, 1993.
    In response to the notice, over 5,200 truck owners
    elected to opt out of the class, and approximately 6,500 truck
    owners (a number which includes fleet owners who own as many as
    1,000 vehicles each) objected to the settlement.    The objectors'
    filings contained many overlapping claims.   The recurring
    contentions were that:   (1) the settlement does nothing to fix
    the trucks (JA 1854,55,57); (2) even with the $1,000 coupon, many
    owners would be unable to purchase a new truck given their high
    cost (with list prices from $11,000 to $33,000); (3) state and
    local government fleet owners would not be able to redeem all of
    their certificates (by buying new vehicles) within the short
    redemption period (fifteen months), and they might be further
    restricted from using the coupons by competitive bidding
    procurement rules; and (4) GM and class counsel colluded in a
    manner that compromised the interests of the class and that would
    preclude a finding of adequate representation.    GM rejoined with
    voluminous material emphasizing the substantial risks plaintiffs
    faced not only in maintaining class treatment but also in
    establishing liability and damages.
    A settlement fairness hearing was held on October 26,
    1993 during which the objectors who submitted written briefs were
    permitted to speak.   The district court approved the settlement
    in a Memorandum and Order dated December 16, 1993.    In that
    order, the court confirmed its Pretrial Order No. 7, which had
    provisionally certified the settlement class.    Although the court
    still made no findings that the requisites of Rules 23(a) and (b)
    were met, it did set forth findings of fact and conclusions of
    law to justify its approval of the settlement as fair, reasonable
    and adequate based on the nine-factor test established in Girsh
    v. Jepson, 
    521 F.2d 153
    (3d Cir. 1975).
    The court found that the total economic value of the
    settlement was "between $1.98 billion and $2.18 billion." (App.
    1727)   Against the prospect of settlement, the court weighed each
    of the nine Girsh factors.   It concluded that "the complexity,
    expense and likely duration of the litigation would be mammoth."
    (op. 6)(JA 1708, 1713)   Although the settlement was reached at an
    early stage of the litigation, just four months after the
    consolidated complaint was filed, the court found that this did
    not weigh against the settlement because the court believed that
    the parties had access to "extensive discovery on the same issues
    of product defect that was previously conducted in the various
    personal injury actions that have been litigated throughout the
    country." (op. 8-9)(JA1715-16)   The district court also found
    that the reaction of class members to the proposed settlement
    supported approval citing "the infinitesimal number of truck
    owners who have either objected to or sought exclusion from the
    settlement." (JA1715.)
    Noting the divided results of the personal-injury jury
    trials and the numerous defenses GM could raise, the court found
    that "a substantial risk in establishing liability" weighed in
    favor of approval.   Similarly, the court found that "[p]erhaps
    the greatest weakness in the plaintiffs' case is the lack of
    proof of economic damages."   (JA1721.)   The court also addressed
    the objection that the settlement did not provide for a recall or
    a "fix," explaining that "no objector that complains that the
    settlement fails to retrofit the alleged defect has been able to
    come forth with a practical and safe modification for the trucks
    that has been designed, evaluated and tested." (JA1736.)
    On December 20, 1993, four days after approving the
    settlement, the district court also approved the class counsel's
    request for attorneys' fees in the amount of $9.5 million.
    Although the court did not believe at that time that it needed to
    review that fee award, to which GM had agreed, it subsequently,
    on February 2, 1994, issued an "amplified order" evaluating the
    award in greater detail.   The court determined that the fee
    request was reasonable under both a lodestar analysis and the
    percentage-of-recovery method (see Part VII infra).     (JA 1775.)
    D.   The NHTSA Investigation
    While this case was under submission to this court, the
    NHTSA investigation continued.   Over the objections of some of
    NHTSA's engineers who had determined that the trucks complied
    with relevant safety standards, on October 17, 1994, Secretary of
    Transportation Federico Pena announced the agency's finding that
    the trucks contained a safety defect creating an increased and
    unreasonable risk of side-impact fires.   The determination was
    based on the allegedly enhanced risk of side-impact fires
    relative to Ford pickups that resulted from GM's placement of the
    fuel tanks outside the frame rails.               GM challenged the propriety
    of the public meeting NHTSA planned to hold and NHTSA's authority
    to order a recall of vehicles that met all relevant safety
    standards.      On December 2, 1994, Secretary Pena announced the
    settlement of the C/K pickup investigation wherein GM contributed
    over $51 million for a variety of safety programs unrelated to
    the pickups, and admitted no liability.6
    E.    Standard of Review
    Each of the issues presented here is reviewable for
    abuse of discretion.            See Bryan v. Pittsburgh Plate Glass Co.,
    
    494 F.2d 799
      (3d    Cir.),      cert.    denied,   
    419 U.S. 900
       (1974)
    (approval of proposed class action settlement); In re School
    Asbestos      Litig.,     
    921 F.2d 1338
    ,    1341   (3d   Cir.   1990),   cert.
    denied, 
    499 U.S. 976
    (1991) (class certification);                     Lindy Bros.
    Builders, Inc. v. American Radiator & Standard Sanitary Corp.,
    
    540 F.2d 102
    , 115 (3d Cir. 1976) (award of reasonable attorney's
    fees); Marrogquin-Manriquez v. INS, 
    699 F.2d 129
    , 134 (3d Cir.
    1983), cert. denied, 
    467 U.S. 1259
    (1984) (scope of discovery).
    An appellate court may find an abuse of discretion where the
    "district court's decision rests upon a clearly erroneous finding
    of fact, an errant conclusion of law or an improper application
    of law to fact."          International Union, UAW v. Mack Trucks, Inc.,
    
    820 F.2d 91
    , 95 (3d Cir. 1987), cert. denied, 
    499 U.S. 921
    (1991).       A finding of fact is clearly erroneous when, although
    6
    .     See 
    note 5 supra
    .
    there is evidence to support it, the reviewing court, based on
    the    entire   evidence,       concludes    with      firm     conviction    that   a
    mistake has been made.            Oberti v. Board. of Ed. of Borough of
    Clementon Sch. Dist., 
    995 F.2d 1204
    , 1220 (3d Cir. 1993).
    II. ANATOMY      OF THE   CLASS CLAIMS
    The consolidated class complaint filed on behalf of the
    nationwide class of GM truck owners (except those from Texas)
    alleged violations of the Magnuson-Moss Warranty Act, 15 U.S.C.A.
    § 2310(d)(1) (1995); and the Lanham Act, 15 U.S.C.A. § 1125(a)
    (1995); and a variety of state common law and statutory claims,
    including strict liability in tort for selling a dangerously
    defective product; negligent design; negligent misrepresentation;
    fraud (based on defendants' alleged course of conduct in the
    advertising, promotion, and sale of the GM pickups intentionally
    concealing      material   facts    about        a   dangerous    latent     defect);
    breach of warranty, including written (from vehicle warranties),
    express (from public representations by GM), implied (warranties
    of     merchantability)     and     statutory         warranties;     and     finally
    violations of various state consumer protection statutes. (JA37).
    The case did not involve any pickup trucks that had actually
    experienced fuel tank fires caused by side-impact collisions.
    Moreover, personal injury or death claims were expressly omitted
    from    the   complaint    as    well   as   from     the     settlement     --   class
    members remain free to pursue such claims if any should accrue.
    The     aggregated           treatment     of        these       claims     was
    potentially complicated by the differences in underlying facts.
    The trucks at issue had nineteen different fuel tank systems;
    proof might thus be required for each design on relevant issues.
    Furthermore, unlike the federal securities laws where there is a
    presumption    of       reliance    on    a    material     misrepresentation,          see
    Basic v. Levinson, 
    108 S. Ct. 978
    (1988), plaintiffs would likely
    have had to prove individual reliance on the allegedly misleading
    materials under the various state laws applicable to most of
    these claims.       More fundamentally, the complaint itself invoked
    state laws that implicated different legal standards on, for
    example, the warranty claims (the laws contain various privity
    requirements or the need for an allegedly defective product to
    fail   in   service      before     a     warranty   claim       can    be   sustained),
    negligent     misrepresentation,              negligence,    and       strict     products
    liability.        The    state     laws    implicated       by   the     filing    of   the
    nationwide class action also differed on such issues as statutes
    of limitations, whether pickup trucks are "consumer products;"
    the application of durational limits on implied warranties; the
    requirement of reliance to              recover for fraud, misrepresentation,
    and warranty claims; whether intent is a required element of
    negligent misrepresentation claims; whether comparative fault is
    a defense; and the relevant test for plaintiffs' design defect
    claims.
    III. RULE 23 - RELEVANT FUNDAMENTAL PRINCIPLES
    Before turning to the precise questions at issue on
    this appeal, it is important that we consider the several basic
    purposes served by class actions in our contemporary, complex
    litigation-laden legal system.              One of the paramount values in
    this system is efficiency.           Class certification enables courts to
    treat common claims together, obviating the need for repeated
    adjudications of the same issues.               See Vol. 1 HERBERT NEWBERG & ALBA
    CONTE, NEWBERG   ON   CLASS ACTIONS § 1.06 (Third Ed. 1992); General Tel.
    Co. v. Falcon, 
    457 U.S. 147
    , 149 (1982).
    The      Supreme   Court    has    articulated        other    important
    objectives served by class actions.                  Class actions achieve "the
    protection of the defendant from inconsistent obligations, the
    protection of the interests of absentees, the provision of a
    convenient       and    economical      means       for   disposing    of     similar
    lawsuits, and the facilitation of the spreading of litigation
    costs among numerous litigants with similar claims."                           United
    States Parole Comm'n v. Geraghty, 
    445 U.S. 388
    pinpoint (1980).
    The Court has explained the significance of the last goal as
    an evolutionary response to the existence of injuries
    unremedied by the regulatory action of government.
    Where it is not economically feasible to obtain relief
    within the traditional framework of a multiplicity of
    small individual suits for damages, aggrieved persons
    may be without any effective redress unless they may
    employ the class-action device.
    Deposit   Guaranty       National    Bank      v.   Roper,   
    445 U.S. 326
    ,   339
    (1980); see also Vol 1 NEWBERG & CONTE § 1.06 at 1-19.                             Cost
    spreading can also enhance the means for private attorney general
    enforcement and the resulting deterrence of wrongdoing.                         
    Id. § 1.06
    at 1-18 to 1-20.
    The     law   favors    settlement,      particularly       in    class
    actions      and    other   complex    cases    where       substantial    judicial
    resources can be conserved by avoiding formal litigation.                         See
    NEWBERG & CONTE § 11.41 at 11-85 (citing cases); Cotton v. Hinton,
    
    559 F.2d 1326
    , 1331 (5th Cir. 1977); Van Brankhorst v. Safeco
    Corp., 
    529 F.2d 943
    , 950 (9th Cir. 1976).                   The parties may also
    gain significantly from avoiding the costs and risks of a lengthy
    and complex trial.          See First Com. Corp. of Boston Customer Accts
    Litig., 
    119 F.R.D. 301
    , 306-07 (D. Mass. 1987).                   These economic
    gains       multiply    when   settlement      also     avoids    the     costs    of
    litigating class status -- often a complex litigation within
    itself.      Furthermore, a settlement may represent the best method
    of distributing damage awards to injured plaintiffs, especially
    where litigation would delay and consume the available resources
    and     where      piecemeal   settlement      could    result,    in     the     Rule
    23(b)(1)(B) limited fund context, in a sub-optimal distribution
    of    the    damage    awards.        See,   e.g.,     In   re   Dennis    Greenman
    Securities Litig., 
    829 F.2d 1539
    , 1542 (11th Cir. 1987).
    Thus, courts should favor the use of devices that tend
    to foster negotiated solutions to these actions.                    Prima facie,
    this would include settlement classes.                True, it was once thought
    that mass tort actions were ordinarily not appropriate for class
    treatment, see Fed. R. Civ. P. 23 Advisory Committee's note,
    subdivision (b)(3), 
    39 F.R.D. 69
    , 103 (1966).                             It has also been
    argued that mass tort cases strain the boundaries of Rule 23.
    See Bruce H. Nielson, Was the 1966 Advisory Committee Right?:
    Suggested Revisions of Rule 23 to Allow More Frequent Use of
    Class Actions in Mass Tort Litigation, 25 HARV. J. LEGIS. 461
    (1988) (suggesting necessity of rule revisions to accommodate
    class     action      treatment           of        mass    torts).            However,   the
    applicability      of    Rule        23        to    mass    tort       cases    has   become
    commonplace, and the use of the class action device, specifically
    the   (b)(3)    class,   has     created            some    of    the    largest   and    most
    innovative settlements in these contexts.                               Prominent examples
    include the recent $4.2 billion settlement of the breast implant
    litigation.        See   In     re    Silicone             Gel   Breast     Implant    Prods.
    Liability Litig., 
    1994 WL 578353
    (N.D. Ala. 1994).
    Despite the potential benefits of class actions, there
    remains an overarching concern -- that absentees' interests are
    being resolved and quite possibly bound by the operation of res
    judicata even though most of the plaintiffs are not the real
    parties    to   the   suit.       The          protection        of   the   absentees'     due
    process rights depends in part on the extent the named plaintiffs
    are adequately interested to monitor the attorneys (who are, of
    course, presumed motivated to achieve maximum results by the
    prospect of substantial fees), and also on the extent that the
    class     representatives       have           interests         that    are    sufficiently
    aligned with the absentees to assure that the monitoring serves
    the interests of the class as a whole.                           In addition, the court
    plays     the     important        role     of       protector      of     the    absentees'
    interests,       in   a     sort    of     fiduciary           capacity,     by    approving
    appropriate representative plaintiffs and class counsel.
    Another      problem       is     that     class    actions        create   the
    opportunity for a kind of legalized blackmail:                               a greedy and
    unscrupulous plaintiff might use the threat of a large class
    action,    which      can    be    costly      to    the    defendant,      to     extract   a
    settlement far in excess of the individual claims' actual worth.
    Because absentees are not parties to the action in any real
    sense,     and     probably        would       not      have     brought     their    claims
    individually, see Mars Steel v. Continental Illinois National
    Bank & Trust, 
    834 F.2d 677
    , 678 (7th Cir. 1987), attorneys or
    plaintiffs can abuse the suit nominally brought in the absentees'
    names.     As one court has               noted, "[t]his fundamental departure
    from     the     traditional        pattern          in    Anglo-American          litigation
    generates a host of problems . . . ."                      
    Id. The drafters
    designed the procedural requirements of
    Rule 23, especially the requisites of subsection (a), so that the
    court    can     assure,    to     the    greatest        extent    possible,       that the
    actions are prosecuted on behalf of the actual class members in a
    way that makes it fair to bind their interests.                             The rule thus
    represents a measured response to the issues of how the due
    process rights of absentee interests can be protected and how
    absentees' represented status can be reconciled with a litigation
    system premised on traditional bipolar litigation.                  Moreover, the
    requirement in Rule 23(c) that the court decide certification
    motions "as soon as practicable," see 
    note 1 supra
    , aims to
    reduce even further the possibility that a party could use the
    ill-founded threat of a class action to control negotiations or
    the   possibility      that    absentees'    interests     could     be    unfairly
    bound.     Hence, the procedural formalities of certification are
    important even if the case appears to be headed for settlement
    rather than litigation.
    This    expanded     role   of   the   court      in   class    actions
    (relative    to    conventional    bipolar    litigation)          continues   even
    after certification.          While the parties in a normal suit do not
    ordinarily require a judge's approval to settle the action, class
    action parties do.       Rule 23(e) provides:          "A class action         shall
    not   be   dismissed    or    compromised    without    the    approval     of the
    court, and notice of the proposed dismissal or compromise shall
    be given to all members of the class in such manner as the court
    directs." FED. R. CIV. P. 23(E).             Courts and commentators have
    interpreted this rule to require courts to "independently and
    objectively analyze the evidence and circumstances before it in
    order to determine whether the settlement is in the best interest
    of those whose claims will be extinguished."                  2 NEWBERG & CONTE §
    11.41 at 11-88 to 11-89.           "Under Rule 23(e) the district court
    acts as a fiduciary who must serve as a guardian of the rights of
    absent     class   members. . . .        [T]he     court      cannot      accept   a
    settlement     that    the   proponents    have      not    shown    to    be   fair,
    reasonable     and    adequate."     Grunin    v.    International         House    of
    Pancakes, 
    513 F.2d 114
    , 123 (8th Cir.) cert. denied, 
    423 U.S. 864
    (1975); Malchman v. Davis, 
    706 F.2d 426
    , 433 (2d Cir. 1983); Sala
    v. National RR Passenger Corp., 
    721 F. Supp. 80
    (E.D. Pa. 1989);
    see also Piambino v. Bailey, 
    610 F.2d 1306
    (5th Cir.), cert
    denied, 
    449 U.S. 1011
    (1980).
    Before sending notice of the settlement to the class,
    the   court    will   usually    approve   the      settlement      preliminarily.
    This preliminary determination establishes an initial presumption
    of fairness when the court finds that:                     (1) the negotiations
    occurred at arm's length; (2) there was sufficient discovery; (3)
    the   proponents      of   the   settlement    are    experienced         in   similar
    litigation; and (4) only a small fraction of the class objected.
    See 2 NEWBERG & CONTE § 11.41 at 11-91.
    As noted above, this court has adopted a nine-factor
    test to help district courts structure their final decisions to
    approve settlements as fair, reasonable, and adequate as required
    by Rule 23(e). See Girsh v. Jepson, 
    521 F.2d 153
    , 157 (3d Cir.
    1975).   Those factors are:          (1) the     complexity and duration of
    the litigation; (2) the reaction of the class to the settlement;
    (3) the stage of the proceedings; (4) the risks of establishing
    liability; (5) the risks of establishing damages; (6) the risks
    of maintaining a class action; (7) the ability of the defendants
    to withstand a greater judgment; (8) the range of reasonableness
    of the settlement in light of the best recovery; and (9) the
    range of reasonableness of the settlement in light of all the
    attendant   risks      of    litigation.        
    Id. The proponents
       of   the
    settlement bear the burden of proving that these factors weigh in
    favor of approval.          See GM Interchange, 
    594 F.2d 1106
    , 1126 n.30
    7th Cir. 1979); Holden v. Burlington Northern, Inc., 
    665 F. Supp. 1398
    , 1407 (D. Minn. 1987); MCL 2d §30.44.                   The findings required
    by the Girsh test are factual, see Malchman v. 
    Davis, 706 F.2d at 434
    ; Plummer v. Chemical Bank, 
    668 F.2d 564
    , 659 (2d Cir. 1982),
    which    will   be     upheld       unless    they     are      clearly    erroneous,
    Weinberger v. Kendrick, 
    698 F.2d 61
    , 73 (2d Cir. 1982), cert.
    denied, 
    464 U.S. 818
    (1983); In re Corrugated Container Antitrust
    Litig., 
    643 F.2d 195
    , 207 (5th Cir. 1981).
    IV. SETTLEMENT CLASSES
    This     appeal        challenges     (among        other   things)     the
    district    court's     class       certification      order.         Before   we   may
    address the propriety of the court's order we must first decide
    whether it is ever proper to certify a class for settlement
    purposes only.         We therefore begin our analysis with a closer
    look at how settlement classes operate.
    A.     Nature of the Device
    As we have explained above, a settlement class is a
    device   whereby     the     court     postpones      the    formal     certification
    procedure    until     the       parties   have    successfully         negotiated    a
    settlement,     thus    allowing       a   defendant      to    explore    settlement
    without conceding any of its arguments against certification.
    Despite the directive of Rule 23(c) that courts certify actions
    as soon as practicable, when a class action has been filed before
    the settlement has been arrived at courts will often delay the
    certification       determination            during      the    pendency       of   settlement
    discussions.        If the settlement negotiations succeed, courts will
    certify       the   class     for      settlement        purposes       only    and    send    a
    combined notice of class pendency and settlements to the class
    members.       Thus, by the time the court considers certification,
    the defendant has essentially stipulated to the existence of the
    class requirements since it now has an interest in binding an
    entire class with its proffered settlement.
    By   specifying         certification           for    settlement      purposes
    only, however, the court preserves the defendant's ability to
    contest certification should the settlement fall apart.                                Because
    the court indulges the assumption of the class's existence only
    until     a    settlement        is    reached      or    the        parties    abandon      the
    negotiations, settlement classes are also sometimes referred to
    as temporary or provisional classes.                     Sometimes the specification
    may also be seen as assuming that the class may only meet the
    requirements        of    Rule    23    if    the   action       is    settled,       and   that
    certification may in fact be inappropriate if the action will
    actually be litigated.                In any event, notwithstanding that there
    is   an   absence        of   clear     textual       authorization        for      settlement
    classes, many courts have indulged the stipulations of parties by
    establishing        temporary      classes    for    settlement       purposes     only.
    See, e.g., Mars Steel v. Continental Illinois Nat'l Bk. & Trust,
    
