Class action can be engine of change

Tagged with:
Lawsuits > Class Actions

Before settlement, Audi customers were kept out of loop on belt problems

By Bruce Mohl
Boston Globe
July 17, 2005

Karen Schwartzman took her 1998 Audi A4 into a body shop in January and received an unexpected warning.

The body shop worker, who was selling her a part, casually mentioned that Audis like hers were known for having timing belt problems and suggested she might want to have it replaced.

She didn't give the warning much credence, since the car had just been in for its 75,000-mile checkup and no one at the Audi dealership had mentioned replacing the timing belt. Audi itself recommended that the belt be replaced at 90,000 miles.

But the very next day her engine seized up and stopped as she was making a turn across oncoming traffic on a state highway. The timing belt had snapped, paralyzing her car and causing $4,847 of engine damage.

''This is the stuff of class-action lawsuits," Schwartzman wrote to Audi in January. ''Audi should at a minimum reimburse us for the expenses we incurred because service technicians went 'by your book' and, in doing so, knowingly put us at considerable risk."

What Schwartzman didn't know was that Audi was already aware of the timing belt problem. More than two years earlier a class-action lawsuit alleging defective timing belts on all 1997-1999 Audi A4s with 1.8-liter turbo engines had been filed in New Jersey. The company chose not to warn its customers about the potential danger until a preliminary settlement was reached in May.

Audi spokesman Axel E. Catton said the company was not obligated to inform customers until the extent of the problem had been fully determined, but Schwartzman said she believes the company had a moral obligation to act more quickly.

''As soon as they had enough information to indicate that their timing belts were not safe, there was a duty on them to inform people," said Schwartzman, who runs her own Boston public relations firm. ''The consequences of them not doing so were huge, not just in terms of the cost of repairs but in terms of human life. Someone could have been killed."

Edward ''Ted" Millstein, a lawyer with Berger & Montague in Philadelphia who helped file the class-action case against Audi, acknowledged the automaker was under no legal obligation to notify customers until a settlement was reached.

''Different companies handle this differently, but it is innocent until proven guilty," Millstein said.

Millstein estimated more than 1,000 of the 35,000 Audi A4 owners had their timing belts break prematurely, although data are still being gathered. He said he was not aware of injuries associated with the timing belt problem.

A spokesman for the National Highway Traffic Safety Administration, which oversees recalls, said the agency had no information on the Audi situation. The spokesman, Rae Tyson, said the agency typically doesn't launch an investigation unless there is a documented safety issue involving crashes, injuries, and/or deaths.

Asked whether a broken timing belt could represent a safety issue, Tyson said it could. ''But unless there is some documentation that it was a safety problem, then we don't get involved with it," he said. ''We don't get involved with theoretical safety issues."

When Schwartzman reported her timing belt incident to Audi in January, a company official told her she would receive no compensation because her car was beyond warranty. Schwartzman then sought mediation through the attorney general's office and contacted the Globe. An Audi spokesman told the Globe at that time that he knew of no recurring problem with the company's timing belts.

In February, Schwartzman received a letter from Audi regional coordinator Ingrid Evert stating that time and mileage deadlines for vehicle maintenance are recommendations and not ''a guarantee that you will not experience a shortcoming in manufacturing with any component(s)."

Nevertheless, Evert offered, ''as a gesture of goodwill," to pay half the repair bill. Schwartzman accepted the offer. But in May she received a letter from Audi informing her that her timing belt problem was not isolated.

''Some Audi owners have reported internal engine damage resulting from a broken timing belt," said the letter, which outlined a preliminary class-action settlement. ''If the timing belt of your vehicle were to break, the engine will not run and may sustain serious internal damage."

Audi, without admitting any guilt, agreed to pay for any timing belt-related repairs through 105,000 miles. The settlement also mandated inspections of Audi A4 timing belts at 40,000 and 80,000 miles, but did not cover replacement of a timing belt as part of regular maintenance. The new timing belt warranty transfers to subsequent owners of the vehicles.

Under the settlement, Audi will pay the balance of Schwartzman's repair bill, something that she said wouldn't have happened without the class-action lawsuit.

Class actions have come under fire in recent years, largely because they are seen as benefiting attorneys more than victims. In February, President Bush signed a measure that places limits on class-action lawsuits, requiring more of them to be filed in federal rather than state courts and curbing settlements involving coupons for goods and services.

Schwartzman said the Audi case demonstrates that sometimes a class-action lawsuit is a consumer's best line of defense.