    834 F.2d 677
    (7th Cir. 1987); Weinberger v. Kendrick, 
    698 F.2d 61
    (2d Cir. 1982), cert. denied, 
    464 U.S. 818
    (1983); In re A.H.
    Robins Co., 
    880 F.2d 709
    , 738-39 (4th Cir. 1989); In re Dennis
    Greeman     Sec.    Litig.,      
    829 F.2d 1539
    ,    1543       (11th   Cir.   1978);
    Plummer v. Chemical Bank, 
    668 F.2d 564
    (2d Cir. 1982); In re Beef
    Industry Antitrust Litig., 
    607 F.2d 167
    , 173 (5th                          Cir. 1979);
    Malchman v. Davis, 
    706 F.2d 427
    , 433-34 (2d Cir. 1983); In re
    Taxable Mun. Bond Sec. Litig., 
    1994 WL 643142
    (E.D. La. Nov. 15,
    1994); In re Silicone Gel Breast Implant Prod. Liab. Litig., 
    1994 WL 578353
    (N.D. Ala. Sept. 1, 1994); In re First Commodity Corp.
    of   Boston,       
    119 F.R.D. 301
    ,     306-08     (D.    Mass.    1987);     In   re
    Bendectin, 
    102 F.R.D. 239
    , 240 (S.D. Oh. 1984), rev'd on other
    grounds, 
    749 F.2d 300
    (6th Cir. 1984); In re Mid-Atlantic Toyota
    Anti-trust Litig., 
    564 F. Supp. 1379
    , 1388-90 (D. Md. 1983); In re
    Chicken Antitrust Litig., 
    560 F. Supp. 957
    , 960 (N.D. Ga. 1980).
    There        has   been   a    great    deal     of    commentary,     both
    critical7    and         laudatory,8   of     the    use     of    these   "settlement
    classes."      And some courts have criticized these accommodations
    7
    .   See, e.g., John C. Coffee, Jr., The Corruption of the Class
    Action, WALL ST. J. Sept. 7, 1994, at A15.
    8
    . 2 Newberg & Conte § 11.27 (First) § 1.46; Roger H. Transgrud,
    Joinder Alternatives in Mass Tort Litigation, 70 CORNELL L. REV.
    779 (1985); Bruce H. Nielson, Was the 1966 Advisory Committee
    Right?:  Suggested Revisions of Rule 23 to Allow More Frequent
    Use of Class Actions in Mass Tort Litigation, 25 HARV. J. LEGIS.
    461, 480
    of the negotiating parties and expressed their ambivalence while
    continuing nonetheless to use them.                See, e.g., Mars Steel, 
    834 F.2d 677
    (7th Cir. 1987) (describing considerable dangers of
    settlement       classes    but   ultimately      upholding        the   settlement).
    Before we interpret the dictates of Rule 23 with respect to
    settlement       classes,    it   will    be     useful   to       survey     both    the
    criticism and the praise.
    B.    Perceived Problems of Settlement Classes
    A number of commentators, particularly the authors of
    the first edition of the Manual for Complex Litigation, have
    voiced     serious    concerns      about      settlement          classes.          These
    criticisms have focused on the fact that Rule 23, a carefully
    constructed scheme intended to protect the rights of absentees
    that    necessarily    relies      on    active    judicial        participation        to
    protect those interests, does not authorize a separate category
    of   class   certification        that    would    permit      a    dilution     of    or
    dispense with the subsection (a) criteria.                § 1.46; see also Mars
    Steel v. Continental Ill. Nat'l Bank & Trust, 
    834 F.2d 677
    , 680
    (7th Cir. 1987);       In re Baldwin United, 
    105 F.R.D. 475
    (S.D.N.Y.
    1984).     Other criticisms focus on the potential prejudice to the
    parties and the institutional threat posed to the court.                             See,
    e.g., Coffee, supra note 10.
    Rule 23 does not in terms authorize the deferral of
    class      certification pending settlement discussions.                        Indeed,
    Rule     23(c)    provides:       "As     soon    as   practicable          after     the
    commencement of           an action brought as a class action, the court
    shall determine by order whether it is to be so maintained."
    Fed. R. Civ. P. 23(a) (emphasis supplied).                  Deliberately delaying
    a     class       certification          determination     so      that    settlement
    discussions can proceed clearly does not represent an effort to
    resolve the issue "as soon as practicable."                     As Judge Posner has
    noted, "[i]t is hard to see why the propriety of maintaining the
    suit    as    a     class    action      could   not   'practicably'       have    been
    determined much earlier.                 And, common though the practice of
    deferring class certification while settlement negotiations are
    going on is, it not only jostles uneasily with the language of
    Rule 23(c)(1) but also creates practical problems."                       Mars 
    Steel, 834 F.2d at 680
    .
    The    danger       here   is   that   the   court    cannot   properly
    discharge its duty to protect the interests of the absentees
    during the disposition of the action.                  Because the class has not
    yet been defined, the court lacks the information necessary to
    determine the identity of the absentees and the likely extent of
    liability, damages, and expenses of preparing for trial.                      See MCL
    2d § 30.45 at 243 ("No one may know how many members are in the
    class, how large their potential claims are, what the strengths
    and weaknesses of the parties' positions are, or how much the
    class will benefit under the settlement."); In re Baldwin United,
    
    105 F.R.D. 475
    ,     481    (S.D.N.Y.     1984).     Moreover,      the    court
    performs its role as supervisor/protector without the benefit of
    a full adversarial briefing on the certification issues.                            With
    less information about the class, the judge cannot as effectively
    monitor for collusion, individual settlements, buy-offs (where
    some      individuals       use    the    class     action      device      to   benefit
    themselves at the expense of absentees), and other abuses.                          See
    In   re    Beef   Indus.     Antitrust      
    Litig., 607 F.2d at 174
    .    For
    example, if the court fails to define the class before settlement
    negotiations commence, then during the settlement approval phase
    the judge will have greater difficulty detecting if the parties
    improperly manipulated the scope of the class in order to buy the
    defendant's acquiescence.
    Settlement classes also make it more difficult for a
    court to evaluate the settlement by depriving the judge of the
    customary structural devices of Rule 23 and the presumptions of
    propriety that they generate.                    Ordinarily, a court relies on
    class      status,    particularly         the     adequacy      of    representation
    required to maintain it, to infer that the settlement was the
    product     of    arm's     length       negotiations.          Cf.    Weinberger    v.
    Kendrick,     
    698 F.2d 61
    ,   74    (2d     Cir.   1983)    (noting     protracted
    nature of negotiations in approving settlement); City of Detroit
    v. Grinnell, 
    495 F.2d 448
    , 463 (2d Cir. 1974) (same); In re
    Baldwin-United,       
    105 F.R.D. 475
    ,    482   (S.D.N.Y.      1984)     (same).
    Where the court has not yet certified a class or named its
    representative or counsel, this assumption is questionable.
    In effect, settlement classes can, depending how they
    are used, evade the processes intended to protect the rights of
    absentees.        Indeed,    the   draft      of    the    MCL     (Third),       although
    considerably      more     receptive     to    settlement          classes    than     the
    earlier editions of the Manual, explains that "[t]he problem
    presented    by    these     requests    is    not    the     lack     of    sufficient
    information       and    scrutiny,     but    rather        the     possibility       that
    fiduciary        responsibilities        of        class      counsel        or      class
    representatives may have been compromised."                       MCL (Third) (draft)
    at 193.      Even some courts successfully using these devices to
    achieve settlements apparently recognize these dangers since they
    certify   these     actions    more     cautiously         than    ordinary       classes.
    See, e.g., Ace Heating & Plumbing Co. v. Crane Co., 
    453 F.2d 30
    ,
    33 (3d Cir. 1971) (court must be doubly careful where negotiation
    occurs before certification and designation of a class counsel);
    In re Beef Antitrust Litig., 
    607 F.2d 167
    , 176-77 (5th Cir. 1979)
    (examining though ultimately rejecting the charge that collusion
    precluded the certification of the settlement class); Simer v.
    Rios, 
    661 F.2d 655
    , 664-66 (7th Cir. 1981) (requiring a higher
    showing     of    fairness     where     settlement         negotiated        prior     to
    certification); Weinberger v. Kendrick, 
    698 F.2d 61
    , 69 (2d Cir.
    1982) (judge made findings about discovery and counsel).
    In    particular,      settlement       classes        create    especially
    lucrative opportunities for putative class attorneys to generate
    fees for themselves without any effective monitoring by class
    members who have not yet been apprised of the pendency of the
    action.   Moreover, because the court does not appoint a class
    counsel until the case is certified, attorneys jockeying for
    position might attempt to cut a deal with the defendants by
    underselling the plaintiffs' claims relative to other attorneys.9
    Unauthorized     settlement     negotiations        occurring      before    the
    certification    determination       thus    "create   the    possibility     of
    negotiation    from   a   position   of     weakness   by   the   attorney   who
    purports to represent the class."           GM Interchange Litigation, 
    594 F.2d 1106
    , 1125 (7th Cir. 1979).            Pre-certification negotiations
    also hamper a court's ability to review the true value of the
    settlement or the legal services after the fact.                  See supra at
    36. In addition, unauthorized negotiations also result in denying
    other plaintiffs' counsel information that is necessary for them
    to make an effective evaluation of the fairness of any settlement
    that results.    See GM 
    Interchange, 594 F.2d at 1125
    .
    Framed as an issue of Rule 23(a) requisites, these
    considerations    implicate    adequacy       of   representation    concerns:
    "[a]rguments in opposition to settlement classes have merit when
    they are addressed to the problem of inadequate representation or
    possible collusion among the named plaintiffs and some or all
    defendants."     In re Baldwin-United Corp., 
    105 F.R.D. 475
    , 480
    9
    . These sorts of dynamics have led some critics to accuse class
    action attorneys of ethical violations. While we emphasize that
    counsel here committed no such violations, we do not preclude the
    possibility that these violations could occur.
    (S.D.N.Y. 1984).       Another court has warned that the "danger of a
    premature, even a collusive, settlement [is] increased when as in
    this case the status of the action as a class action is not
    determined until a settlement has been negotiated, with all the
    momentum that a settlement agreement generates . . . ."; Mars
    
    Steel, 834 F.2d at 680
    ; see also 
    Malchman, 706 F.2d at 433
    (recognizing special potential for collusion or undue pressure by
    defendants in settlement negotiations); 
    Weinberger, 698 F.2d at 73
    (requiring a higher showing of fairness to accommodate greater
    potential for improper settlement).             Settlement classes, which
    constitute ad hoc adjustments to the carefully designed class
    action framework constructed by Rule 23, lack the regulatory
    mechanisms that ordinarily check this improper behavior:               "There
    is in fact little or no individual client consultation and no
    judicial oversight of a hidden process of wheeling and dealing to
    maximize overall recovery and fees for hundreds and thousands of
    massed cases."     In re Joint Eastern & Southern District Asbestos
    Litigation, 
    129 B.R. 710
    , 802 (E & S.D.N.Y. 1991) (discussing the
    ramifications of class treatment of mass torts).
    In   addition    to    these    procedural    problems   (and   the
    problems created for a judge trying to evaluate both class status
    and   the   adequacy    of   a    class    settlement    simultaneously)    the
    earlier achievement of settlement through the use of a settlement
    class also can lead to a settlement that may provide inadequate
    consideration in exchange for the release of the class's claims.
    With early settlement, both parties have less information on the
    merits.    That is, they have less information on the membership of
    the    class,   on   the    size    of    potential      claims,     on   whether   the
    settlement purports to resolve class or individual claims, on the
    strengths and weaknesses of the case, and on how class members
    will benefit from the settlement. See MCL 2d § 30.45 at 243-44; 2
    NEWBERG & CONTE § 11.09 at 11-13. Without the benefit of more
    extensive discovery, both sides may underestimate the strength of
    the plaintiffs' claims.
    Turning to the question of due process rights, we note
    that    class     members    may,    as       a    result    of   these   information
    deficiencies, not be in a fair position at this early stage to
    evaluate whether or not the settlement represents a superior
    alternative to litigating.               Perhaps more troubling in light of
    the reality that absentees tend to lack a real understanding of
    the actions supposedly pursued in their names is that, "where
    notice of the class action is . . . sent simultaneously with the
    notice of the settlement itself, [the settlement class paradigm],
    the class members are presented with what looks like a fait
    accompli."      Mars 
    Steel, 834 F.2d at 680
    -81.                   Thus, even if they
    have     enough      information         to       conclude    the    settlement      is
    insufficient and unsatisfactory, see In re Beef Antitrust Litig.,
    
    607 F.2d 167
    , 173 n.4 (5th Cir. 1979), cert. denied, 
    452 U.S. 905
    (1981), the mere presentation of the settlement notice with the
    class notice may pressure even skeptical class members to accept
    the settlement out of the belief that, unless they are willing to
    litigate     their         claims     individually          --     often    economically
    infeasible -- they really have no choice.
    In     a    different    vein,        a    number    of    cases    have   also
    criticized settlement classes on the grounds that they create an
    opportunity for "one-way intervention," allowing putative class
    members to wait to see whether they think the settlement is
    favorable before deciding whether they want to be bound by it.
    See McDonald v. Chicago Milwaukee Corp., 
    565 F.2d 416
    , 420 (7th
    Cir. 1977); Watkins v. Blinzinger, 
    789 F.2d 474
    , 475 n.3 (7th
    Cir. 1986) ("A deferred ruling [on certification] converts the
    class action to an opportunity for one-way intervention, which
    Rule 23 is designed to avoid. . . ."); Premier Electrical Constr.
    Co. v. National Electrical Contractors Ass'n, Inc., 
    814 F.2d 358
    ,
    363   (7th    Cir.        1987)     (criticizing         delay     of    certification).
    Because class members have the opportunity to wait until the
    outcome is known (i.e., the settlement's terms are determined) to
    decide whether they want to be bound by the result, courts and
    defendants     are        exposed    to   the      same     potential      for    multiple
    lawsuits     that       class   actions      are       designed    to   avoid,    and   the
    supposed advantages of settlement classes are largely eroded.
    Perhaps        more     troubling,          the     possibility      of    pre-
    certification           negotiation    and      settlement        may    facilitate     the
    filing of strike suits.              Since settlement classes can involve a
    settlement achieved either before or after the filing of class
    claims,   recognition         of    the    settlement        class    device    allows
    plaintiffs to file as class actions cases that counsel never
    intended to have certified, but instead only to settle the claims
    individually.           Mars Steel, 
    834 F.2d 677
    , 681 (7th Cir. 1984)
    ("[Plaintiffs will be tempted to add class claims in order to
    intimidate        the     defendant,       then     delete     them     by     way     of
    compromise.").            Knowing   that     they    would     not    face     judicial
    scrutiny if they settle before certification, plaintiffs' lawyers
    face no deterrent from attempting to extract larger settlements
    by threatening class litigation than they could with the cases
    filed individually.
    In    many    respects       then,   the   failings       of    settlement
    classes are a function of the dearth of information available to
    judges attempting to scrutinize the settlements in accordance
    with their Rule 23(e) duties.              Because the issue of certification
    is never actively contested, the judge never receives the benefit
    of the adversarial process that provides the information needed
    to review propriety of the class and the adequacy of settlement.
    This   problem      is     exacerbated      where    the     parties    agree     on    a
    settlement of the case before the class action is filed, since a
    motion    for       certification          and    settlement         are      presented
    simultaneously.
    Last, but by no means least, the use of settlement
    classes also risks transforming the courts into mediation forums.
    See Coffee, supra note 9 at A15.                  Cases could be filed without
    any    expectation        or   intention    of      litigation,        with    the
    foreknowledge that the natural hydraulic pressure for settlement
    may in fact lead to a class settlement, especially given the
    incentive a defendant has to bind as many potential claimants as
    possible with an approved class settlement.               Courts may approve
    these class settlements even if the case is highly inappropriate
    for class treatment, since judges confronting the reality of
    already over-taxed judicial resources, see Proposed Long Range
    Plan   for   the    Federal    Courts   (March    1995)   at   9-12,    may   feel
    constrained to dispose of such onerous litigation through the
    settlement class device.         The losers in this type of scenario are
    not only inadequately represented class members but also the
    federal courts as an institution, because their resources are
    further sapped by entertaining cases that arguably do not belong
    there.10     This increased burden will be especially problematic if
    the    standards    for    certification    are    relaxed     for     settlement
    classes; as this appeal demonstrates, proceedings attendant to
    settlement class certification can consume considerable federal
    judicial time.
    C.   Arguments Favoring Settlement Classes
    Although settlement classes are vulnerable to potent
    criticisms,     some   important    dynamics      militate     in    favor    of   a
    10
    . Because the parties do not come before the court until the
    action has settled, some courts have even expressed concern that
    such cases do not present a case or controversy for Article III
    purposes.   Cf. Carlough v. Amchem Products, Inc., 
    834 F. Supp. 1437
    , 1462-67 (E.D. Pa. 1993).
    judge's          delaying     or     even    substantially       avoiding      class
    certification          determinations.            Because      certification      so
    dramatically increases the potential value of the suit to the
    plaintiffs and their attorneys as well as the potential liability
    of     the      defendant,    the     parties       will     frequently      contest
    certification vigorously.           As a result, a defendant considering a
    settlement may resist agreeing to class certification because, if
    the settlement negotiations should fail, it would be left exposed
    to major litigation.         See In re Beef Indus. Antitrust Litig., 
    607 F.2d 167
    ,     177-78   (5th     Cir.   1979)    ("[A     blanket   rule    against
    settlement classes] may render it virtually impossible for the
    parties to compromise class issues and reach a proposed class
    settlement before a class certification . . . ."); In re Baldwin
    United, 
    105 F.R.D. 475
    (S.D.N.Y. 1984).
    In mass tort cases, in particular, use of a settlement
    class can help overcome certain elements of these actions that
    otherwise can considerably complicate efforts to settle.                       These
    hurdles include "the large number of individual plaintiffs and
    lawyers;       . . .   the   existence      of    unfiled    claims     by   putative
    plaintiffs; and . . . the inability of any single plaintiff to
    offer     the    settling    defendant       reliable       indemnity    protection
    . . . ." Transgrud, 70 CORNELL L. REV. at 835.                By using the courts
    to overcome some of the collective action problems particularly
    acute in mass tort cases, the settlement class device can make
    settlement feasible.             The use of settlement classes can thus
    enable both parties to realize substantial savings in litigation
    expenses by compromising the action before formal certification.
    See 2 NEWBERG & CONTE § 11.09 at 11-13.               Through settlement class
    certification,        courts   have     fostered     settlement        of    some    very
    large, complex cases that might otherwise never have yielded
    deserving plaintiffs any substantial renumeration.
    Settlement classes also increase the number of actions
    that are amenable to settlement by increasing the rewards of a
    negotiated solution, in at least four ways.                  First, the prospect
    of    class    certification     increases       a   defendant's        incentive        to
    settle because the settlement would then bind the class members
    and    prevent    further      suits    against      the    defendant.            Second,
    settlement      classes    may   reduce        litigation    costs      by        allowing
    defendants to stipulate to class certification without forfeiting
    any of their legal arguments against certification should the
    negotiations fail.          Third,      because the payment of settlement
    proceeds,      even   relatively       small    amounts,     may      palliate       class
    members, settlement can reduce differences among class members,
    and thus make class certification more likely, increasing the
    value of settlement to the defendant, since a larger number of
    potential claims can thus be resolved.                       Fourth,        the    use   of
    settlement      classes    reduces      the     probability      of    a     successful
    subsequent challenge to the class-wide settlement.                          By treating
    the    class     as   valid    pending     settlement,       a     temporary        class
    facilitates notice to those persons whom the court might consider
    part of the class.         The expanded notice afforded by access to the
    customary class action notification process protects both the
    absentees and the defendants by eliminating negotiations between
    the defendants and the named plaintiffs with respect to the class
    definition       that     could      leave      the     defendant       vulnerable       to
    additional suits by absentees whose interests, a court later
    determines, were not adequately served or protected.                           2 NEWBERG &
    CONTE § 11.27 at 11-40 (citing Midland Mut. Life Ins. Co. v.
    Sellers, 
    101 B.R. 921
    (Bankr. S.D. Ohio 1989)).                         Increasing the
    certainty that the settlement will be upheld augments the value
    of    settling    to     the       defendant     and    consequently          the   amount
    defendants will be willing to pay.                  Thus, delaying certification,
    in    contravention      of    a    strict   reading     of     Rule    23,    encourages
    settlement,      an     important      judicial       policy,    by     increasing      the
    prospective gains to the defendant (and thus potentially to the
    plaintiffs as well) from exploring a negotiated solution.
    Moreover,        critics         of      settlement        classes        may
    underestimate the safeguards that still inhere.                        Although courts
    are often certifying settlement classes with sub-optimal amounts
    of information, and without the full benefit of the processes
    meant    to    protect     the      absentees'        interests,       the    provisional
    certification of a settlement class does not finally determine
    the absentees' rights.             When the simultaneous notice of the class
    and     the   settlement       is     distributed       to    the      proposed     class,
    objecting      class     members      can      still    challenge       the     class    on
    commonality, typicality, adequacy of representation, superiority,
    and predominance grounds -- they are not limited to objections
    based strictly on the settlement's terms.               2 NEWBERG & CONTE §11.27
    at 11-40 (citing Midland Mut. Life Ins. Co. v. 
    Sellers, 101 B.R. at 921
    ).
    Furthermore, the view that, in settlement class cases,
    the court lacks the information necessary to fufill its role as
    protector of the absentees, may reflect an assumption that the
    court's approval always comes early in the case.                  See 2 NEWBERG &
    CONTE §    11.27   at   11-43 to 11-44.         While it often does, the
    certification decision is sometimes made later in the case, when
    the parties have presumably developed the merits more fully (in
    discovery    or    in   the   course   of   wrangling    over   the   settlement
    terms) and when prior governmental procedures or investigations
    might have also yielded helpful information.                
    Id. Whatever the
    timing of the certification ruling, the judge has the duty of
    passing on the fairness and adequacy of the settlement under Rule
    23(e) and also of determining whether the class meets the Rule's
    requisites under 23(a).11        Whether or not the court certifies the
    class before settlement discussions, these duties are the same.
    2 NEWBERG & CONTE § 11.27, at 11-46.
    Although a judge cannot presume that the putative class
    counsel actively represented the absentees' interests, the court
    11
    . We are somewhat dubious of the court's ability to discharge
    its duties completely under these circumstances.  See Part IVE
    infra.
    can still monitor the negotiation process itself to assure that
    both    counsel     and    the     settlement      adequately     vindicate     the
    absentees' interests.            Thus, there is no reason to inflexibly
    limit the use of settlement classes to any specified categories
    of cases (for example, those cases with few objectors, those
    which do not involve partial settlements,12 or those which do not
    involve     an    expanded       class).         Even    apparently   troublesome
    litigation activity, such as expanding the class just before
    settlement approval at the defendant's request, is no more free
    from judicial scrutiny in a settlement class context than it
    would be otherwise.        The court still must give notice to the now-
    expanded class and satisfy itself that the requisites of class
    certification are met.           
    Id. at 11-49.
         Since the party advocating
    certification      bears   the     burden    of    proving   appropriateness     of
    class treatment, David v. Romney, 
    490 F.2d 1360
    (3d Cir. 1974),
    where   the      procedural   posture       is    such   that   the   court   lacks
    adequate information to make those determinations, it can and
    should withhold the relevant approvals.                  2 NEWBERG & CONTE § 11.27
    at 11-46.
    But even if the use of settlement classes did reduce a
    judge's capacity to safeguard the class's interests, it does not
    necessarily impair the ability of absentees to protect their own
    12
    .      MCL 2d expressed concern about partial settlements
    (settlements only as to certain plaintiffs or certain defendants)
    since "[m]embers of the settlement class will almost certainly
    find   it  difficult   to understand    their  position   in the
    litigation." MCL 2d § 30.45.
    interests.     Individual class members retain the right to opt out
    of the class and settlement, preserving the right to pursue their
    own litigation. See Premier Elec. Const. Co. v. N.E.C.A., Inc.,
    
    814 F.2d 358
    (7th Cir. 1987) (criticizing settlement classes
    because they create opportunities for one-way intervention).               In
    fact, the use of the settlement class in some sense enhances
    plaintiffs' right to opt out.         Since the plaintiff is offered the
    opportunity    to   opt   out   of   the   class   simultaneously   with   the
    opportunity to accept or reject the settlement offer, which is
    supposed to be accompanied by all information on settlement, the
    plaintiff knows exactly what result he or she sacrifices when
    opting out.     See 2 NEWBERG & CONTE § 11.27 at 11-51.             See In re
    Beef Industry Antitrust 
    Litigation, 607 F.2d at 174
    .
    In sum, settlement classes clearly offer substantial
    benefits.      However, the very flexibility required to achieve
    these gains strains the bounds of Rule 23 and comes at the
    expense of some of the protections the Rule-writers intended to
    construct.    As Judge Schwarzer has explained:
    one way to see [the settlement class] is as a
    commendable example of the law's adaptability to meet
    the needs of the time -- in the best tradition of the
    Anglo-American common law. But another interpretation
    might be that it is an unprincipled subversion of the
    Federal Rules of Civil Procedure.    True, if it is a
    subversion, it is done with good intentions to help
    courts   cope  with   burgeoning  dockets,   to  enable
    claimants at the end of the line of litigants to
    recover compensation, and to allow defendants to manage
    the staggering liabilities many face.           But as
    experience seems to show, good intentions are not
    always enough to ensure that all relevant private and
    public interests are protected. The siren song of Rule
    23 can lead lawyers, parties and courts into rough
    waters   where  their ethical compass  offers only
    uncertain guidance.
    William W. Schwarzer, Settlement of Mass Tort Class Actions:
    Order Out of Chaos, CORNELL L. REV. (forthcoming).
    D.     Are Settlement Classes Cognizable Under Rule 23?
    Although    not   specifically   authorized   by   Rule   23,
    settlement classes are not specifically precluded by it either;
    indeed, Judge Brieant has read subsection (d), giving the court
    power to manage the class action, as authorizing the creation of
    "tentative", "provisional", or "conditional" classes through its
    grant of power to modify or decertify classes as necessary.
    See, e.g., In re Baldwin-United Corp., 
    105 F.R.D. 475
    , 478-79
    (S.D.N.Y. 1984).      And because of the broad grant of authority in
    Rule 23(d), at least one commentator has noted that the validity
    of temporary settlement classes is usually not questioned.             2
    NEWBERG & CONTE §11.22 at 11-31.       Courts apparently share this
    confidence.    Indeed, one court believed that "[i]t is clear that
    the Court may provisionally certify the Class for settlement
    purposes."    South Carolina Nat'l Bank v. Stone, 
    749 F. Supp. 1419
    ,
    (D.S.C. 1990).
    We believe that the "provisional"13 or "conditional"14
    conception    of    the    settlement     class   device     finds    at   least    a
    colorable textual basis in the Rule.              Rule 23(d) enables a court
    to certify a class, if it complies with its duty to assure that
    the class meets the rule's requisites by making appropriate Rule
    23 findings (see Part IV(E) infra).               Some courts appear to have
    concluded    that    the    built-in     flexibility    of    the    Rule,   which
    enables    the     court   to   revisit    the    requisites    and    modify      or
    decertify the class should its nature change dramatically during
    the negotiation process, renders it acceptable to determine class
    status     after     settlement    and     thus    avoid     scrutinizing       and
    adjudicating class status at an earlier stage when the outcome is
    unknown.     See, e.g., In re 
    Baldwin-United, 105 F.R.D. at 483
    ; In
    re Beef Antitrust 
    Litig., 607 F.2d at 177
    ("[T]he Court finds
    that a conditional class should be certified for the purpose of
    considering the proposed settlements.")
    Alternatively, some courts have conceived of settlement
    classes as a "temporary assumption" by the court to facilitate
    settlement.      See Mars 
    Steel, 834 F.2d at 680
    ; In re Beef Indust.
    13
    .   The terms "tentative" and "provisional" appear to be used
    interchangeably.
    14
    .    "Conditional" is actually a term that can be properly
    applied to all class actions, even those that are certified in
    the normal process. Under Rule 23(c)(1), the court retains the
    authority to re-define or decertify the class until the entry of
    final judgment on the merits.       This capacity renders all
    certification orders conditional until the entry of judgment.
    See MCL 2d § 30.18.
    Antitrust 
    Litig., 607 F.2d at 177
    ; 2 NEWBERG & CONTE § 11.27 at 11-
    50.    The arguments of the late Herbert Newberg, one of the
    leading advocates of settlement classes, reflect an assumption
    that   the    Rule   23   determinations   are    merely     postponed,    not
    eliminated:
    On analysis, however, it would appear that this
    argument   [that   courts  using   settlement   classes
    circumvent the need to test the propriety of the class
    action according to the specific criteria of Rule 23]
    may be rebutted by perceiving the temporary settlement
    class as nothing more than a tentative assumption
    indulged in by the court . . . .      The actual class
    ruling is deferred in these circumstances until after
    hearing on the settlement approval . . . .     At that
    time, the court in fact applies the class action
    requirements to determine whether the action should be
    maintained as a class action . . . .
    2 NEWBERG & CONTE § 11.27 at 11-50.15       Newberg posits, therefore,
    that the temporary assumption conception of the settlement needs
    no special authorization since the court eventually follows the
    ordinary     certification   process,   only     deferring    it   until   the
    settlement approval stage.
    Courts have also relied on the more general policies of
    Rule 23 -- promoting justice and realizing judicial efficiencies
    -- to justify this arguable departure from the rule.
    15
    . See also In re Mid-Atlantic Toyota Antitrust Litig., 564 F.
    Supp. 1379, 1388 n.13 (D. Md. 1983) ("Completely ancillary to the
    proposed settlement, [a temporary settlement class] lasts only as
    long as the period betwen the preliminary approval of the
    settlement and the court's final determination on the settlement.
    In effect, a temporary settlement class serves only as a
    procedural vehicle for providing notice to putative members of a
    proposed class . . . .").
    [T]he hallmark of Rule 23 is flexibility . . . .
    Temporary settlement classes have proved to be quite
    useful in resolving major class action disputes. While
    their use may still be controversial, most Courts have
    recognized their utility and have authorized the
    parties to compromise their differences, including
    class action issues through this means.
    
    Weinberger, 698 F.2d at 72-73
    .           One commentator found implicit
    authorization for settlement classes under a settlement-oriented
    interpetation of Rule 23:
    [Rule 23] provides that a court may certify a common
    question class action when it will prove "superior to
    other available methods for the fair and efficient
    adjudication of the controversy."         A judicially
    supervised and approved class action settlement, like a
    judicially supervised trial, is a means of hearing and
    determining judicially, in other words "adjudicating,"
    the value of claims arising from a mass tort.      As a
    result, if conditional certification of the case as a
    common question class action for settlement purposes
    would enhance the prospects for a group settlement,
    then Rule 23 authorizes certification.
    Roger H. Transgrud, Joinder Alternatives in Mass Tort Litig., 70
    CORNELL L. REV. 779, 835 (1985) (footnotes ommited).
    It   is   noteworthy   that    resistance    to   more   flexible
    applications of Rule 23 has diminished over time.               See In re
    Taxable Mun. Bond Secur. Litig., 
    1994 WL 643143
    , *4 (E.D. La.
    1994)   (commenting    upon   this   trend).     The    evolution    of   the
    reception accorded settlement classes has manifested itself in
    the successive versions of the Manual for Complex Litigation.
    The first edition of the Manual criticized the initiation of
    settlement negotiations before certification, and discouraged all
    such negotiations.      See MCL 1st § 1.46.            The second edition
    recognizes the potential benefits of settlement classes but still
    cautioned      that    "the    court    should    be   wary    of   presenting      the
    settlement to the class."              MCL §30.45 at 243.       The (draft) third
    version acknowledges that "[s]ettlement classes offer a commonly
    used vehicle for the settlement of complex litigation" and aims
    only to supervise rather than discourage their use.                         See MCL §
    30.45 at 192.
    A survey of the caselaw confirms the impression that
    resistance to settlement classes has diminished:                    few cases since
    the late 1970's and early 1980's even bother to squarely address
    the    propriety      of   settlement     classes.       Moreover,     no   court    of
    appeals that has had the opportunity to comment on the propriety
    of settlement classes has held that they constitute a per se
    violation of Rule 23.            See, e.g., Ace Heating & Plumbing Co. v.
    Crane Co., 
    453 F.2d 30
    , 33 (3d Cir. 1971) (finding no prohibition
    but granting absentees standing to appeal settlement approval);
    Marshall v. Holiday Magic, Inc., 
    550 F.2d 1173
    , 1176 (9th Cir.
    1977)      (describing     how   court     approved    combined     notice    of    the
    pendency of the class and the terms of the proposed settlement);
    In    re    Beef   Antitrust     Litig.,    
    607 F.2d 167
       (5th   Cir.    1979);
    Corrugated Container Antitrust Litig., 
    643 F.2d 195
    , 223 (5th
    Cir.       1981)   (upholding      settlement      despite      pre-certification
    negotiations with some defendants); Weinberger v. Kendrick, 
    698 F.2d 61
    (2d Cir. 1982); Mars Steel, 
    834 F.2d 677
    , 681 (7th Cir.
    1987) (criticizing settlement classes but ultimately approving
    settlement).             But   some   courts       recognize        that    this     practice
    represents        a   significant          departure      from     the     usual    Rule     23
    scenario and thereby counsel that courts should scrutinize these
    settlements even more closely.
    We acknowledge that settlement classes, conceived of
    either as provisional or conditional certifications, represent a
    practical         construction        of     the     class       action     rule.          Such
    construction affords considerable economies to both the litigants
    and    the    judiciary        and    is     also     fully      consistent        with    the
    flexibility integral to Rule 23.                   A number of other jurisdictions
    have    already          accepted     settlement          classes     as    a      reasonable
    interpretation of Rule 23 and thereby achieved these substantial
    benefits.         Although we appreciate the concerns raised about the
    device,      we    are    confident        that    they    can   be   addressed       by   the
    rigorous applications of the Rule 23 requisites by the courts at
    the approval stages, as we discuss at greater length herein.                                For
    these reasons, we hold that settlement classes are cognizable
    under Rule 23.
    E. Are the Rule 23(a) and (b) Findings Required for
    Settlement Classes? Does Finding the Settlement
    to Be Fair and Reasonable Serve as a Surrogate for the Findings?
    There is no explicit requirement in Rule 23 that the
    district judge make a formal finding that the requisites of the
    rule have been met in order to certify a class.                             However, most
    district judges have routinely done so, assuming that it was
    required, and in published opinions, a number of courts have
    endorsed or at least acknowledged the compelling policy reasons
    for doing so.      See, e.g., Eisenberg v. Gagnon, 
    766 F.2d 770
    , 785
    (3d Cir. 1985); 
    Plummer, 668 F.2d at 659
    ; Interpace Corp. v.
    Philadelphia, 
    438 F.2d 401
    , 404 (3d Cir. 1971); MCL 2d § 30.13
    ("The   judge     should    enter         findings    and    conclusions    after    the
    hearing, addressing each of the applicable requirements of Rule
    23(a) and (b).").      For example, where there has been some dispute
    over    certification,          a     court      should      give   the     litigants,
    particularly the absentees, some statement of the reasons for its
    decision.    
    Eisenberg, 766 F.2d at 785
    .                 Articulated findings also
    simplify    the   review    of       complex     cases      generally.      
    Id. With respect
    to settlement classes, we hold that courts must make the
    findings because the legitimacy of settlement classes depends
    upon fidelity to the fundaments of Rule 23.16
    Inasmuch       as       collusion,       inadequate     prosecution      and
    attorney    inexperience            are    the   paramount       concerns     in    pre-
    certification settlements, see 
    Malchman, 706 F.2d at 433
    ; 
    Beef, 607 F.2d at 174
    , the need for the adequacy of representation
    finding is particularly acute in settlement class situations,
    given the inquiry's purpose of detecting cases where there is a
    "likelihood that the litigants are involved in a collusive suit
    16
    . This conclusion is supported by the text of Rule 23(e).
    That section provides that "class action" may not be compromised
    without court approval, and arguably a case is not a "class
    action" in the absence of such findings.
    . . . ." Eisen v. Carlisle & Jacquelin, 
    391 F.2d 555
    , 562 (2d
    Cir. 1968).
    There appears to be no authority contra this practice.
    Indeed, the courts and commentators that have endorsed settlement
    classes have seemed to assume that the approving court made the
    requisite     class   determinations    at   some     point.      For    example,
    Newberg's     argument   rebutting     the   charge     that    the   "tentative
    assumption" of class status by the court to foster settlement
    evades the Rule's strictures continues:
    The   actual  class   ruling  is   deferred   in   these
    circumstances   until  after   [the]  hearing    on the
    settlement approval, following notice to the class. At
    that time, the court in fact applies the class action
    requirements to determine whether the action should be
    maintained as a class action . . . .
    2 NEWBERG & CONTE § 11.27 11-50.             See also Whitford v. First
    Nationwide Bk., 
    147 F.R.D. 135
    , 142 (WD Ky. 1992) (disregarding
    even the possibility that these classes would not have to meet
    all of the normal certification requisites).                    Even the cases
    where   the    courts    did   not   recognize      a    need    to     make   the
    determinations demonstrate a heightened concern for fairness and
    a more cautious approach to settlement approval.                See Ace Heating
    & Plumbing Co. v. Crane Co., 
    453 F.2d 30
    , 33 (3d Cir. 1971)
    (court must be doubly careful where negotiation occurs before
    certification and designation of a class counsel); Mars 
    Steel, 834 F.2d at 681
    (applying a higher standard of fairness); Simer
    v. Rios, 
    661 F.2d 655
    , 664-66 (7th Cir. 1981) (requiring a higher
    demonstration of fairness); Weinberger v. Kendrick, 
    698 F.2d 61
    ,
    69   (2d   Cir.     1982)    (emphasizing       the     extensive   discovery        and
    ability and experience of counsel).
    Some courts have certified settlement classes "without
    articulating or consciously applying Rule 23 tests."                        2 NEWBERG &
    CONTE § 11.27 at 11-52.            See, e.g., Mars 
    Steel, 834 F.2d at 681
    (suggesting       that      the   certification         procedure     may      not    be
    necessary to combat the potential for abuse created by the use of
    settlement classes since that potential is "held in check by the
    requirement       that   the      judge   determine       the   fairness       of    the
    settlement    . . .");       Weinberger      v.   
    Kendrick, 698 F.2d at 73
    (determination that proposed settlement is fair, reasonable and
    adequate substitutes for Rule 23 findings); In re Beef Antitrust
    Litig., 
    607 F.2d 167
    , 177 (5th Cir. 1979); City of Detroit v.
    Grinnell,     
    495 F.2d 448
    ,    464-65     (2d    Cir.   1974)     (rejecting
    contention that the court erred when it approved a settlement and
    acquiesced in the settlement's assumption of the existence of a
    proper class).        Some courts neglecting the findings have taken
    the view that the notice of proposed settlement, which must be
    preliminarily       approved      by   the   court,      "carries   the     necessary
    implication that the action complies with Rule 23."                         
    Beef, 607 F.2d at 177
    .
    We disagree both with this suggestion and with the
    conclusion that a fairness determination is a surrogate for Rule
    23 findings.17        Even if we set aside the problem of the court's
    inadequate      information,       the      inquiry    into       the   settlement's
    fairness      cannot    conceptually        replace    the     inquiry    into     the
    propriety of class certification.                  Normally, a court makes the
    required commonality and typicality determinations by referencing
    the original class complaints in order to assure that the claims
    alleged by the named plaintiffs are common to the class (although
    the   class    need    not    share   every    claim    in    common,    Hassine    v.
    Jeffes, 
    846 F.2d 169
    , 177-78 (3d Cir. 1988)), and that the claims
    alleged by the named plaintiff occupy approximately the same
    position of centrality to the named plaintiffs as they do to the
    rest of the class.            Weiss v. York Hosp., 
    745 F.2d 786
    , 810 (3d
    Cir. 1984), cert. denied, 
    470 U.S. 1060
    (1985).                         Neither the
    existence of a settlement nor the terms of settlement affect the
    nature of this important inquiry.
    The      Rule     23(a)       class      inquiries        (numerosity,
    commonality,        typicality,       and     adequacy       of     representation)
    constitute     a    multipart    attempt      to    safeguard     the   due   process
    rights of absentees.             Thus, the ultimate focus falls on the
    17
    .     We note in this regard that other courts have made the
    determinations of adequacy of representation and homogeneity of
    the class when evaluating the fairness of the settlement for the
    express purpose of assuring that they possess enough information
    to execute their Rule 23(e) duty.        See In re Beef Industry
    Antitrust 
    Litig., 607 F.2d at 173
    n.4 (quoting ARTHUR R. MILLER, AN
    OVERVIEW OF FEDERAL CLASS ACTIONS: PAST, PRESENT AND FUTURE (Federal
    Judicial Ctr. 1977)); see also In re Baldwin-United Corp., 
    105 F.R.D. 475
    , 483 (S.D. N.Y. 1984) (making findings in the opinion
    which preliminarily approved the settlement).
    appropriateness of the class device to assert and vindicate class
    interests.      Conversely, however, the process of negotiation does
    not reveal anything about commonality and typicality.                      One might
    argue    that   these    requisites       are    merely    means    to   the    end    of
    vindicated rights, and that observing the process of negotiation
    could demonstrate adequate vindication -- the true aim of the
    Rule.      In our view, a court cannot infer that the rights of the
    entire     class     were    vindicated         without    having    assured         that
    commonality and typicality were satisfied.
    The 23(b)(3) determination is also important in the
    regulatory scheme.          To be certified as a (b)(3) class, the judge
    must determine that "questions of law or fact common to the
    members of the class predominate over any questions affecting
    only individual members and that a class action is superior to
    other available methods for the fair and efficient adjudication
    of   the    controversy."        FED. R. CIV. P.           23(b)(3).18         But    the
    settlement      approval        inquiry     is     far     different      from        the
    certification inquiry.          In settlement situations, the superiority
    requirement arguably translates into the question whether the
    settlement      is   a   more    desirable       outcome    for    the   class       than
    individualized litigation, and              may assure that the settlement
    has not grossly undervalued plaintiffs' interests.                       But even if
    18
    .   As the case before us involves a damages class under Rule
    23(b)(3), we do not address the application of the (b)(1) and
    (b)(2) requisites which, without the important right to opt out,
    involve different considerations.
    this is so, a point we neither concede nor decide, there remains
    the concern about conflicts between those appointed to represent
    class interests -- the lawyers and named plaintiffs -- and the
    rest     of   the   class.        These    concerns,        particularly        acute     with
    settlement classes, concentrate the focus of the certification
    inquiries on the representational elements.
    Certainly,    evaluating          the   settlement         can   yield     some
    information         relevant       to     the        adequacy        of    representation
    determination under 23(a)(4).              The settlement evaluation involves
    two types of evidence:             a substantive inquiry into the terms of
    the settlement relative to the likely rewards of litigation, see
    
    Weinberger, 698 F.2d at 73
    ;    Protective          Comm.      for     Indep.
    Stockholders v. Anderson, 
    390 U.S. 414
    , 424, 
    88 S. Ct. 1157
    , 1163
    (1968), and a procedural inquiry into the negotiation process.
    The focus on the negotiation process results from the realization
    that a judge cannot really make a substantive judgment on the
    issues in the case without conducting some sort of trial on the
    merits, exactly what the settlement is intended to avoid. See
    Malchman       v.   
    Davis, 706 F.2d at 433
    .         Instead,     the     court
    determines whether negotiations were conducted at arms' length by
    experienced counsel after adequate discovery, in which case there
    is   a   presumption      that     the    results      of     the    process     adequately
    vindicate the interests of the absentees.                          
    Weinberger, 698 F.2d at 74
    ; City of Detroit v. 
    Grinnell, 495 F.2d at 463
    ; Baldwin-
    
    United, 105 F.R.D. at 482
       ("In    order       to    supplement        judicial
    examination       of   the    substance         of    a    compromise       agreement,      and
    because a court cannot conduct a trial in order to avoid a trial,
    attention must be paid to the process by which a settlement has
    been reached.").
    Although         the    procedural             focus     on     the     fairness
    determination yields information pertinent to the adequacy of
    representation         inquiry,      it    cannot         fully   satisfy     the    inquiry.
    That   is   because      reliance         on   the    negotiation          process   used   to
    approve     the    settlement         to       satisfy      the     class     certification
    requirements puts excessive pressure on the settlement approved
    determinations, and, more fundamentally, such a reliance may be
    circular.         Cf. NEWBERG & CONTE § 11.28 at 11-54 (suggesting a
    greater need for a court to carefully articulate if reasons for
    settlement        approval      where          the    class       was      not     separately
    certified).
    Courts       approving            settlements          have     examined       the
    negotiating process in light of the "experience of counsel, the
    vigor with which the case was prosecuted, and the coercion or
    collusion    that      may    have    marred         the    negotiations         themselves."
    Malchman v. Davis, 
    706 F.2d 426
    , 433 (2d Cir. 1983) (citing
    
    Weinberger, 698 F.2d at 73
    ; 
    Grinnell, 495 F.2d at 465
    .).                             Some of
    these courts have suggested that the fact that vigorous, arm's
    length negotiations occurred should allay concerns about adequacy
    of representation.            But these inferences depend on the implicit
    assumption    that      the    lawyers         actually      negotiating         really   were
    doing so on behalf of the entire class, see 2 NEWBERG & CONTE §
    11.28 at 11-59, assumptions which are clearly unjustified in a
    context    where   the   potential     for    intra-class   conflict    further
    emperils the class's representation.             Far too much turns on the
    adequacy of representation to accept it on blind faith.
    Without      determining     that    the   class      actually    was
    adequately represented, the district judge has no real basis for
    assuming    that   the    negotiations       satisfactorily    vindicated     the
    interests of all the absentees.               The focus on the negotiation
    process    also    cannot    address    the     part   of   the    adequacy    of
    representation inquiry intended to detect situations where the
    named plaintiffs are unsuitable representatives of the absentees'
    claims.    To state that class members were united in the interest
    of maximizing over-all recovery begs the question.                Although that
    observation might allay some concern about a conflict between the
    attorney and the class, a judge must focus on the settlement's
    distribution terms (or those sought) to detect situations where
    some class members' interests diverge from those of others in the
    class.     For example, a settlement that offers considerably more
    value to one class of plaintiffs than to another may be trading
    the claims of the latter group away in order to enrich the former
    group.
    In short, the prophylactic devices used by judges to
    approve these pre-certification settlements without ever formally
    certifying the class fail to satisfy the requirements of Rule 23.
    Without determining that the class claims are common and typical
    of the entire putative class and that the class representatives
    and   their   counsel    are     adequate     representatives,     we   have   no
    assurance that the district court fully appreciated the scope and
    nature of the interests at stake.19             Finally, we note that courts
    adopting the view that the formal class determinations are not
    necessary for settlement classes may be contravening not only the
    language of the rule but also the Supreme Court's requirement in
    General Telephone Co. of Southwest v. Falcon, 
    457 U.S. 147
    , 160,
    
    102 S. Ct. 2364
    , 2372 (1982) (disapproving the trial court's
    insufficient     scrutiny      of    the    named    plaintiff's   capacity    to
    adequately represent the class), that "[a]ctual, not presumed,
    conformance     with   Rule    23(a)      remains,   however,   indispensable."
    Thus,   while    we    approve      the    provisional   certification    of   a
    19
    .    In Malchman v. 
    Davis, 706 F.2d at 433
    , the court was
    satisfied by the district court's determination that the
    settlement class satisfied the adequacy of representation inquiry
    noting: "There is no doubt that the district court must make an
    independent evaluation of whether the named plaintiffs were
    adequate representatives of the class . . . .     A judge has an
    obligation to consider whether the interest of the class are
    adequately represented." (citing East Texas Motor Freight Sys.,
    Inc. v. Rodriguez, 
    431 U.S. 395
    , 403-06, 
    97 S. Ct. 189
    , 96-98
    (1977)); see also 
    Plummer, 668 F.2d at 659
    & n.4. We agree that
    this is an appropriate focus given the heightened potential for
    collusion, buy-offs and other abuses in settlement class
    situations where the negotiations occur before the court appoints
    class representatives and counsel.    We still believe, however,
    that   courts should assure that settlement classes meet all of
    the requirements of 23(a) and (b).         This prescription is
    consistent with the heightened duty of courts in class action
    settlements to assure that the absentees' rights are adequately
    protected.
    settlement      class       to     facilitate     settlement    discussions,      final
    settlement approval depends on the finding that the class met all
    the requisites of Rule 23.
    F. Can There be a Valid Settlement Class That
    Would Not Serve as a Valid Litigation Class?
    As    we     have    previously     explained,    courts   using     the
    settlement class device must at some point definitively certify
    the class and satisfy themselves that the requisites of Rule 23
    have    been    satisfied.           To   avoid    that   process   entirely      would
    dismantle the rule's carefully constructed mechanism that serves
    to protect absentees' due process rights.                   Moreover, despite some
    courts' suggestions that the standards are less rigorous for
    settlement classes, we do not believe that Rule 23 authorizes
    separate, liberalized criteria for settlement classes.
    At the outset we note that, while some other courts
    have    nominally         complied    with   the    rule,   they    appear   to   have
    assumed that lower standards apply in settlement class cases.
    See Officers for Justice v. Civil Serv. Comm'n of San Francisco,
    
    688 F.2d 615
    , 633 (9th Cir. 1982), cert. denied, 
    459 U.S. 1217
    ,
    
    103 S. Ct. 1219
    (1983) ("[C]ertification issues raised by class
    action litigation that is resolved short of a decision on the
    merits must be viewed in a different light."); Fisher Bros. v.
    Phelps Dodge Indus. Inc., 
    604 F. Supp. 446
    , 450 (E.D. Pa. 1985);
    In re Dennis Greenman Securities Litig., 
    829 F.2d 1539
    , 1543
    (11th   Cir.        1987)    ("In    reviewing     settlement    certifications,     a
    special standard has been employed."); A.H. 
    Robins, 880 F.2d at 740
    (in deciding whether to certify a class, settlement is at
    least an important factor in favor and might even be a per se
    ground for certification);              Manual.2d at §30.45.              Other courts
    have stated that settlement reduces the potential conflicts among
    the    class     and   thus   enhances        the   likelihood     of     meeting   the
    criteria, presumably the same criteria a litigation class must
    satisfy.        See, e.g.,    Bowling v. Pfhizer, Inc., 
    143 F.R.D. 141
    ,
    159 (S.D. Oh. 1992).          Newberg is of this view.                  See 2 NEWBERG &
    CONTE §11.28, at 11-58.
    According to Newberg, though settlement does not impact
    the numerosity requirement it may indeed increase the likelihood
    of meeting the commonality and typicality inquiries.                       "Typicality
    of claims in a settlement class context requires proof that the
    interests of the class representative and the class are commonly
    held     for    the    purposes   of     receiving       similar    or     overlapping
    benefits from a settlement."                  2 NEWBERG & CONTE §11.28 at 11-58.
    On this theory, because the court has delayed the findings until
    the outcome of the litigation (i.e., the settlement agreement) is
    known,    the     judge   conducts      the    inquiry   based     on    the   relative
    rewards to the class members rather than based on the various
    legal claims of class members.                  So long as all plaintiffs get
    similar        benefits   from    the    settlement,       irrespective        of   the
    different strengths of their initial claims, the commonality and
    typicality inquiries are viewed as likely to be satisfied.
    Under      this   approach,   the     adequate        representation
    inquiry is also simplified in the settlement class context by a
    result-oriented approach toward the class requirement findings.
    Rather than asking whether the lawyers have sufficient resources
    and skills to prosecute the action (as would be the case with
    customary class certification procedures), courts, it is said,
    need only determine, in hindsight, whether the settlement was
    negotiated at arms' length, and whether the negotiations were
    long, thorough and deliberative.          See In re Corrugated Container
    Antitrust Litig., 
    643 F.2d 195
    , 212 (5th Cir. 1981) (adequacy
    judged by sufficiency of settlement); In re Domestic Air Transp.
    Antitrust      Litig.,    
    148 F.R.D. 297
    ,     341    (N.D.         Ga.   1993)
    (inequitable     distribution).        Courts     adopting        this    approach
    require proof only that named plaintiffs' and class interests are
    not antagonistic.        See, e.g., Goodman v. Lukens Steel Co., 
    777 F.2d 113
    , 123 (3d Cir. 1985) (relying on absence of conflict to
    find adequate representation); Lewis v. Curtis, 
    671 F.2d 779
    , 788
    (3d     Cir.    1982)     (finding     named      plaintiff        an     adequate
    representative despite small stake in litigation and ignorance of
    facts and claims); Steiner v. Equimark Corp., 
    96 F.R.D. 603
    , 610
    (W.D.    Pa.   1983)     ("The   key   question    [for     the     adequacy    of
    representation      inquiry]      is   whether      their     interests        are
    antagonistic.").        In these cases, courts have effectively relied
    on the settlement's terms -- the outcome of the action -- to find
    the required absence of antagonism.20
    We disagree with this approach, championed primarily by
    Newberg.     There is no language in the rule that can be read to
    authorize      separate,       liberalized       criteria      for     settlement
    classes.21        Although     we   acknowledge    the    need   for    flexible
    interpretation of Rule 23 to enable it to achieve its broader
    purposes     of    vindicating       difficult     individual        claims    and
    conserving    judicial       resources,   see    
    Beef, 607 F.2d at 177
    -78
    (discussing the policy needs for flexibility); Ace 
    Heating, 453 F.2d at 33
    (recognizing need to give small claimants who did not
    20
    .    For example, in finding adequate representation, one court
    noted: "[S]o long as all class members are united in asserting a
    common right, such as achieving the maximum possible recovery for
    the class, the class interests are not antagonistic for
    representation purposes." In re Corrugated Container Antitrust
    Litig., 1980-1 Trade Cas. (CCH) ¶63, 163 at 77,788 n. 10 (S.D.
    Tex. 1979), aff'd, 
    643 F.2d 195
    (5th Cir. 1981) (citing WRIGHT &
    MILLER, FED. PRACTICE & PROCEDURE CIVIL § 1768, at nn.7 & 8).
    21
    .   Indeed, if any difference in standards is warranted, pre-
    certification settlement may raise the adequacy of representation
    standard. Since this inquiry must ascertain "whether there has
    been any collusion or undue pressure by the defendants on would
    be class representatives," see First Comm. Corp. of Boston
    Consumer Accts. Litig., 
    119 F.R.D. 301
    , 308 (D. Mass 1987);
    Alvarado Partners LP v. Mehta, 
    723 F. Supp. 540
    , 546 (D. Colo.
    1989), it must carry greater weight in the settlement class
    context where there is an enhanced potential for those evils.
    Thus, while the other 23(a) findings remain important when the
    action settles, the need to assure an absence of collusion and an
    alignment of interests assumes an especially crucial role.
    Reliance, for the class requisites analysis, on the settlement's
    terms and process also increases the importance of an independent
    conclusion of adequate representation (i.e., one not derived
    solely by reference to the nature of the negotiations).
    opt out the right to appeal a settlement approval), we emphasize
    that Rule 23 is designed to assure that courts will identify the
    common   interests      of    class      members    and     evaluate         the     named
    plaintiff's     and    counsel's      ability      to     fairly      and    adequately
    protect class interests.           See Katz v. Carte Blanche Corp., 
    496 F.2d 747
    ,    757    (3d   Cir.   1974).       Thus,      actions      certified      as
    settlement classes must meet the same requirements under Rule 23
    as   litigation      classes.       To    allow     lower       standards      for    the
    requisites of the rule in the face of the hydraulic pressures
    confronted by courts adjudicating very large and complex actions
    would erode the protection afforded by the rule almost entirely.
    Judge Posner has explained the animating concern behind
    this strict application.            "The danger of a premature, even a
    collusive,     settlement     is   increased       when    as    in   this    case the
    status of the action as a class action is not determined until a
    settlement has been negotiated, with all the momentum that a
    settlement agreement generates . . . ." 
    Mars, 834 F.2d at 680
    .
    The foregoing discussion has focused on adequacy of
    representation, but the presence of commonality and typicality
    are equally important to the class action regime.                       Certifying a
    class without the existence of questions common to the class (or
    where the class representatives' claims are not typical) perverts
    the class action process and converts a federal court into a
    mediation forum for cases that belong elsewhere, usually in state
    court.   On the other hand, the cases that make the settlement
    class device appear most useful are cases presenting the most
    unwieldy substantive and procedural issues, i.e., those diversity
    cases in which plaintiffs from many states are confronted with
    differing defenses, differing statutes of limitations, etc. --
    precisely those cases that stretch the Rule to its outer-most
    limits.
    This is a troublesome issue -- and a close one.              Many
    mass tort actions have this problem.              The School Asbestos cases
    and the Breast Implant cases had it, and this case does, as well.
    It may initially seem difficult to envision an actual trial of
    these   cases    because   of   the   differing    defenses   certain   to    be
    raised under the various bodies of governing law.                    While the
    problem may be overstated,22 settlement classes still serve the
    useful purpose of ridding the courts -- state and federal -- of
    this albatross even though the case may never have been triable
    in class form.       But if that were the primary function of the
    settlement      class,   the    federal   courts     would    have   become   a
    mediation forum, a result inconsistent with their mission and
    limited resources.       In sum, "a class is a class is a class," and
    a settlement class, if it is to qualify under Rule 23, must meet
    22
    .   In the School Asbestos 
    case, 789 F.2d at 996
    , the panel
    asked counsel to analyze all the claims and defenses and write a
    report reflecting whether the differing claims and defenses
    evidence a small number of patterns that would be amenable to
    trial through a series of special verdicts. The plaintiffs came
    up with a demonstration that the claims and defenses were
    reducible to four patterns. That, in our view, was sufficient to
    satisfy the commonality and typicality inquiries. The same might
    be true in this case.
    all of its requirements.             The district court should keep these
    matters in mind on remand.
    V. IS    THE   SETTLEMENT CLASS PROPER HERE?
    A.     Were There Adequate Findings Under Rule 23(a)?
    Certain of the objectors in this case contend that the
    district court committed plain error by never actually certifying
    the class as required by Rule 23.                See Brief of French Objectors
    at 18.       This, of course, would be a serious error, since without
    certification there is no class action, and "[i]n a settlement
    entered without class certification the judgment will not have
    res    judicata    effect    on    the    claims     of   absent   class   members."
    Simer v. Rios, 
    661 F.2d 655
    , 664 (7th Cir. 1981).
    The district court certified the class provisionally in
    a pre-trial order.          See Pretrial Order No. 7.               We have already
    noted that provisional certification constitutes an acceptable
    means of facilitating settlement negotiations.                      See 2 NEWBERG &
    CONTE §11.27 at 55-56.            It appears that the court believed that
    it     certified    the     class        by    "confirming"        the   provisional
    certification in its order approving the settlement.                       (JA 1708,
    1745.)    However, the court did not make the findings we hold that
    Rule    23    requires,     not    even       upon   approving     the   settlement.
    Because we hold today that courts employing settlement classes
    must still make findings that the class complies with Rule 23(a)
    and the appropriate parts of Rule 23(b), the court's failure to
    comply with the rule in this respect is a plain error of law, and
    hence an abuse of discretion, requiring that the certification be
    set aside.
    Our        conclusion      that     the       settlement   class       was   not
    properly certified does not mean that the class could not be
    certified on remand.               Accordingly, we must consider whether the
    existing record is adequate to support class certification, or
    whether further record development is required.
    B. Could the Class Requisites Have Been Met
    On The Current Record?
    1.    Numerosity, Commonality, and Typicality
    As     we       have    explained,        a    class   action     --   whether
    certified for settlement or litigation purposes -- must meet the
    class requisites enunciated in Rule 23.                       The district court did
    not make findings on these issues.                The numerosity requirement of
    Rule   23(a)      is    plainly      satisfied    in       this    action    encompassing
    nearly six million truck owners.                 The commonality and typicality
    inquiries of 23(a), however, raise substantial concerns about the
    sufficiency of this class.               The record currently lacks the facts
    needed to establish these requisites, and the defendants also
    ardently maintain that the applicability of different defenses to
    different    groups         of     plaintiffs    would      prevent    the    class      from
    satisfying the commonality and typicality requirements.                            At this
    juncture, we leave open the possibility that, on remand, the
    district court may indeed find facts sufficient to support these
    elements.
    2.   Adequacy of Representation
    a.   The Situation of the Fleet Owners
    This settlement class appears to fail to meet Rule
    23(a)'s    adequacy       of    representation    test.       The     adequacy    of
    representation inquiry has two components intended to assure that
    the absentees' interests are fully pursued:                it considers whether
    the named plaintiffs' interests are sufficiently aligned with the
    absentees, and it tests the qualifications of the counsel to
    represent the class.            See Weiss v. York Hospital, 
    745 F.2d 786
    ,
    811 (3d Cir. 1984); 2 NEWBERG & CONTE § 11.28 at 11-58.                      On the
    first prong, we are not satisfied that the interests of various
    class members were sufficiently aligned; indeed the settlement
    appears to create antagonism within the class.                While some courts
    have been satisfied that there is no intra-class conflict where
    "all class members are united in asserting a common right, such
    as achieving the maximum possible recovery for the class," In re
    Corrugated Container Antitrust Litig., 1980-1 Trade Cas. (CCH) ¶
    63, 163 at 77, 788 n.10 (S.D. Tex. 1979), aff'd. 
    643 F.2d 195
    (5th    Cir.    1981),    we    disapprove    such    a   myopic     focus   on   the
    settlement terms.
    In this case in particular, the conclusion that the
    settlement      --   that      (supposedly)   maximized      class    recovery     --
    satisfied the requirement that class members' interests not be
    antagonistic ignores the conspicuous evidence of such an intra-
    class    conflict    in     the   very   terms   of   this    settlement.         The
    substantial impediments to fleet owners using these certificates
    creates a conflict between their interests in this settlement and
    those    of    individual       owners.      (The     named      plaintiffs        are    all
    individual owners.)            Moreover, the dubious value of the transfer
    option,       see     Part    VI(A)(1)(c)       infra,     one      of    the     principal
    responses to the fleet owners' objection, does little to reduce
    the disparity in the prospective value to the different sections
    of the class.
    This is not a case where some plaintiffs share the
    prospect of a future claim with other class members who currently
    have    such     a   claim.      The    fleet    owners     will     never       enjoy    the
    benefits of the settlement terms, such as the intra-household
    transfer       option,       intended    specifically         for    the        benefit    of
    individual owners.            Thus, we must be concerned that individual
    owners     had       no   incentive     to   maximize       the      recovery       of    the
    government entities; they could skew the terms of the settlement
    to their own benefit.             Not surprisingly, the settlement leaves
    fleet    owners       with    significantly         less   value         than    individual
    owners.       At the very least, the class should have been divided
    into sub-classes so that a court examining the settlement could
    consider settlement impacts that would be uniform at least within
    the sub-classes.
    b.    Did Counsel Adequately Represent the
    Interests of the Entire Class?
    The    other    aspect   of   the     adequacy       of    representation
    test, whether counsel is qualified and serves the interests of
    the   entire   class,    also    gives   us   reason     to    pause.    Courts
    examining settlement classes have emphasized the special need to
    assure that class counsel:          (1) possessed adequate experience;
    (2)   vigorously    prosecuted    the    action;   and   (3)    acted   at   arms
    length from the defendant.        See, e.g., 
    Malchman, 706 F.2d at 433
    ;
    Alvarado 
    Partners, 723 F. Supp. at 546
    .             The first criterion is
    no problem, for these counsel clearly possess the experience and
    skills to qualify them to pursue these sorts of actions.                But the
    second and third points require attention in view of lack of
    significant discovery and the the extremely expedited settlement
    of questionable value accompanied by an enormous legal fee.
    Before addressing the latter points, it is necessary to
    begin with some legal theory discussing the structural nature of
    fee arrangements in class actions of this type, having in mind
    that even honorable counsel -- like class counsel here -- may be
    compromised by the possibility of a large fee.
    (1)   Class Action Attorneys' Fees
    Theory and Structure
    Beyond    their   ethical     obligations      to   their    clients,
    class attorneys, purporting to represent a class, also owe the
    entire class a fiduciary duty once the class complaint is filed.
    See 2 NEWBERG & CONTE § 11.65 at 11-183; Greenfield v. Villager
    Indus., Inc., 
    483 F.2d 824
    , 832 (3d. Cir. 1973).                The large fees
    garnered by some class lawyers can create the impression of an
    ethical violation since it may appear that the lawyer has an
    economic stake in their clients' case.                     But class actions cannot
    be    analyzed     in    the    same    framework          as    conventional           bipolar
    litigation.      Because of the collective action problems associated
    with cases where individual claims are relatively small, WRIGHT,
    MILLER & KANE, 5 Federal Practice and Procedure § 1754 at 49, and
    the    social    desirability          of    many     class       suits         (the    private
    enforcement model), 
    id. at 51;
    Sprogis v. United Airlines, Inc.
    
    444 F.2d 1194
    (7th Cir. 1971), large attorneys' fees serve to
    motivate capable counsel to undertake these actions.                              Thus, large
    fee   awards     standing      alone    do     not    suffice         to    show       that    the
    representation was inadequate or unethical.                            These allowances
    generally    reflect      the     realization        that       the   lawyer       represents
    numerous    individuals         with   somewhat       varying         interests,         not    an
    acceptance of the situation where the lawyer's personal interests
    trump the interests of the entire class.
    Some      commentators          blame    the    system         of    compensating
    class action lawyers in a manner that fails to confront fully the
    differences between class action litigation and classical bipolar
    litigation      for     creating    incentives        that       diverge        markedly       and
    predictably from their clients' interests.                       The leading critic is
    Professor Coffee.          See John C. Coffee, Jr., Understanding the
    Plaintiff's Attorney:             The Implications of Economic Theory For
    Private Enforcement of Law Through Class and Derivative Actions,
    86 COLUM. L. REV. 669, 671-72 (1986) (noting that critics "have
    argued   that     the     legal    rules      governing         the    private         attorney
    general have created misincentives that unneccessarily frustrate
    the utility of private enforcement.                These critics have focused
    chiefly on the conflicts that arise between the interests of
    these attorneys and their clients in class and derivative actions
    . . . .") (hereinafter Understanding the Plaintiff's Attorney);
    
    Id. at 677
    ("Ultimately, the most persuasive account of why class
    actions      frequently        produce     unsatisfactory     results   is     the
    hypothesis that such actions are uniquely vulnerable to collusive
    settlements that benefit plaintiff's attorneys rather than their
    clients.");       John    C.    Coffee,     Rescuing   the   Private    Attorney
    General:      Why the Model of the Lawyer as Bounty Hunter Is Not
    Working, 42 MD. L. REV. 215 (1983); John C. Coffee, The Unfaithful
    Champion:     The Plaintiff as Monitor in Shareholder Litigation, 48
    SUM LAW & CONTEM. PROBS., 5 Summer 1985; Kevin M. Clermont & John D.
    Currivan, Improving on the Contingent Fee, 63 CORNELL L. REV. 529
    (1978); Murray L. Schwartz & Daniel J.B. Mitchell, An Economic
    Analysis of the Contingency Fee in Personal-Injury Litigation, 22
    STAN. L. REV. 1125 (1970).
    Economic models have shown how conventional methods of
    calculating class action fee awards give class counsel incentives
    to    act   earlier   than     their     clients   would   deem   optimal.     See
    Coffee, Understanding the Plaintiff's Attorney, 86 COLUM. L. REV.
    at 688.     Because, under a percentage of recovery award mechanism,
    the    attorney    will    only    enjoy    a   relatively   small   portion    of
    whatever incremental award he can extract from the defendant, the
    defendant       can    pressure        the     plaintiffs'      attorney         into     early
    settlement       by    threatening        to    expend     large      sums      on    dilatory
    tactics that would run the expenses up beyond what plaintiffs'
    attorneys       can    expect     to   profit.         
    Id. at 690.
           Rather       than
    presenting a possible solution, the lodestar method seemingly
    exacerbates the problem of cheap settlement by divorcing the fee
    award from the settlement's size, since plaintiffs' attorneys
    have no incentive to take the risk on a trial for potentially
    larger    award        to   the    class       where   their        own    fees       will    not
    necessarily reflect the greater risk taken on trial.                                  See also
    
    id. at 718
    (discussing how lodestar method may create structural
    collusion).
    Coffee also blames the principal-agent problem endemic
    to class actions for creating a situation where the defendants
    and plaintiffs can collusively settle litigation in a manner that
    is   adverse      to    the      class's       interest:        "At       its    worst,       the
    settlement process may amount to a covert exchange of a cheap
    settlement for a high award of attorney's fees.                            Although courts
    have     long    recognized        this      danger      and    have       developed         some
    procedural safeguards intended to prevent collusive settlements,
    these reforms are far from adequate to the task."                                 
    Id. at 714
    n.121 (citing cases).              A number of commentators have identified
    settlements which afford only nonpecuniary relief to the class as
    prime     suspects          of    these      cheap     settlements.             See     Coffee,
    Understanding The Plaintiff's Attorney, 86 COLUM. L. REV. at 716
    n.129;      JONATHAN     R.     MACEY    &    GEOFFREY      P.    MILLER,      The    Plaintiffs'
    Attorneys         Role    in     Class        Action      and       Derivative        Litigation:
    Economic Analysis and Recommendations for Reform, 58 U. CHI. L.
    REV.   1,     45    n.10       (1991);        Nancy      Morawetz,         Bargaining,           Class
    Representation, and Fairness, 54 OHIO ST. L.J. 1, 5 n.40 (1993).
    While      courts         may    fail    to     appreciate         adequately         the
    distinction        between       conventional          bipolar         litigation          and    class
    actions      in     many        respects,         they        may      over-emphasize             these
    differences        in    other     respects.             To    be      sure,   courts        will   be
    willing      to    award        fees     in    class        actions       that       would       appear
    extraordinary and arguably improper in conventional litigation.
    Nevertheless, some of the critiques based on ethical or collusive
    concerns remain instructive.                     Although subsequent versions seem
    to avoid a discussion, the Manual for Complex Litigation (First)
    acknowledged        the       potential        for    attorney-class             conflict.          It
    condemned      fees       that     are        paid    separate          and    apart       from     the
    settlement funds paid to the class because amounts "paid by the
    defendant(s) are properly part of the settlement funds and should
    be known and disclosed at the time the fairness of the settlement
    is considered."           MCL 1st § 1.46.
    One       court    has      noted       that       the    "effect       of     such   an
    arrangement [where the counsel fees are not resolved and the
    details not included in the class notice] may be to cause counsel
    for the plaintiffs to be more interested in the amount to be paid
    as fees than in the amount to be paid to the plaintiffs." In re
    General    Motors    Corp.     Engine   
    Interchange, 594 F.2d at 1131
    .
    Commentators have also noted how, where there is an absence of
    objectors,       courts   lack   the    independently-derived          information
    about the merits to oppose proposed settlements.                       See Coffee,
    Understanding the Plaintiff's Attorney, 86 COLUM. L. REV. at 714
    n.131.     Of course, by endorsing a practice where the class is,
    for practical purposes, deprived of information concerning the
    fees,    courts    foster    a   situation      where      there   will    be   fewer
    objectors.23
    (2)   The Stewardship of Counsel Here
    A number of factors militate against the conclusion
    that     the   class's    interests     were    sufficiently       pursued      here.
    First,     the    settlement     arguably      did   not    maximize      the   class
    members' interests.          Every owner received a coupon whose value
    could only be realized by purchasing a new truck.                      Significant
    obstacles existed to the development of a secondary market in the
    transfer certificates given that the transfer restrictions and
    their limited lifespan minimize the value of the transfer option.
    Second, class counsel effected a settlement that would yield very
    substantial rewards to them after what, in comparison to the $9.5
    million fee, was little work.
    23
    .    The information on fee agreements may prompt potential
    objectors to oppose not only the awards but, also, to the extent
    they conclude arm's length negotiations were compromised, the
    adequacy of the settlement and the propriety of the class.
    Third, the fact that the settlement involves only non-
    cash relief, which is recognized as a prime indicator of suspect
    settlements, increases our sense that the class's interests were
    not adequately vindicated.          The separate negotiation of the fee
    agreement and the failure to disclose the amount of the award in
    the class notice only enhance this sense that counsel may have
    pursued a deal with the defendants separate from, and perhaps
    competing for the defendant's resources with, the deal negotiated
    on behalf of the class.          And although the degree to which a
    settlement hurts a defendant is not ordinarily a measure of the
    settlement's    adequacy,     the    fact    that    this   settlement          might
    actually benefits GM by motivating current owners to buy new
    trucks from the company (the settlement may arguably be viewed as
    a GM sales promotion device) certainly does little to allay the
    concern that the settlement did not advance the interests of the
    class as much as it might have.
    Fourth,    our    concern     about     the   vigor     of    counsels'
    prosecution of the class claims, specifically the possibility
    that counsel did not do right by the class, is buttressed by the
    legacy of Prandini v. National Tea Co., 
    557 F.2d 1015
    , 1021 (3d
    Cir. 1977).    In Prandini, this court recognized the potential for
    attorney     class   conflicts      where    the    fees,   while       ostensibly
    stemming      from    a     separate        agreement,      were        negotiated
    simultaneously.        We   characterized        simultaneity      of     fee     and
    settlement    negotiations    as     a   "situation      . . .          having,    in
    practical    effect,        one   fund    divided    between      the    attorney     and
    client."     To respond to this danger of collusion between the
    class counsel and defendant, Prandini and the Third Circuit Task
    Force Report on court awarded attorney's fees disapproved fee
    discussions      until        after      the    achievement       and    approval     of
    settlement.          See    
    Prandini, 557 F.2d at 1021
    ;     Court   Awarded
    Attorney's Fees, Report of the Third Circuit Task Force, 
    108 F.R.D. 238
    , 266 (1985) [hereinafter Task Force].24
    In this case, there were strong indications that such
    simultaneous negotiations in fact transpired.                     Indeed, there was
    evidence    in   a    letter      from    class    counsel    that      at   least   some
    portion of the fees and expenses had to have been negotiated
    simultaneously with the settlement.                      (Butler Letter on fees,
    Jenkins app. at 70-1).            The court justified its dismissal of the
    allegation of simultaneous negotiation by citing (1) a statement
    in   the    letter         that   the    "attorneys'       fees    were      negotiated
    separately, after we agreed on everything else," and (2) GM's
    24
    . Other courts and authorities have followed this guide. See,
    e.g., Ashley v. Atlantic Richfield Co., 
    794 F.2d 128
    (3d Cir.
    1986); MCL 2d § 30.41; 2 NEWBERG & CONTE § 11.29 at 11-62
    (recognizing potential for conflict where settlement and fees to
    be paid by defendant simultaneously negotiated).    To implement
    this prophylactic bar fully, courts would have to require class
    counsel to disclose all understandings as to fees, not simply
    concluded, formal agreements.    See MCL 2d § 34.42 at 237-39.
    Although it recognized that this prophylactic rule could impede
    some settlements by making it impossible for the defendant to
    size up its total liability (i.e. the sum of the settlement
    amount and any fees the defendant agrees to pay), Task 
    Force 108 F.R.D. at 267-69
    , the Task Force concluded that avoiding the
    conflicts justified this cost.
    reservation of the right to contest any award of fees that it
    deemed    unreasonable.       Even      though   we   assume    that    these   are
    factual findings, thus ordinarily deserving deference, we think
    these    findings    were   made   by    reference    to   an   erroneous    legal
    standard.        Indeed,    neither      of   these    bases    is     persuasive,
    especially in view of GM's acquiecence in a patently baseless
    ground for augmenting the counsel fee, see Part VII infra.
    In considering the adequacy of representation, we are
    loath to place such dispositive weight on the parties' self-
    serving remarks.        And even if counsel did not discuss fees until
    after they reached a settlement agreement, the statement would
    not allay our concern since the Task Force recommended that fee
    negotiations be postponed until the settlement was judicially
    approved, not merely the date the parties allege to have reached
    an agreement.       We recognize that Evans v. Jeff D., 
    475 U.S. 717
    ,
    734-38, 
    106 S. Ct. 1531
    , 1541-43 (1986), overruled Prandini's
    strict rule prohibiting simultaneous negotiations.                   However, many
    of the concerns that motivated the Prandini rule remain, and we
    see no reason why Jeff D. or its underlying policy of avoiding
    rules that impede settlement preclude us from considering the
    timing of fee negotiations as a factor in our review of the
    adequacy    of    the    class'    representation.          Consequently,       the
    likelihood that the parties did negotiate the fees concurrently
    with the settlement in this case increases our concern about the
    adequacy of representation.25
    Nor would GM's reservation of the right to appeal the
    fee award establish that the fee was negotiated separately since
    the likelihood that GM would want to contest an award based on a
    fee petition to which it agreed is quite small.                The fact is
    confirmed by GM's "lay down" position with respect to the fee
    application.     Although the Supreme Court clearly invalidated the
    use of mulitipliers in lodestar awards in 1992, see City of
    Burlington v. Dague, 
    112 S. Ct. 2638
    (1992), GM did not apprise
    the district court of this fact when it was approving the fee
    award, or complain when the district court used a mulitplier in
    the    calculations.      This   posture    of   GM     suggests   that    its
    reservation of the right to appeal the fee award should not be
    given great weight in determining whether the settlement and
    attorney's fee were negotiated separately.            But we hasten to add
    that we have not resolved these factors.         We only hold today that
    the court did not make the necessary findings, and we remand to
    the district court so that it can make the necessary Rule 23
    findings.
    The thrust of the foregoing discussion is that the
    circumstances under which the settlement evolved, made possible
    by    the   settlement   class   device,   may   have    compromised      class
    25
    .   While the parties could have sought a waiver permitting
    simultaneous negotiations, Task Force at 269, the parties did not
    seek one here.
    counsel      in     a     manner       raising    doubts      as     to     adequacy      of
    representation.           The district court will examine this aspect of
    the matter on remand.               Perhaps, on a more developed record, the
    adequacy of representation will be established.                           These concerns
    underscore the importance of having the district court make Rule
    23 findings.            Although we do not believe that the class would
    meet the requirements for certification on the current record, we
    do   not    preclude       the     possibility    that     certification          could   be
    properly supported on a more developed record.                         Thus, we remand
    this action to the district court so that it can re-examine the
    class      certification         and   the   settlement       and,     if   appropriate,
    certify the class by making the findings required by Rules 23(a)
    and (b).
    VI. IS      THE   SETTLEMENT FAIR, REASONABLE,   AND   ADEQUATE?
    Invoking the correct standard of review under Girsh v.
    Jepson, 
    521 F.2d 153
    , 157 (3d Cir. 1975), the objectors also
    argue that the district court abused its discretion, when it
    approved      the       settlement      as   fair,    reasonable          and   adequate.
    Because we leave open the possibility that the district court may
    on remand properly certify the class pursuant to Part V of this
    opinion, we must also address the district court's approval of
    the settlement.           Rule 23(e) imposes on the trial judge the duty
    of   protecting         absentees,       which   is   executed        by    the    court's
    assuring that the settlement represents adequate compensation for
    the release of the class claims.                 See 2 NEWBERG & CONTE § 11.46 at
    11-105 to 11-106.           Some courts have described their duty under
    Rule 23(e) as the "fiduciary responsibility" of ensuring that the
    settlement is fair and not a product of collusion.                   In re Warner
    Commun. Secur. Litig., 
    798 F.2d 35
    , 37 (2d Cir. 1986); see also,
    Plummer v. Chemical Bank, 
    668 F.2d 654
    , 658 (2d Cir. 1982);
    Grunin v. International House of Pancakes, 
    513 F.2d 114
    , 123 (8th
    Cir.), cert. denied, 
    423 U.S. 864
    (1975); Alvarado Partners L.P.
    v. Mehta, 
    723 F. Supp. 540
    , 546 (D. Colo. 1989).                   At all events,
    where the court fails to comply with this duty, absentees have an
    action to enjoin the settlement.             2 NEWBERG & CONTE § 11.23.
    In order for the determination that the settlement is
    fair, reasonable, and adequate "to survive appellate review, the
    district court must show it has explored comprehensively all
    relevant factors."          
    Malchman, 706 F.2d at 434
    (citing Protective
    
    Committee, 390 U.S. at 434
    ; 
    Plummer, 668 F.2d at 659
    ).                    A number
    of   courts       have    recognized   the   need   for   a    special    focus   on
    precluding the existence of collusion.              See 
    Malchman, 706 F.2d at 433
    (advocating a focus on the negotiation process to uncover
    possible collusion); General Motors 
    Interchange, 594 F.2d at 1125
    (finding      a    need    for   heightened    scrutiny       of   the   settlement
    stemming from the potential for collusive settlement).
    The topic of class action settlement has received much
    attention, which is understandable given the growing frequency of
    the settlement of increasingly large claims through the class
    action device.           See In re A.H. Robins Co., 
    880 F.2d 709
    , 739-40
    (4th Cir. 1989) (discussing the use of the device to settle
    various mass tort cases); In re Taxable Municipal Bond Secur.
    Litig., 
    1994 WL 643142
    at *5 (noting the dramatic change in
    attitudes        of        courts    and     commentators           toward       the    settlement
    class).          The       drive    to    settle     class        actions    has       also   grown,
    notwithstanding              the     potential         for       collusive       settlements      to
    compromise absentee interests.                         Courts undertaking the special
    role   of    supervising             class      action       settlements         are    apparently
    heeding the public                 policy in favor of settlement, see 2 NEWBERG &
    CONTE § 11.41 at 11-85, and acknowledging the urgency of this
    policy      in    complex          actions      that    consume          substantial      judicial
    resources and present unusually large risks for the litigants.
    We    have       already    noted      the      special     difficulties         the
    court encounters with its duties under Rule 23(e) in approving
    settlements            where       negotiations        occur       before        the    court     has
    certified the class.                 Because of such difficulties, many courts
    have required the parties to make a higher showing of fairness to
    sustain these settlements.                   See, e.g., Ace Heating & Plumbing Co.
    v.   Crane       Co.,       
    453 F.2d 30
    ,   33    (3d       Cir.    1971)    ("[W]hen       the
    settlement            is    not     negotiated         by    a     court     designated         class
    representative the court must be doubly careful in evaluating the
    fairness of the settlement to the plaintiff's class."); General
    Motors 
    Interchange, 594 F.2d at 1125
    (attributing a need for
    heightened        scrutiny          of    the     settlement        to     the    potential      for
    collusive settlement); 
    Weinberger, 698 F.2d at 73
    (higher showing
    of fairness required in pre-certification settlements and special
    focus on assuring adequate representation and the absence of
    collusion); Malcham v. Davis, 
    706 F.2d 426
    , 434 (2d Cir. 1983);
    Mars Steel v. Continental Ill. Nat'l Bank & Trust, 
    834 F.2d 677
    ,
    681 (7th Cir. 1987); County of Suffolk v. Long Island Lighting
    Co., 
    907 F.2d 1295
    , 1323 (2d Cir. 1990);                    2 NEWBERG & CONTE §
    11.23; MCL 2d § 30.42 (citing the informational deficiencies
    faced by the court and counsel in pre-certification settlements).
    We affirm the need for courts to be even more scrupulous than
    usual    in   approving    settlements     where    no    class    has    yet   been
    formally certified.
    Settlements that have survived this heightened standard
    have involved much stronger indications of sustained advocacy by
    the de facto class counsel than we observe in this case.                         See
    Weinberger v. Kendrick, 
    698 F.2d 61
    (2d Cir. 1982) (settlement
    discussions did not commence until after four years of discovery
    supplemented by another investigation by a trustee and after
    plaintiffs     rejected    the   first    settlement      offer);    In    re   Beef
    Indus.    Antitrust       
    Litig., 607 F.2d at 177
    -78    (settlement
    discussions began after six months of discovery; action pending
    for three years, court was fully briefed); City of Detroit v.
    Grinnell, 
    495 F.2d 448
    , 464 (2d Cir. 1974) (approving settlement
    after several counsel vied for position for four years and voiced
    strenuous     objections,    explaining     that    Manual's      concerns      about
    settlement      classes    articulated     by      the    Manual    for    Complex
    Litigation only pertained to settlement in the early stages of
    litigation); cf. Plummer v. Chemical Nat'l Bank, 
    668 F.2d 654
    (2d
    Cir. 1982) (rejecting settlement where plaintiffs' counsel relied
    on information voluntarily furnished by defendants).
    There are certain basic questions that courts can ask
    to detect those cases settled in the absence of sustained effort
    by class representatives sufficient to protect the interests of
    the absentees.   See MCL 2d § 30.41.         For instance:        Is the relief
    afforded by the settlement significantly less than what appears
    appropriate in light of the preliminary discovery?                  Have major
    causes of action or types of relief sought in the complaint been
    omitted   by   the   settlement?       Did     the    parties     achieve   the
    settlement after little or no discovery?             Does it appear that the
    parties negotiated simultaneously on attorneys' fees and class
    relief?   Even acknowledging the possibility of some overpleading,
    these questions raise a red flag in this case.
    With the courts' heightened duty to scrutinize this
    pre-certification      settlement   and   some       of   these     rudimentary
    indicators in mind, we now apply our nine-factor Girsh test, see
    Part 
    III supra
    , and conclude from the balance of these factors
    that the district court's conclusion that the settlement was fair
    and       reasonable     constitutes      an     abuse      of     discretion.
    Coincidentally, this result tracks the conclusions of a Texas
    appeals court that, based on an analysis similar to that of
    Girsh, set aside an order approving a substantially identical
    settlement of similar claims brought by residents of Texas.                                  See
    Bloyed v. General 
    Motors, 991 S.W.2d at 422
    .
    A.     Adequacy of Settlement - General Principles
    This      inquiry        measures    the       value    of     the   settlement
    itself to determine whether the decision to settle represents a
    good   value     for     a    relatively       weak     case    or   a      sell-out    of    an
    otherwise strong case.            The Girsh test calls upon courts to make
    this   evaluation        from    two     slightly       different         vantage      points.
    According to Girsh, courts approving settlements should determine
    a range of reasonable settlements in light of the best possible
    recovery (the eighth Girsh factor) and a range in light of all
    the attendant risks of litigation (the ninth factor).                              See Girsh
    v. 
    Jepson, 521 F.2d at 157
    ;               see also Malchman v. Davis, 
    706 F.2d 426
    ,   433 (2d Cir. 1983) (identifying a similar test); City of
    Detroit v. Grinnell Corp., 
    495 F.2d 448
    , 463 (2d Cir. 1974)
    (same).
    In formulaic terms we agree that "in cases primarily
    seeking    monetary          relief,     the     present       value      of    the    damages
    plaintiffs       would       likely    recover     if       successful,        appropriately
    discounted for the risk of not prevailing, should be compared
    with the amount of the proposed settlement." MCL 2d § 30.44                                   at
    252.      This    figure       should    generate       a    range     of    reasonableness
    (based on size of the proposed award and the uncertainty inherent
    in these estimates) within which a district court approving (or
    rejecting) a settlement will not be set aside.                                 See Newman v.
    Stein, 
    464 F.2d 689
    , 693 (2d Cir. 1972). The evaluating court
    must, of course, guard against demanding too large a settlement
    based on its view of the merits of the litigation; after all,
    settlement is a compromise, a yielding of the highest hopes in
    exchange for certainty and resolution.          See Cotton v. Hinton, 
    559 F.2d 1326
    , 1330 (5th Cir. 77).           The primary touchstone of this
    inquiry is the economic valuation of the proposed settlement.
    We turn to this analysis.        As will appear, the district
    court's conclusion that the settlement was within the range of
    reasonableness rests heavily on the proposition that the class
    had never proven any diminution in value of the trucks.                  It
    ignored the fact that the coupons provided no cash value and made
    no provision for repairing the allegedly life-threatening defect.
    For the reasons that follow, we believe that the district court
    did not sufficiently scrutinize the valuations of the settlement,
    and    that,   on    this   record,    the   settlement   appears   to   be
    inadequate.       Consequently, we will conclude that the district
    court erred when it found that the settlement fell within the
    range of reasonableness.
    1.    Valuation of the Settlement - Introduction
    The     value   of   the   $1,000   certificates   is   sharply
    disputed.      GM argues that the certificates are worth close to
    their face value since they can be redeemed for a broad array of
    GM trucks and can be used in combination with dealer incentives.
    For those unable or unwilling to purchase another GM truck, GM
    argues, cash can be realized from transferring the certificate
    within the household for full value or selling the certificate
    for $500.        Plaintiffs presented an expert, Dr. Itamar Simonson,
    who placed the value of the certificates between $1.98 and $2.18
    billion, based on an estimate that 34% to 38% of the class would
    redeem     the    certificate     in    purchasing     a   new    truck     and     an
    additional 11% of the class would sell their certificates for
    $500.      Objectors      contest      these   estimates    and    many     of     the
    assumptions used to generate them.
    We therefore analyze several of the foundations for the
    district    court's      evaluation.        First,    we   inquire       about     the
    reliability       of   plaintiffs'     witness's     valuation.          Second,    we
    explore the adequacy of the district court's consideration of the
    possibility that some class members would not be able to use the
    coupons at all.          Third,       we inquire as to whether the quite
    significant restrictions on transfer of the certificates present
    obstacles to the development of a market so as to render the
    estimates of their worth unreasonably inflated.                      Finally, we
    consider    whether      the   size    of   the   attorneys'      fees    agreement
    suggests that GM attached a greater value to the class claims
    than proponents of the settlement would have us believe.                      These
    factors lead ineluctably to the conclusion that the district
    court over-valued this settlement, which in turn gives credence
    to the contention of the objectors that the proffered settlement
    was, in reality, a sophisticated GM marketing program.
    a.     Plaintiffs' Witness Dr. Itmar Simonsen
    Dr. Simonsen's methods and assumptions raise serious
    doubts about the reliability of the valuations they generated.
    Although Simonsen's conclusion was based on his estimate that
    between    34%     and     38%   of   the     class     members      would    use    the
    certificate, his own telephone survey revealed that only 14% of
    the class reported that they would "definitely" or "probably" buy
    a   new   truck.         Apparently    Simonsen       only     excluded      those   who
    responded that they would "definitely not buy" or "probably not
    buy" a new truck, a methodological choice which is questionable.
    Furthermore,       Simonsen      discounted    the     statistics      by    seemingly
    arbitrary factors in an effort to be "conservative," but without
    some basis or explanation for deriving those factors, we have no
    way of judging whether they were conservative or aggressive.
    Even more importantly, the raw survey data probably
    over-state the prospects that the certificates will be used since
    there are substantial obstacles to obtaining and transferring the
    certificates,       none    of   which      Simonsen    deals     with.       Finally,
    Simonsen supposed that a higher percentage of fleet owners would
    redeem    the    certificates,        but    this      seems    to    disregard      the
    statutory and regulatory constraints that often restrict fleet
    buyers' purchase decisions.              Indubitably all of these concerns
    reduce the value of the settlement, yet Simonson appears simply
    to have multiplied his estimated number of users by the coupon
    amount or transfer value.
    On the other hand, although various objectors have made
    a good argument that the net value of the certificates will also
    be   eroded    by     rising   truck   prices   (which    would   allegedly    be
    influenced both by the huge number of certificates that would
    need to be redeemed within a relatively brief time and by the
    fact that dealers may take advantage of customers they know to be
    somewhat tied to the purchase of a GM truck by their desire to
    realize value from the coupon), we will, to be conservative, not
    take this factor into account.             Even so Simonsen's methodology
    undermines his conclusion to the extent that his valuation cannot
    support the settling parties' case.
    b.    Inability of Class Members to Use Certificates
    The    district    court   also   erred     by    not   adequately
    accounting     for     the   different   abilities   (not      inclinations)   of
    class members to use the settlement.            One sign that a settlement
    may not be fair is that some segments of the class are treated
    differently from others.           See Piambino v. 
    Bailey, 610 F.2d at 1329
    ; In re GM Corp. Engine Interchange 
    Litig., 594 F.2d at 1128
    ;
    MCL 2d § 30.41 at 236.           Consequently, the fact that the coupon
    settlement benefits certain groups of the class and not others
    suggests that the district court did not adequately discharge its
    duties to safeguard the interests of the absentees.                    See In re
    Fine   Paper       Antitrust   Litigation,   
    617 F.2d 22
       (3d   Cir.   1980)
    (ongoing duty of the judge to protect absentees); Piambino v.
    Bailey, 
    610 F.2d 1306
    , 1329 (duty to assure the settlement is
    fair, reasonable and adequate with respect to each category of
    the class).
    People of lesser financial means will be unable to
    benefit comparably from the settlement.    GM cites a number of
    other judicially approved class action settlements that awarded
    coupons and argues that, since this coupon provides far more
    consideration, it necessarily merits approval.    See, e.g., New
    York v. Nintendo of Am. Inc., 
    775 F. Supp. 676
    , 679 (S.D.N.Y.
    1991) ($5 discount coupon for video game purchase approximately
    $200); In re Cuisinart Food Processor Antitrust Litig., 1983-2
    Trade Cas. (CCH) ¶ 65 at 680 (D. Conn. 1983) (discount coupons
    with maximum value of $100 for machines costing approximately
    $100 to $300); In re Domestic Air Transp. Antitrust Litig., 
    148 F.R.D. 297
    , 331 (N.D. Ga. 1993) (certificates worth between $10
    and $200 for flights costing between $50 and $1500).
    These cases, however, differ dramatically in the amount
    of money required to purchase the good -- i.e. to realize the
    certificate's value -- and in the frequency with which a typical
    consumer might expect to purchase the good.   Whether a new truck
    costs between $20,000 and $33,000 as some objectors claim (JA
    1884, 1889-90, 2210) or some amount "far less" than that, as GM
    claims, this purchase is not comparable to buying a new food
    processor or even an airline ticket.      As the district court
    acknowledged, "a substantial number of class members" (Op. at 18)
    would not be able to afford a new truck within the fifteen month
    coupon      period.       Both    the    high    cost     of     the    trucks     and    the
    infrequency of a consumer's purchase of a new truck (relative to
    the    fifteen         month     redemption      period)             make   using        these
    certificates significantly more difficult than those in the other
    coupon settlements, for all class members but particularly for
    the poorer ones.
    Even    where     class     members        do     manage       to   use     the
    certificates, we are concerned about their real value.                              It may
    not be the case that the certificates saved those class members
    $1,000 on something they would have otherwise bought; those class
    members may only have purchased new GM trucks because they felt
    beholden to use the certificates.                   Thus, rather than providing
    substantial value to the class, the certificate settlement might
    be little more          than a sales promotion for GM, in just the way
    that     the    Bloyed        court   characterized            the    settlement     as     a
    "tremendous sales bonanza" for GM.                      Bloyed v. General Motors
    
    Corp., 881 S.W.2d at 431
    .
    We turn then to the fleet buyers, who constitute a
    readily         identifiable          category       of         plaintiffs         arguably
    disadvantaged by the settlement.                 Budgetary constraints prevent
    some   of      them    from    replacing    their      entire        fleets    within     the
    fifteen        month     redemption        period.26            Competitive         bidding
    26
    .   This is true of, for example, the State of Iowa, State of
    Indiana, West Virginia Department of Transportation, State of New
    York, Commonwealth of Pennsylvania Department of Transportation
    and Department of General Services, County of Los Angeles,
    California, Jefferson Parish, Louisiana, and the City of New
    York.
    requirements also apparently impede many of these entities from
    being    able    to    use     the   certificates.          Because       there    is     no
    assurance    that      GM     will   be    the   lowest    bidder,      the    government
    entities bound by these requirements may not be able to use the
    certificates.          See, e.g. The Louisiana Public Bid Law, LA. R.
    STAT. § 38:2212(A)(1)(a).                 [Jefferson Parish Brief at 5].                 The
    district     court      dismissed          these    objections         saying     it    was
    "confident      that    ingenious         counsel   will    be    able    to    structure
    bidding requirements so that the governmental entities can take
    full advantage of the certificates." (Op. at 26.)                         The district
    court's observation, while perhaps partially accurate, represents
    far too cavalier a dismissal of a potentially serious intra-class
    and conflict inequity.
    The      named    plaintiffs        argue    that,    if    certain       fleet
    buyers and individuals were dissatisfied with the settlement's
    terms, they could simply opt-out of the class and pursue their
    own relief individually.             (Plaintiff's Brief at 15 n.13.)                   While
    such an argument might theoretically be true, it ignores the
    realities of pursuing small claims.                   It would cost considerably
    more    to   litigate       individual       claims      than    the    litigant       could
    recover, using either a retrofit or a warranty theory to measure
    damages.     And the district court apparently did not consider the
    possibility of a subclass of fleet owners, though that might
    alter the anatomy of the settlement.                  At all events, the right of
    parties to opt out does not relieve the court of its duty to
    safeguard the interests of the class and to withhold approval
    from any settlement that creates conflicts among the class.                            In
    sum,     the    relative      inability      of   class     members       to   use    the
    certificates militates against settlement approval.
    c.   Value of the Transfer Option
    In order to support its conclusion that the settlement
    was reasonable and fair, the district court cited the ability of
    fleet    buyers     and     those   consumers     with    budget        constraints    to
    realize value from the certificates by transferring them.                              We
    believe    the      value    of     the   transfer    option       is    dubious,     and
    consequently        that    the     settlement    was     unfair    to     substantial
    portions of the class.
    Simonsen's valuation of the settlement includes $157
    million    attributable        to    transferred      certificates.            Simonsen
    calculated that holders of the certificates could realize $250
    from the sale of the transferred certificates (with a $500 face
    value). He gave no explanation for his assumption of a $250
    market    value.       To    the    extent   that    this   methodology        is    also
    dubious, it compounds the skewing of the valuation wrought by his
    usage estimates, see Part 
    VI(A)(1)(a) supra
    .
    The value of this option depends on the development of
    a secondary market for these certificates.                         But there is no
    assurance that a market will develop; indeed, the restrictions on
    transfer, which GM claims are necessary to prevent fraud, pose
    significant barriers to the creation of such a market.                                The
    requirement    that    holders    send    in    their    $1,000    or   original
    certificate to exchange for the $500 transfer certificate imposes
    very significant transaction costs since the parties must agree
    on a price before the original holder initiates the transfer
    process (which could easily last several weeks).                    During that
    process, there is substantial market risk, for the price of the
    transfer certificate could well move dramatically and induce a
    breach in the purchase agreement by one of the parties.                 Breaches
    would pose a real problem in this case because the transfer
    certificate cannot be reissued in another's name and thus cannot
    be resold.     Because of these risks, individuals will be quite
    reluctant to contract for these transfer certificates.                         Even
    worse,   the   one-time     transfer     restriction     also     precludes     the
    development of a market making clearing house mechanism.                     In our
    view, therefore, it is quite possible that holders will be unable
    to realize any significant value from the transfer option.
    Aside from the effect of the transfer restrictions, we
    also question Simonsen's valuation on the basis that it did not
    account for the inability to use the transfer certificates in
    conjunction    with    other   incentive       plans.      For    example,      the
    incremental    value   of   the   $500    transfer      certificate     to    class
    members would be completely eroded if GM offers a $1,000 dealer
    rebate program, since the class member would be forced to choose
    between the plans and would therefore be no better off then the
    general public.
    The district court did not take cognizance of these
    factors.         It erred when it presumed development of a liquid
    market for these transfer certificates with very little support
    in the record for it, and when it relied on a putative value of
    the transfer option arbitrarily ascribed by plaintiffs' expert to
    find   that      the    settlement     was    fair       and   reasonable.             Although
    objectors might have made out an even stronger case by proffering
    their own expert on this valuation, the court has an independent
    duty   to     scrutinize       the    settlement's         value      and      any     evidence
    offered     to     support     it.     Accordingly,            we   find       that    evidence
    pertaining       to     the   incremental      value      created         by    the    transfer
    option does not support the valuation of the settlement.
    d.      GM's Implicit Valuation of the Claim
    Our concerns about the adequacy of the settlement are
    complicated by the generous attorneys' fees GM agreed to pay in
    this   case.          Although    originally        GM    vigorously           contested     the
    viability of the class claims and the class, the company, in view
    of its willingness to pay attorneys' fees of $9.5 million, may,
    at   the    time       of   settlement,      have    valued         the   claims       at   some
    substantial        multiple      of   the    fee    award.27         This       $9.5   million
    27
    .   GM was apparently so eager to have this $9.5 million fee
    approved that its counsel did not even object when the district
    court applied a multiplier notwithstanding clear Supreme Court
    precedent invalidating the use of multipliers.     See City of
    Burlington v. 
    Dague, 112 S. Ct. at 2638
    . In our view, the fact
    that counsel to this large multinational corporation did not
    object to this clear error raises a smoking gun signaling GM's
    awareness of the questionable settlement it made.
    attorney's fee award seems unusually large in light of the fact
    that the settlement itself offered no cash outlay to the class.
    GM's apparent willingness to pay plaintiffs' counsel close to
    $9.5   million    indicates      that    the   party    in   perhaps     the   best
    position to evaluate the claim may have thought the action, which
    both plaintiffs' counsel and the defense contend was not worth
    much, posed a significant enough threat to cause GM to strike a
    lucrative deal with plaintiff's counsel.
    On the other hand, perhaps GM's valuation results only
    from the class counsel's decision to settle the action at an
    early stage and GM's desire to encourage that decision.                         Of
    course, a decision to settle that occurs at too incipient a stage
    of the proceedings also weighs against settlement approval.                     In
    short,    while     the    settlement      certainly     presented       difficult
    valuation issues, we believe that the district court erred when
    it uncritically accepted such high estimates of the settlement's
    value.
    2.   Valuing This Settlement Relative to The Relief Requested
    The ninth Girsh factor also undermines the district
    court's   decision.        In   the    class   action   context,    "the   relief
    sought in the complaint" serves as a useful benchmark in deciding
    the reasonableness of a settlement.              See Cotton v. Hinton, 
    559 F.2d 1326
    , 1330 (5th Cir. 1977).                 Here the adequacy of the
    certificate settlement is particularly dubious in light of the
    claims    alleged    and    the       relief   requested     in    the    original
    complaint.        The coupons offered by GM simply do not address the
    safety   defect      that    formed    the    central     basis   of   the     amended
    complaint filed barely four months before the settlement.28                        The
    district court gave two justifications for its conclusion that,
    notwithstanding       this    discrepancy,        the     settlement     was      fair.
    First, the court explained, "no objector that complains that the
    settlement fails to retrofit the alleged defect has been able to
    come forth with a practical and safe modification for the trucks
    that   has   been    designed,      evaluated     and     tested."     (Op   at   29.)
    Second, the court also relied on the fact that "[t]he proposed
    class settlement does not affect the rights of settlement class
    members to participate in any recall that NHTSA orders." (Op 34-
    35.)
    Considering      the      validity     of    these      arguments,     we
    conclude that they do not alleviate the substantial concerns
    created by the dramatic divergence of the settlement terms from
    the    relief      originally       sought.        This     factor,      therefore,
    strengthens our conviction that the settlement was not fair,
    reasonable, or adequate.
    a.    The Retrofit Issue
    It is true that there does not appear to be a
    consensus    retrofit.        For     each   of   the    suggested     retrofits     --
    28
    .     In the amended consolidated complaint, class counsel
    described the trucks as "rolling firebombs" and estimated that an
    additional 200 deaths would occur unless GM took prompt
    corrective action. (Oral Aug. Trans. 127, 257).
    relocation      of    the     gas    tank    to     the       spare     tire    location,
    installation of a tank with a rubber bladder, or installation of
    a metal cage around the gas tank -- there was evidence that the
    retrofit    was      either   ineffective         or    caused      other      performance
    problems for at least some model years.                     On the other hand, there
    was also evidence supporting the efficacy of various retrofits.
    For instance, GM's own documents considered all three options and
    found that all would enhance the safety of the fuel systems. (JA
    1863-64.)       In    addition,      there    was      also    potentially        damaging
    testimony by Ronald E. Elwell, an engineering analyst at GM for
    fifteen    of   his    twenty-eight         years      and    its     chief     expert   in
    defending the fuel tank location and design on the full-size
    trucks in a number of significant product liability cases, see,
    e.g., Bowman v. General Motors, 
    427 F. Supp. 234
    , 236 (E.D. Pa.
    1977).
    In his deposition, Elwell testified that GM designed a
    retrofit using a steel cage which prevented the gas tanks from
    rupturing in side impact testing.                 He further testified that GM
    abandoned the retrofit (knowing, because of its own secret crash
    tests, of the increased fire danger) only because GM feared that
    it would give the public the wrong impression.                           (Jenkins App.
    119)     GM attempted to impeach Elwell by characterizing him as a
    "disgruntled,"       (former)       employee.          By    way   of   rehabilitation,
    objectors explain Ellwell's reduced duties as a result of health
    problems.       Whether       or    not   Ellwell's         testimony     could     itself
    establish that the steel cage enhances safety, his testimony
    might have been important if the case had proceeded to trial.                     As
    a consequence, the district court abused its discretion when it
    summarily dismissed Elwell's testimony.
    b.   Availability of Other Remedies
    The district court also relied on the existence of the
    NHTSA recall mechanism and the class numbers' unencumbered right
    to bring personal injury suits to justify its approval of a
    settlement      that   did   not    secure      any   of   the   equitable   relief
    originally      requested.         While   individual      tort    suits   are   not
    barred,   the     court's    approval      of   this   settlement     (which     does
    nothing to redress the alleged danger) foregoes the opportunity
    presented by the pleadings29 to prevent injuries that tort suits
    can at best address only retrospectively.                  More importantly, the
    NHTSA remedy may be extremely limited in that it can only require
    a manufacturer to repair a vehicle first purchased within eight
    calendar years of the investigation.                   The court's observation
    that "all the plaintiffs may have statute of limitations problems
    in this action that may be equally as severe or worse than the
    eight year NHTSA limitation" does nothing to increase the value
    of the theoretical access to a NHTSA recall remedy to the owner
    or others who may be injured by the trucks at some future point.
    29
    .   The pleadings alleged a dominant control theory which, if
    successful, would have required GM, the manufacturer and
    distributor   of  these   vehicles,  to   remedy  the   allegedly
    unreasonable safety defects before they could cause or exacerbate
    the damage and injury resulting from a side impact collision.
    Hence, the potential existence of a partial recall under NHTSA
    does not dispel our doubts about the terms of the settlement
    diverging so far from the original complaint.               In so concluding,
    we   do   not    rely   on   the   subsequent    resolution    of     the   NHTSA
    investigation, which did not include any recall.
    In   sum,   we   agree   with the    district     court    that      the
    evidence    of    the   existence    of   an    effective    retrofit       to    be
    contradictory; nevertheless, we think that the very murkiness of
    this evidence and the fact that certain key evidence was wrongly
    excluded, especially in light of the magnitude of the alleged
    safety defect, militates against approving a settlement attained
    at such an early stage of the litigation which does nothing to
    repair the vehicles, even if only by creating a fund to finance
    retrofits.30
    30
    .   The district court also based its conclusion that the
    settlement was reasonable relative to the best possible recovery
    (i.e., relative to the relief requested) on its doubts that a
    court could or should award the recall/retrofit remedy requested.
    The court expressed some doubt that it had the power to order a
    recall by injunction, citing Walsh v. Ford Motor Co., 
    130 F.R.D. 260
    (D.D.C. 1990) and National Women's Health Network Inc. v.
    A.H. Robins Co., 
    545 F. Supp. 1177
    (D. Mass. 1982). Neither of
    these cases, however, conclusively establishes that the district
    court would lack the power to order a recall. The fact that no
    court has done it before and that there may be some logistical
    issues to surmount do not themselves support the court's
    conclusion;   other   class   actions  and   complex   litigation
    settlements have developed mechanisms for supervising and
    enforcing compliance with detailed affirmative injunctions. See,
    e.g., MCL.2d § 33.55 ("The court may also decide to appoint a
    master under Rule 53 to monitor future implementation of
    injunctive features of the settlement."). Although we intimate
    no view on the matter, it does seem to warrant further
    consideration. At all events, the district court could clearly
    have awarded relief that would require GM to set up a fund to
    B.    Complexity of the Suit
    This factor is intended to capture "the probable costs,
    in both time and money, of continued litigation."                    Bryan v.
    Pittsburgh Plate Glass Co., 
    494 F.2d 799
    , 801 (3d Cir.), cert.
    denied,   
    419 U.S. 900
        (1974).      By   measuring   the     costs     of
    continuing on the adversarial path, a court can gauge the benefit
    of   settling   the    claim    amicably.        The   district    court     here
    concluded that the litigation "would be mammoth" and would have
    resulted in a "substantial delay in . . . recovery." (JA 1708,
    1713-14).
    While it is true, as the Youngs objectors argue, that
    the district court's conclusion in part depended on the ambitious
    definition of the class in terms of both geography and models
    included, (Youngs 25), the action would still involve a complex
    web of state and federal warranty, tort, and consumer protection
    claims even if the class had been subdivided and some of the
    legal issues simplified.         Had the case not been settled, both
    plaintiffs and GM would have had to conduct discovery into the
    background of the six million vehicles owned by class members,
    including any representations allegedly made to plaintiffs.                  Each
    side would also have needed to hire or produce a retinue of
    experts to testify on a variety of complex issues.                Undoubtedly,
    (..continued)
    finance retrofits initiated by the owners' individually.      See
    
    Bloyed, 881 S.W.2d at 433
    . The district court, therefore, did
    not lack the power to order a remedy that would have been more
    responsive to the class's concern about leaving the trucks on the
    road.
    GM   would   have        ardently    contested      the    action    at    every    step,
    leading to a plethora of pre-trial motions.                         In contrast, this
    settlement made its remedies immediately available and avoided
    the substantial delay and expense that would have accompanied the
    pursuit of this litigation.                The district court thus correctly
    concluded        that    the     complexity    factor      weighed        in    favor     of
    approving the settlement.
    C.    Reaction of the Class
    In an effort to measure the class's own reaction to the
    settlement's       terms       directly,    courts    look     to    the       number    and
    vociferousness of the objectors.                 Courts have generally assumed
    that "silence constitutes tacit consent to the agreement."                              Bell
    Atlantic Corp. v. Bolger, 
    2 F.3d 1304
    , 1313 n.15 (3d Cir. 1993).
    However,     a    combination        of    observations      about     the      practical
    realities of class actions has led a number of courts to be
    considerably more cautious about inferring support from a small
    number of objectors to a sophisticated settlement.                        See, e.g., In
    re Corrugated Container Antitrust 
    Litig., 643 F.2d at 217-18
    ; GM
    Interchange 
    Litig., 594 F.2d at 1137
    .
    In a class action case involving securities litigation,
    this court has recognized the possibility that the assumption
    that   silence      constitutes       tacit    consent     "understates         potential
    objectors        since     many     shareholders      have     small       holdings       or
    diversified       portfolios,       . . .     and   thus     have    an    insufficient
    incentive to contest an unpalatable settlement agreement because
    the cost of contesting exceeds the objector's pro rata benefit."
    Bell Atlantic Corp. v. 
    Bolger, 2 F.3d at 1313
    n.15.               Although
    this is not a securities class action and the amounts at stake
    could be significant, the absentees may not fully appreciate the
    size of their potential claims since, by excluding those owners
    whose trucks have already experienced some mishap related to the
    fuel tank design, the class may include only those who have no
    reason (outside of media coverage) to know of the latent defect
    or the claim based on the alleged existence of that defect.
    Even where there are no incentives or informational
    barriers to class opposition, the inference of approval drawn
    from silence may be unwarranted.         As we noted earlier, Judge
    Posner has explained that "where notice of the class action is
    . . .   sent   simultaneously   with   the   notice   of   the   settlement
    itself, the class members are presented with what looks like a
    fait accompli."     Mars 
    Steel, 834 F.2d at 681
    .            In this case
    especially, the combined notice largely defeats the potential for
    objection since the notice did not inform the class that the
    original complaint had sought a retrofit.31           Without information
    about the original complaint, absentees lacked any basis for
    comparing the settlement offered to them to the original prayer.
    31
    .   There may also have been other deficiencies in the notice.
    The fact that the notice did not disclose the attorneys fees that
    the class counsel and defendants agreed to, and the fact that the
    notice suggested that class members could also have a recall
    remedy from NHTSA (though many of the trucks were so old that
    NHTSA lacked the power to recall them), may also have helped
    suppress potential objection.
    It is instructive that many of the better-informed absentees, the
    fleet owners, did object.
    The   fact    that     a    poll    conducted     by   class   counsel's
    marketing expert reported that a minimum of 63% of the class
    would probably or definitely not use the coupon to purchase a new
    truck also suggests that the class could not possibly have so
    wholeheartedly endorsed the settlement.                      Moreover, one cannot
    infer approval of the settlement from requests for the transfer
    of the certificates, as the district court did.                      Those requests
    only signify that certain class members attempted to maximize the
    value they could realize from the settlement with which they were
    presented and thus might illustrate how futile class members
    thought objecting would be.
    Although      the      absolute       number      of    objectors     was
    relatively      low,32    there    are    other    indications      that    the   class
    reaction to the suit was quite negative:                        The seemingly low
    number of objectors includes some fleet owners who each own as
    many as 1,000 trucks, and those who did object did so quite
    vociferously.          In conjunction with the already-noted problems
    associated      with     assuming       that    the    class    members     possessed
    adequate    interest       and     information        to   voice    objections,    the
    appeals    of   those     who     actually      objected    demonstrate     that   the
    reaction of the class was actually negative, and not supported by
    32
    .   Of approximately 5.7 million class members, 6,450 owners
    objected and 5,203 opted out.
    the "vast majority of the class members" as the district court
    concluded. (Op at 8.)             The class reaction factor plainly does
    not, contrary to the district court's conclusion, weigh in favor
    of approving the settlement.
    D.    Stage of Proceedings
    The    stage-of-proceedings        facet    of      the   Girsh     test
    captures the degree of case development that class counsel have
    accomplished prior to settlement.              Through this lens, courts can
    determine whether counsel had an adequate appreciation of the
    merits of the case before negotiating.               The district court found
    that this factor favored settlement approval, relying on the fact
    that settlement was presented for approval less than six months
    prior to the scheduled trial date.
    Given the purpose of this inquiry, however, it is more
    appropriate to measure the stage by reference to the commencement
    of proceedings either in the class action at issue or in some
    related proceeding.          See In re Beef 
    Antitrust, 607 F.2d at 180
    (court referred to discovery in companion cases); City of Detroit
    v. Grinnell Corp., 
    356 F. Supp. 1380
    , 1386 (S.D.N.Y. 1972), rev'd
    on   other   grounds,       
    495 F.2d 448
      (2d   Cir.    1974)     (noting   the
    extensive discovery in that and parallel cases); In re Baldwin-
    United 
    Corp., 105 F.R.D. at 483
    (access to expert testimony and
    other evidence from parallel state court proceedings as well as
    to   relevant      public    documents    led    court      to   believe   counsel
    "availed themselves of all of these sources of information and
    conducted full adversarial negotiations. . ."); 2 NEWBERG & CONTE §
    11.45 at 11-102 n.247.
    The relevant period of time this case was in litigation
    was    quite    brief;    approximately   four   months   elapsed   from   the
    filing of the consolidated complaint to reaching the settlement
    agreement.       To be sure, we cannot measure the extent of counsel's
    effort from the time of the litigation alone; class counsel in
    this case are known to be quite industrious, and the district
    court properly considered class counsel's review of the materials
    from prior product liability proceedings and from the Moseley
    personal injury case, Mosley v. General Motors Corp., No. 90-v-
    6276 (Fulton County, Ga. Feb. 4, 1993).            However, mere access to
    the materials from other proceedings does not establish that
    counsel developed the merits, particularly where the other cases
    were premised on different theories of recovery.               While we have
    no doubt that class counsel diligently reviewed those materials
    during the relevant period, nothing in the record demonstrates
    that   they     had    conducted   significant   independent   discovery    or
    investigations to develop the merits of their case (as opposed to
    supporting the value of the settlement), that they had retained
    their own experts, or that they had deposed a significant number
    of the individuals implicated in the materials from these other
    proceedings.          It is particularly noteworthy that the plaintiffs
    did not depose Ronald Elwell, although he could potentially have
    offered   evidence       that    would      have    substantially      bolstered       the
    plaintiffs' case.           See Part 
    VI(A)(2)(a) supra
    .
    At all events, the inchoate stage of case development
    reduces our confidence that the proceedings had advanced to the
    point that counsel could fairly, safely, and appropriately decide
    to    settle    the    action.        While    the    district     court     may    have,
    laudably,      been    attempting      to     minimize     the   funds      expended    on
    discovery in order to maximize the funds available to the class,
    we think that the district court erred by not assuring that
    adequate discovery had been taken.
    Beyond the incipient stage of the case and the modest
    indications of substantive development, there is little basis for
    presuming vigorous proscution of the case from the fact that
    settlement      negotiations      occurred.           In   ordinary      class     action
    settlements (i.e., where the court certifies the class before
    settlement negotiations commence) courts can presume that the
    negotiations occurred at arm's length because they have already
    determined that the counsel negotiating on behalf of the class
    adequately represents the class's interests.                          See Part 
    IV(E) supra
    , (discussion of adequacy of representation).                       In cases such
    as this one, however, where there has been no determination by
    the    court    that    a    proper    class       exists,   the   mere      fact    that
    negotiations transpired does not tend to prove that the class's
    interests were pursued.            
    Id. In short,
    the incipient stage of
    the   proceedings       poses    an    even    larger      obstacle    to    settlement
    approval in settlement class situations than it would in normal
    class action settlements since courts have no other basis on
    which to conclude that counsel adequately developed the claims
    before deciding to settle.
    Furthermore,            to    the       extent         that     this     stage-of-
    proceedings factor also aims to assure that courts have enough
    exposure to the merits of the case to enable them to make these
    evaluations, it cannot support settlement approval here.                                        With
    little     adversarial           briefing      on     either       class    status        or        the
    substantive       legal      claims,        the     district        court     had    virtually
    nothing    to    aid       its    evaluation        of    the     settlement       terms.            We
    therefore       conclude         that   the    district         court     clearly    erred           in
    finding that this factor weighed in favor of settlement approval.
    E.    Risks of Establishing Liability
    By evaluating the risks of establishing liability, the
    district    court      can        examine      what       the     potential     rewards             (or
    downside) of litigation might have been had class counsel elected
    to litigate the claims rather than settle them.                                     See In re
    Baldwin-United         Corp.,       
    105 F.R.D. 475
    ,    482     (S.D.N.Y.           1985)
    (comparing advantages of an immediate cash payment with risks
    involved in long and uncertain litigation).                             The district court
    here   concluded       that        this   factor          also     weighed     in    favor           of
    approving       the    settlement         since          "there    appear[ed]        to        be     a
    substantial       risk       in    establishing            liability       because        of        the
    complexity and size of the case along with the legal and factual
    problems raised by GM." (Op. at 14) (JA 1708).                         While we agree
    with   the    district       court     that,    on        balance,   the    prospective
    difficulty faced by a nationwide class of establishing liability
    favored settlement, we believe the question is much closer than
    it thought, and thus the factors do not weigh heavily in favor of
    settlement as the district court believed.
    We   do   not        gainsay    that     the    plaintiff     class   faced
    considerable obstacles in establishing liability.                          First, it is
    not clear that the plaintiffs could maintain the federal causes
    of action (the Lanham Act and Magnuson-Moss Act claims) without
    some proof that the trucks suffered some decline in value, which
    the class was unable to demonstrate by published Kelley Blue Book
    figures.     Second, the trucks complied with the applicable federal
    safety     standards     during        the    relevant        times.        This   would
    undoubtedly       be   strong,        though        not     necessarily     conclusive,
    evidence     that      the        trucks     were     not     (legally)      defective.
    Statistics offered by GM also suggest that the trucks presented
    no greater risk than other trucks or vehicles.                           See (JA 1978,
    2168).   Moreover, data from actual accidents, as opposed to crash
    tests, failed to reveal any statistically significant difference
    in post-collision fires, injuries or death relative to Ford or
    Dodge full-size pickups.              Finally, to the extent that state law
    requires      proof          of      individualized            reliance      for    the
    misrepresentation claims, that would seem to pose a substantial
    barrier to proving class-wide liability (though, as noted below,
    that issue can be the subject of separate proceedings).
    On the other hand, we are not impressed by some of the
    factors relied upon by the district court to support its finding
    of substantial risk in proving liability.                      The court cited the
    legal   obstacles        faced    by    the      class,      such    as    statutes   of
    limitations varying in different states, the lack of vertical
    privity for the warranty claims (required in some states), the
    varying expiration of warranty durational limits, and the bar
    under some state laws to recovery for economic losses on tort
    claims. (JA 1708, 1718-22).                 In response to these concerns, we
    point   out   that       variations         in     the     state    procedural     rules
    applicable    to    the    class       members      have    not     prevented    courts,
    including this one, from adjudicating class claims.                         See Hoxworth
    v. Blinder, Robinson & Co., 
    980 F.2d 912
    , 924 (3d Cir. 1992)
    (affirming finding of (b)(3) predominance despite differences in
    state law).        Moreover, even if these variations precluded the
    successful prosecution of the class claims, qua class claims, in
    this case they would not necessarily doom the action to failure.
    Many     of    the    difficulties        posed     by    these   variations
    could have been surmounted (or were more likely to be surmounted)
    if the action were not treated as a national class.                          Hence, the
    fact that the only other national automotive product defect class
    action ended in a defense verdict does not weigh heavily in favor
    of   settlement.          Indeed,      to    the    extent     that       state-by-state
    variations       in    procedural             laws     created           legal    obstacles,             the
    district court should have considered dividing the action into
    geographic         sub-classes           instead        of      considering             the        entire
    nationwide class to be hobbled.                        Additionally, the court should
    have    considered          making       the    inquiry       we     made    in       In     re    School
    Asbestos 
    Litig., 789 F.2d at 1110
    , as to whether the case in
    terms    of    claims       and     defenses         might     fall       into    three           or    four
    patterns so that, with the use of special verdict forms, the case
    might have been manageable.
    We      also       note     that,        in     other       cases,        courts          have
    certified nationwide mass tort class actions, which also include
    myriad    individual             factual       and     legal    issues,          relying           on    the
    capacity      for      a        court    to     decertify           or    redefine           the       class
    subsequently if the case should become unmanageable.                                         See, e.g.,
    In re School Asbestos 
    Litig., 789 F.2d at 1110
    (3d Cir. 1986).
    See also Bruce H. Nielson, Was the Advisory Committee Right?:
    Suggested Revisions of Rule 23 to Allow More Frequent Use of
    Class Actions in Mass Tort Litigation, 25 HARV. J. LEGIS. at 469
    ("Some federal district court judges have suggested that this
    problem could be overcome and that multistate and nationwide
    classes       could        be     certified       by        . . .        using        Rule     23(c)(4)
    subclasses to account for variances in state law . . . ."); see
    infra discussion on Risks of Maintaining Class Status.                                             In any
    event,     the      failure         of    the     district          court        to     analyze         the
    applicability of these various defenses to the different groups
    of plaintiffs may itself constitute an abuse of discretion. See
    Piambino     v.    Bailey,     
    610 F.2d 1306
    ,    1329    (5th      Cir.     1980)
    ("[Vacatur] is demanded by the failure to assess the interests of
    the categories of plaintiffs and whether the settlement was fair,
    adequate and reasonable as to each." (emphasis in original)); see
    also Piambino v. Bailey, 
    757 F.2d 1112
    , 1140 (11th Cir. 1985).
    In addition, a plethora of other evidence buttressed
    the class claims.          First, the depositions and affidavits from GM
    engineers,        including     Elwell,       characterizing        the   design      as
    indefensible,       would     have    strongly    supported     the    class      claims
    notwithstanding the fact that Elwell was arguably vulnerable to
    impeachment on the basis of his own employment history.                          Second,
    the evidence from Zelenuk v. GM, No. 96-131262 (Tex. 1992), that
    GM    concealed     crash     tests    might     have   been   admitted      in     this
    proceeding.        Third, the fact that GM has prevailed in three of
    the eight C/K pickup product liability trials does not support
    the   settlement      by    confirming    the     weakness     of   the    underlying
    claims, for at least two other plausible interpretations could
    explain this statistic.              The fact that plaintiffs prevailed in
    five of the eight actions suggests that the claim alleged here
    was not so weak after all, at least if alleged by suitable
    plaintiffs.        Moreover, such a statistic understates plaintiffs
    recoveries for these types of claims by not accounting for the
    individual settlements that have been reached.
    While we recognize that establishing liability would by
    no    means   have    been       easy   or    certain      for    the   plaintiffs,      the
    district      court       over-emphasized           the    importance       of    defenses
    applicable to only some class members under certain state laws
    and    incorrectly         discounted        a   significant        body    of    evidence
    pertinent to proving liability.                  Therefore, it is not clear that
    plaintiffs     faced       the    grave      prospects     on    the    merits    that   the
    district      court       apparently         believed      when    it     approved       this
    settlement.          In    any    event,      the   district      court's    failure      to
    distinguish between groups of plaintiffs that did and those that
    did not confront difficult state law defenses constitutes an
    abuse of discretion.             
    Piambino, 610 F.2d at 1329
    .
    F.    Risks of Establishing Damages
    Like    the    previous        factor,      this    inquiry   attempts      to
    measure the expected value of litigating the action rather than
    settling it at the current time.                          The district court relied
    heavily on this factor in approving the settlement:                              "[B]ecause
    the plaintiffs cannot adequately prove diminished value [of the
    pickups], the court concludes that risks of proving damages weigh
    strongly in favor of approval of the proposed class settlement."
    (Op. at 15)(JA 1708, 1722).               We do not share the district court's
    confidence, and conclude that this factor does not weigh strongly
    in favor of settlement.
    GM argues that the class's warranty claim amounts to a
    claim for diminished resale value.                Some United States Courts of
    Appeals and some state courts have rejected such claims either on
    the grounds that a warranty of merchantability does not include
    any   guarantee         about   the   product's    resale      value,    see,       e.g.,
    Carlson v. General Motors Corp., 
    883 F.2d 287
    , 298 (4th Cir.
    1989), cert. denied, 
    495 U.S. 904
    (1990), or on the basis that
    the tort law of many states precludes tort claims for purely
    economic loss, see GM APPX. tab 14, 3062, 3105.                         In assessing
    this Girsh factor, the district court relied on its belief that
    the class could not demonstrate any diminution of the trucks'
    value relative to Ford and Dodge trucks by referring to the
    Kelley Blue Book.
    We   do    not,   however,    believe     that     this   is    the    only
    permissible        approach     to    measuring   the    value     of   the    defect.
    According to the Uniform Commercial Code, "the measure of damages
    for breach of warranty is the difference at the time and place of
    acceptance between the value of the goods accepted and the value
    they would have had if they had been as warranted, unless special
    circumstances show proximate damages of a different amount."                         UCC
    § 2-714(2).        Although diminished resale value might represent one
    method   of    measuring        the   damage   suffered     by    owners      from   the
    publicity about the fuel tanks, it does not fully measure the
    difference between the value the defect-free truck would have had
    at delivery and the actual value of the truck as delivered.
    Measuring damages with a focus on resale value confounds the
    effects of varying rates of depreciation with the effect of the
    defect on the market value.           The comparisons to the trucks of
    other manufacturers are similarly deficient measures since they
    fail to gauge the effect of the defect on the value of the trucks
    at delivery.
    The cost of a retrofit, which effectively puts the
    truck in the condition in which it allegedly should have been
    delivered, may constitute an alternative measure of the damages
    arising from the breach of warranty.                 It has the advantage of
    avoiding    the      speculative      exercise        of     ascertaining       the
    hypothetical value of defect free trucks.               See, e.g., McGrady v.
    Chrysler Motors Corp., 
    360 N.E.2d 818
    , 821-22 (Ill. App. Div.
    1977)   (affirming     an   award    of     actual    repair       expenses   where
    measuring value of vehicles as warranted upon delivery would be
    speculative); Nelson v. Logan Motor Sales, Inc., 
    370 S.E.2d 734
    ,
    737 (W. Va. 1988) (reversing a ruling that repair costs were not
    evidence   relevant    to   the     value    of   the      goods    as   accepted).
    Nothing in the UCC precludes such a measure; in fact, § 2-714(1)
    of the Uniform Commercial Code provides:
    Where   the  buyer   has  accepted   goods  and   given
    notification he may recover as damages for any non-
    conformity the loss resulting in the ordinary course of
    events from the seller's breach as determined in any
    manner which is reasonable.
    (emphasis added)(citation omitted).33
    33
    .   GM argues that a repair remedy is available only when it is
    less costly to the defendant than diminution in value. We think
    Because the district court based its determination of
    this factor on its exclusive reference to the Kelley Blue Book
    and   refused     to    consider    alternative     measures      that   appear    to
    provide concrete (and substantial) damage figures, we believe
    that the court erred in finding that the risks of proving damages
    were so great that they strongly favored settlement approval.
    G. Risks of Maintaining Class Status
    The value of a class action depends largely on the
    certification of the class because, not only does the aggregation
    of the claims enlarge the value of the suit, but often the
    combination       of    the    individual   cases     also     pools     litigation
    resources and may facilitate proof on the merits.                        Thus, the
    prospects for obtaining certification have a great impact on the
    range of recovery one can expect to read from the action.
    The    district      court   found     that   this    factor    favored
    settlement, although it did not place great weight on it.                        (Op.
    at 16-17.)             The court cited the "myriad factual and legal
    issues"34   and        the    vigorous   contest    waged    by     GM   prior    to
    (..continued)
    that such rigid rules are inappropriate, and that the court
    should carefully consider all of the proffered measures of
    damages. In any event, the costs of retrofit, though unsettled
    by the district court as of this juncture, will be less than the
    diminution in value (if the settling parties' valuation of the
    certificates is any indication of that diminution).
    34
    .   The legal issues that might vary among class members
    included   the   claims   of  breach   of   warranty,   negligent
    misrepresentation, and negligence and products liability, which
    would be based on the various state laws. Potentially variable
    factual issues included the fact that the disputed trucks did not
    use a single gas tank design, and the individualized proof of
    settlement negotiations as the basis for this finding.              
    Id. Two observations,
    which the district court appeared to ignore, weaken
    the basis for its finding that the risk involved in maintaining
    class status favored settlement.
    First, Rule 23(a) does not require that class members
    share every factual and legal predicate to meet the commonality
    and typicality standards.        Baby Neal v. Casey, 
    43 F.3d 48
    , 56 (3d
    Cir. 1994); Hassine v. Jeffes, 
    846 F.2d 169
    (3d Cir. 1988).
    Indeed, a number of mass tort class actions have been certified
    notwithstanding   individual      issues   of   causation,   reliance,     and
    damages.    See, e.g., In re School Asbestos 
    Litig., 789 F.2d at 1009
    .   Because separate proceedings can if necessary, be held on
    individualized    issues     such    as    damages    or   reliance,      such
    individual questions do not ordinarily preclude the use of the
    class action device.       See, e.g., Eisenberg v. Gagnon, 
    766 F.2d 770
    , 786 (3d Cir. 1985).
    For example, in School Asbestos, the court certified a
    nationwide (b)(3) class after counsel demonstrated to the court
    how the laws of the 50 states could be reduced to four general
    patterns,    providing     the   framework      for   sub-classes   if     the
    nationwide action had proven unmanageable.35    School Asbestos,
    (..continued)
    reliance required in some jurisdictions for fraud, negligent
    misrepresentation, and breach of warranty claims.
    35
    .   The district court could retain the sub-classes although
    they might not have properly been brought in that court
    originally.   Cf. In re Agent Orange Prod. Liab. Litig., 
    100 F.R.D. 718
    , 724 (E.D.N.Y. 1983) (recognizing hypothetical need of
    the court to apply the laws of different states); In re 
    Agent 789 F.2d at 1110
    .      Although there was no such demonstration in
    this case, we have no reason to doubt that such a demonstration
    would have been possible, for we cannot conceive that each of the
    forty-nine states (excluding Texas) represented here has a truly
    unique statutory scheme, or that all of the model years possessed
    distinct fuel truck designs.        Damage issues, moreover, are not as
    individualized as the district court seemed to assume:                the cost
    of repair could have served as the measure, and that cost would
    not vary much among class members.         Hence, it is quite possible
    that a nationwide class could have been properly certified here.
    Second, even if the action could not be certified as it
    was   originally     filed,   the    district    court        disregarded   the
    possibility   that    there   were     other    ways     to     aggregate   the
    litigation and/or adjudication of these claims.                The court might
    have considered dividing the class into geographic or model-year
    subclasses or allowing the case to continue as a multi-district
    litigation for the remainder of pre-trial discovery.                  Each of
    those alternatives could have surmounted some of the individual
    issues while retaining some of the substantive advantages of the
    class action as framed here.         Thus, the court's conclusion that
    this factor favored settlement may have reflected its mistaken
    all-or- nothing approach to certifying this national class.
    (..continued)
    Orange Prod., 
    580 F. Supp. 690
    (E.D.N.Y. 1984) (performing choice
    of law analysis).
    Additionally, some of the district court's bases for
    finding such a significant risk in the ability to maintain class
    status undermine our confidence in the appropriateness of the
    district court's certification of the settlement class.                               For
    instance, if the district court correctly concluded that there
    were insurmountable barriers to class treatment, it could not
    certify the class for settlement purposes. See Part 
    IV(F) supra
    .
    It is true that settlement can reduce the differences among class
    members.          But    as     we   have      explained,      the        standard    for
    certification       is    the    same    for       settlement      classes      as    for
    conventional classes.
    Moreover, if the class members' claims differed so much
    as to preclude certification even of geographic subclasses, a
    settlement that treats all class members alike cannot be adequate
    and   fair   to    all   of     them.       For      reasons   stated      above,    this
    settlement does not even appear to treat all members of the class
    equitably.     See Parts V(B) and 
    VI(A)(1)(b) supra
    .                        Indeed, the
    settlement    arguably        affords    the      least   relief     to    those     class
    members with the most valuable claims, i.e., the fleet owners.
    See   Part   
    VI(A)(1)(b) supra
    .         The    district     court's     concern,
    therefore, that the class could not maintain its class status, is
    somewhat inconsistent with its certification of the class for
    settlement purposes.36
    36
    .    This anomaly is at least partially attributable to the
    court's failure to certify the class in the manner required by
    Rule 23.   But some part of the inconsistency signals that the
    We must agree that this class, even if appropriately
    crafted, confronted significant difficulties in maintaining its
    status in light of the claims alleged.              Nevertheless, we are once
    again   left   with    the   impression      that    the    district   court   too
    hastily approved a settlement because of its perhaps exaggerated
    concern that the quite ambitious initial nationwide definition of
    the class made it too difficult to form a class or group of
    classes capable of litigating these claims.
    H.   Ability to Withstand Greater Judgment
    We find no error in the district court's resolution of
    this final Girsh factor -- whether the defendant has the ability
    to withstand a greater judgment.             The district court determined
    that GM "could withstand a judgment greater than the proposed
    settlement,"    (Op.   at    17),   although    it    did    not   attribute   any
    significance to this finding "under these facts."
    I.    Summary
    Assuming arguendo that the district court had validly
    certified the settlement class (i.e., properly determined that it
    met the requisites of Rule 23) we hold that the settlement is not
    fair, reasonable, or adequate under the nine factor Girsh test of
    this circuit.       The case was simply settled too quickly with too
    little development on the merits for certificates that may well
    be   worth   significantly    less    than    the    $1.98    to   $2.18 billion
    (..continued)
    district court ignored the various ways that the class claims
    could be manageably litigated.
    estimate accepted by the district court.                  We conclude that the
    district court erred by accepting plaintiffs' witness' estimated
    valuations when those so clearly lacked a sound methodological
    basis and when there were so many other indications -- including
    the inability of fleet owners and less wealthy class members to
    use the certificates, the dubious value of the transfer option,
    and   GM's   own   apparent     valuation      of   the    claim     --   that   the
    settlement was inadequate and unreasonable, and may even have
    been a marketing boon to GM.
    Additionally, the failure of this settlement to abate
    the lingering safety problem, despite the vociferousness of the
    arguments for some recall or retrofit in the initial complaint,
    enhances     our   conviction    that   this    settlement      is    inadequate.
    Beyond its dubious valuation of the settlement, the district
    court also over-estimated the risks of proving liability and
    damages and of maintaining class-status and under-estimated the
    true degree of opposition to the settlement.               The district court,
    however, correctly applied the complexity-of-suit and defendants-
    capacity-for-greater-judgment factors.
    Although we are not bound in any way by the proceedings
    in the separate Texas action, our decision today shares many of
    the concerns expressed by the Texas appellate court which set
    aside an approval of a very similar coupon settlement.                           See
    
    Bloyed, 881 S.W.2d at 422
    .        Rule 42 of the Texas Rules of Civil
    Procedure,     which   governs    class     actions,      is   patterned     after
    Federal Rule of Civil Procedure 23.                  The Bloyed court also was
    concerned about a settlement that provided absolutely nothing to
    those unwilling or unable to purchase another GM truck and that
    did nothing about the allegedly dangerous vehicles left on the
    road.   The Texas court objected as well to the $9.5 million in
    attorneys fees negotiated between that class's counsel and GM.
    Balancing the Girsh factors, on the current record,
    this settlement clearly fails to meet the standards required for
    judicial approval.       We leave open the possibility, however, that
    the   district   court   on    remand        might   develope   the    record   more
    fully, properly approve the settlement, in either its original or
    a re-negotiated form, and, following the guidance offered by this
    opinion, certify the settlement class.
    VII. APPROVAL      OF THE   ATTORNEYS' FEE AWARD
    The   French       and    Young      objectors     also    contest    the
    district court's award of attorneys' fees.                  (Order Dec. 20, 1993
    and Feb. 2, 1994.)       The court initially awarded fees without an
    independent review of the agreement, explaining its refusal to
    review the award: "[The fee agreement] is a matter of contract
    between the parties, rather than a statutory fee case, . . . and
    payment of the fees will have no impact on the class members
    ...." (JA 1772, OP 3)          Subsequently, on February 2, 1994, the
    court   issued   an   "amplification"           of   its   prior     ruling,    which
    justified the award under both the lodestar37 and the percentage
    of recovery38 methods.      Class counsel maintain that the objectors
    lack   standing    to   contest    the    agreement   made      between   GM   and
    themselves, and that the objectors waived their right to appeal
    the award by not raising their objections below.                   Although our
    disposition of the certification and settlement approval issues
    obviates the need for a review of the fee award at this stage
    (and moots the waiver question), we highlight some of the primary
    issues   in    analyzing   the    appropriateness      of   a   particular     fee
    agreement for the district court on remand (in the event that the
    record   is    expanded,   the    class   certified,    and     the   settlement
    approved).
    At the outset, we note that a thorough judicial review
    of fee applications is required in all class action settlements.
    The district court did not accommodate practical realities here
    when, rationalizing its initial refusal to review the fee, it
    stated that the fee award was "to be paid by General Motors
    Corporation and will in no way reduce the recovery to any of the
    settlement class members." (JA 1771.)             Indeed, this court has
    recognized that "a defendant is interested only in disposing of
    the total claim asserted against it; . . . the allocation between
    37
    .    The lodestar method calculates fees by multiplying the
    number of hours expended by some hourly rate appropriate for the
    region and for the experience of the lawyer.
    38
    . The percentage of recovery method resembles a contingent fee
    in that it awards counsel a variable percentage of the amount
    recovered for the class.
    the class payment and the attorneys' fees is of little or no
    interest to the defense."      Prandini v. National Tea Co., 
    557 F.2d 1015
    , 1020 (3d Cir. 1977); 2 NEWBERG & CONTE § 11.09 (purpose of
    judicial review is to police abuses even where defendant pays
    plaintiff's fees).       In light of these realities, class counsel's
    argument   that    objectors   have   no   standing   to    contest   the   fee
    arrangement is patently meritless:            the fee agreement clearly
    does impact their interests, as it is, for practical purposes, a
    constructive common fund.
    Moreover, as discussed at length in the adequacy of
    representation section, see Part 
    V(B)(3) supra
    , the divergence in
    financial incentives present here creates the "danger . . . that
    the lawyers might urge a class settlement at a low figure or on a
    less-than-optimal basis in exchange for red-carpet treatment for
    fees,"   Weinberger v. Great Northern Nekoosa Corp., 
    925 F.2d 518
    ,
    524 (1st Cir. 1991).       See also Prandini v. National Tea 
    Co., 557 F.2d at 1020
    ("When the statute provides that a fee is to be paid
    as a separate item, the conflict between client and attorney may
    not be as apparent . . . .      It is often present nonetheless.").
    This   generates    an   especially   acute    need   for    close    judicial
    scrutiny of the fee arrangements that implicate this concern.
    See In re Agent Orange Prod. Liab. Litig., 
    818 F.2d 216
    , 224 (2d
    Cir. 1987)    ("The test to be applied is whether, at the time a
    fee sharing agreement is reached, class counsel are placed in a
    position that might endanger the fair representation of their
    clients and whether they will be compensated on some basis other
    than for legal services performed."); Piambino v. 
    Bailey, 757 F.2d at 1139
          ("Because       of     the   potential       for      a    collusive
    settlement,          a    sellout    of    a    highly     meritorious        claim,       or   a
    settlement       that       ignores       the     interests       of   minority        classes
    members, the district judge has a heavy duty to ensure that . . .
    the fee awarded plaintiffs' counsel is entirely appropriate.").
    We have previously acknowledged that the potential for conflict
    between the class and its counsel is not limited to situations
    meeting the strict definitions of a common fund.39
    As we have also explained in this opinion, courts must
    be   especially           vigilant    in       searching    for    the    possibility           of
    collusion       in       pre-certification         settlements.           See       Part   
    IV(e) supra
    .        In addition, the court's oversight task is considerably
    complicated by the fact that these attorney-class conflicts are
    often difficult to discern in the class action context, "where
    full     disclosure         and     consent      are     many     times      difficult       and
    frequently impractical to obtain."                     Agent 
    Orange, 818 F.2d at 224
    (citations omitted).                 Finally, we emphasize that the court's
    oversight function is not limited to detecting "the actual abuse
    [that potential attorney-class conflicts] may cause, but also for
    39
    . The common fund doctrine provides that a private plaintiff,
    or   plaintiff's  attorney,   whose  efforts   create,  discover,
    increase, or preserve a fund to which others also have a claim,
    is entitled to recover from the fund the costs of his litigation,
    including attorneys' fees. Vincent v. Hughes Air West, Inc., 
    557 F.2d 759
    (9th Cir. 1977).
    potential public misunderstandings they may cultivate in regard
    to the interests of class counsel."             Agent 
    Orange, 818 F.2d at 225
    (citing Susman v. Lincoln American Corp., 
    561 F.2d 86
    , 95
    (7th Cir 1977), and Prandini v. National Tea Co., 
    557 F.2d 1015
    ,
    1017 (3d Cir. 1977)); see also Grinnell 
    I, 495 F.2d at 469
    ; ABA
    Code of Professional Resp. Canon 9 (1975).            On remand, therefore,
    the district court must be alert to the presence in the fee
    agreement of any actual abuse or appearance of abuse capable of
    creating a public misunderstanding.
    Having emphasized the necessity for judicial review of
    fee   awards   in   all   class   action   settlements,     we   will briefly
    clarify some principles of fee approval for the district court to
    apply on remand if it certifies a class and approves settlement.
    Because the district court purported to use both the
    lodestar     and    the   percentage-of-recovery      methods,    the   actual
    grounds for its approval of the fee are not entirely clear.
    Although it is sensible for a court to use a second method of fee
    approval to cross check its conclusion under the first method, we
    believe that each method has distinct advantages for certain
    kinds   of   actions,     which   will   make   one   of   the   methods   more
    appropriate as a primary basis for determining the fee.                    Here,
    for the reasons that follow, the court should probably use the
    percentage of recovery rather than the lodestar method as the
    primary determinant, although the ultimate choice of methodology
    will rest within the district court's sound discretion.
    The lodestar and the percentage of recovery methods
    each have distinct attributes suiting them to particular types of
    cases.     See Task 
    Force, 108 F.R.D. at 250-53
    .                  Ordinarily, a
    court making or approving a fee award should determine what sort
    of action the court is adjudicating and then primarily rely on
    the corresponding method of awarding fees (though there is, as we
    have   noted,    an    advantage    to   using   the   alternative       method    to
    double check the fee).40
    Courts generally regard the lodestar method, which uses
    the number of hours resonably expended as its starting point, as
    the appropriate method in statutory fee shifting cases.                    Because
    the lodestar award is de-coupled from the class recovery, the
    lodestar       assures    counsel        undertaking     socially     beneficial
    litigation      (as   legislatively      identified    by   the   statutory       fee
    shifting provision) an adequate fee irrespective of the monetary
    value of the final relief achieved for the class.
    This       de-coupling   has    the   added   benefit    of    avoiding
    subjective evaluations of the monetary worth of the intangible
    rights often litigated in civil rights actions.               Outside the pure
    statutory fee case, the lodestar rationale has appeal where as
    here, the nature of the settlement evades the precise evaluation
    needed   for    the    percentage   of    recovery     method.      The   lodestar
    40
    . For example, a court can use the lodestar method to confirm
    that a percentage of recovery amount does not award counsel an
    exorbitent hourly rate; similarly, the percentage of recovery
    method can be used to assure that counsel's fee does not dwarf
    class recovery.
    method    has     the    added      benefit      of     resembling      modes     of   fee
    determination in conventional bipolar litigation.                          On the other
    hand, the lodestar method has been criticized as giving class
    counsel the incentive to delay settlement in order to run up fees
    while still failing to align the interests of the class and its
    counsel, and because it does not rewarding counsel incrementally
    for    undertaking       the    risk     of    going     to    trial.      See    Coffee,
    Understanding the Plaintiff's Attorney, 86 COLUM. L. REV. at 691.
    Courts use the percentage of recovery method in common
    fund    cases    on     the    theory    that    the     class    would    be    unjustly
    enriched if it did not compensate the counsel responsible for
    generating the valuable fund bestowed on the class.                              See Task
    
    Force, 108 F.R.D. at 250
    .                Because these cases are not presumed
    to serve the public interest (as evidenced by the lack of a fee
    statute),      there     is    no   social     policy     reason    that    demands     an
    adequate fee.         Instead, the court apportions the fund between the
    class    and    its    counsel      in   a    manner    that     rewards   counsel     for
    success and penalizes it for failure.                         Courts have relied on
    "common fund" principles and the inherent management powers of
    the court to award fees to lead counsel in cases that do not
    actually generate a common fund.                      See, e.g., In re Air Crash
    Disaster at Florida Everglades, 
    549 F.2d 1006
    (5th Cir. 1977)
    (using    common      fund     principles       in     settlement    of    consolidated
    cases).     The rationale behind the percentage of recovery method
    also applies in situations where, although the parties claim that
    the fee and settlement are independent, they actually come from
    the same source.
    We believe that this case presents a situation more
    closely aligned with the common fund paradigm than the statutory
    fee paradigm.      Although class counsel and GM contend (and the
    district court believed) that the fee was a separate agreement,
    thus superficially resembling the separate awards in statutory
    fee cases, private agreements to structure artifically separate
    fee   and   settlement    arrangements        cannot    transform    what    is   in
    economic reality a common fund situation into a statutory fee
    shifting case.      Certainly, the court may select the lodestar
    method in some non-statutory fee cases where it can calculate the
    relevant parameters (hours expended and hourly rate) more easily
    than it can determine a suitable percentage to award.                       But the
    court must vigilantly guard against the lodestar's potential to
    exacerbate the misalignment of the attorneys' and the class's
    interests.     See Coffee, Understanding the Plaintiff's Attorney,
    86 COLUM. L. REV. at 717.
    In this case, the fee clearly was not made pursuant to
    a   statute;   therefore    no   legislatively         endorsed   policy     favors
    assuring counsel an adequate fee.               And the settlement, though
    difficult to value, did not award the even more hard-to-value
    intangible     rights    that    could   in    some     limited     circumstances
    justify using the lodestar method.              In sum, although this case
    presents a hybrid, we believe that it more closely resembles a
    common fund case.
    At all events, to the extent that the district court
    relied on the lodestar method, it erred by applying a multiplier.
    In   the   lodestar     section   of    its     analysis,   the    district   court
    calculated the multiplier needed to apply to the simple lodestar
    result, $3,158,182, to obtain the requested amount, $9,500,000.
    (see Feb. order at 4-5.)             After estimating the multiplier to be
    between 2.5 and 3, the court proceeded with a "contingent nature
    of the success" analysis of the multiplier's appropriateness from
    Lindy. See Lindy Bros. Builders Inc., v. American Radiator &
    Standard Sanitary Corp., 
    540 F.2d 102
    , 116-17 (3d Cir. 1976).
    The Supreme Court, however, has rejected the use of multipliers
    to   enhance    the     lodestar's     hourly    rate    amount.      See   City   of
    Burlington v. 
    Dague, 112 S. Ct. at 2638
    .                    Notwithstanding this
    clear Supreme Court precedent, GM's counsel failed to apprise the
    district court about Dague even though its pertinence was patent.
    To the extent that the district court construed the fee
    agreement      as   a   common    fund,    its     analysis    also    appears     to
    misapprehend key aspects of the percentage of recovery method.
    In common fund cases, a district judge can award attorneys' fees
    as a percentage of the fund recovered.                  See Blum v. Stenson, 
    465 U.S. 886
    , 900 n.16, 
    104 S. Ct. 1541
    n.16 (1984); In re Smithkline
    Beckman Corp. Secur. Litig., 
    751 F. Supp. 525
    (E.D. Pa. 1990).
    One court has noted that the fee awards have ranged from nineteen
    percent to forty-five percent of the settlement fund.                                    
    Id. at 533.
      Here, the district court summarily asserted that, although
    it could not value the settlement precisely, "whatever method is
    used   in    computing      the    ultimate      value       of   the    settlement, the
    attorneys'        fees   sought      in    this       action      will       constitute      an
    extremely small percentage of the total value and will be minute
    compared to the aforesaid 19-45% range."                      (Feb. order at 10.)
    Given       our      skepticism      of     the      settlements'            value
    generally and of Simonsen's estimates in particular 
    (see supra
    discussion on settlement fairness), we are much less sanguine
    that   the    $9,500,000       fee       actually      constitutes            an    acceptable
    percentage of the class recovery.                 On the current record, we are
    constrained to reject that conclusion.                       At the very least, the
    district court on remand needs to make some reasonable assessment
    of the settlement's value and determine the precise percentage
    represented by the attorneys' fees.                   The problem, however, is not
    simple,     for    arguably,       any    settlement       based        on    the    award   of
    certificates would provide too speculative a value on which to
    base   a    fee    award.         (See    Task    
    Force, 108 F.R.D. at 250-53
    (discussing the preferability of the lodestar method for civil
    rights actions where the difficulty of valuing injunctive relief
    complicates       the    calculation        of    a    fee     using         the    percentage
    method.)
    On remand, the district court might wish to examine the
    fee primarily under the percentage of recovery scheme.                                   If so,
    the court will need to determine a precise valuation of the
    settlement on which to base its award.       The court may however, as
    a check, want to use the lodestar method to assure that the
    precise percentage awarded is not unreasonable.
    VIII. OTHER ISSUES; CONCLUSION
    Objectors also appealed the district court's denial of
    discovery into the settlement negotiations and the adequacy of
    the notice with respect to the attorneys' fees.               In light of our
    holding on the certification and settlement approval issues and
    its effect on the need for us to judge the fee award, we need not
    reach these issues.
    For the foregoing reasons, we will vacate the orders
    certifying the provisional class and approving the settlement and
    remand   for   further   proceedings   consistent      with    this   opinion.
    Parties to bear their own costs.
    In Re: General Motors Corporation Pick-Up    Truck    Fuel Tank
    Products Liability Litigation, Nos. 94-1064, 94-1194, 94-1195,
    94-1198, 94-1202, 94-1203, 94-1207, 94-1208 and 94-1219
    JOHN R. GIBSON, Senior Circuit Judge, concurring in the central
    holding and with the judgment.
    The court today issues a truly masterful opinion.                           I
    concur   fully    in     the   central      holding     of     the    court   that    the
    district court failed to make adequate findings under Rule 23(a)
    to    justify    class    certification,         and    that    the    case    must    be
    remanded   to    the     district     court      for   further       proceedings,     and
    amplification of the record.               I concur fully in the reasoning of
    the court that supports this conclusion and holding, and concur
    specifically in Parts I, II, III, IV.A, D, E, F, and V.A and B.1
    of the opinion.
    In addition, I certainly agree that it follows that the
    district court on remand must consider further the issues of the
    adequacy   of    representation,           whether     the   settlement       is   fair,
    reasonable      and   adequate,      and    if   reached,      issues    relating      to
    attorneys' fees.
    With respect to the remainder of the opinion, I am of
    the thought that some of the discussion is simply not required to
    support the holding we reach, specifically Part IV.B and C.                            In
    view of the fact that we are remanding for adequate findings
    under Rule 23(a), I think we need not reach the issue of whether
    the class requisites have been made on the current record, as we
    can   anticipate      that     the   district     court      will    conduct   further
    proceedings and make additional record in order to fully support
    such findings.        Thus, I think Part V.B.2 dealing with adequacy of
    representation, Part VI dealing with whether the settlement is
    fair, reasonable and adequate on the record before us, and Part
    VII dealing with issues relating to the attorneys' fees simply
    need not be addressed in detail as they may come before this
    court on a far different record after remand.
    I must make clear that I have misgivings about not
    joining in the full opinion.   The opinion is a most thorough and
    scholarly analysis of the numerous issues surrounding settlement
    of class actions and approval of settlement classes.     It will
    stand as the opinion of the court.   My concerns are simply that
    the court has discussed areas that it need not reach.
    

Document Info

Docket Number: 94-1064, 94-1194, 94-1195, 94-1198, 94-1202, 94-1203, 94-1207, 94-1208 and 94-1219

Citation Numbers: 55 F.3d 768

Judges: Becker, Alito, Gibson, History, Standard, Review, Background, Principles, Rule, Settlement

Filed Date: 4/17/1995

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (72)

county-of-suffolk-a-municipal-corporation-robert-alcorn-christopher-s , 907 F.2d 1295 ( 1990 )

29-fair-emplpraccas-1473-30-empl-prac-dec-p-33064-the-officers-for , 688 F.2d 615 ( 1982 )

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rafael-oberti-by-his-parents-and-next-friends-carlos-and-jeanne-oberti , 995 F.2d 1204 ( 1993 )

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27-fair-emplpraccas-1169-27-empl-prac-dec-p-32321-roderick-plummer , 668 F.2d 654 ( 1982 )

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in-re-air-crash-disaster-at-florida-everglades-on-december-29-1972 , 549 F.2d 1006 ( 1977 )

16-fair-emplpraccas-963-14-empl-prac-dec-p-7681-jean-h-prandini , 557 F.2d 1015 ( 1977 )

clement-j-mcdonald-individually-and-as-class-representative-of-holders-of , 565 F.2d 416 ( 1977 )

in-re-warner-communications-securities-litigation-steven-becker-russell , 798 F.2d 35 ( 1986 )

in-re-beef-industry-antitrust-litigation-m-d-l-docket-no-248-meat , 607 F.2d 167 ( 1979 )

Findley v. Blinken (In Re Joint Eastern & Southern District ... , 129 B.R. 710 ( 1991 )

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