Administrative error severely reduces amount each class member will receive in Caterpillar lawsuit

April 18, 2018

Tyson Fisher


Even after winning a large class action lawsuit against Caterpillar for its failed C13 and C15 engines, class members eventually walked away with significantly less than expected.

An administrative error underestimated the number of claims, drastically reducing the amount of money each class member will receive in the $60 million settlement.

Epiq Class Actions & Claims Solutions, the court-appointed settlement administrator, made significant errors in its calculations, according to court documents.

In June 2014, a class action lawsuit was filed against Caterpillar for installing defective C13 and C15 engines in trucks and buses. According to the suit, the anti-pollution system called Caterpillar Regeneration System failed under normal conditions. Engines lost horsepower or completely shut down.

Owners of affected systems sued Caterpillar for costs of continuous repair and the expenses incurred as a result of the failures.

With the first case filed in 2012 before being consolidated into a class action suit in 2014, the legal battle continued for approximately four years. In June 2017, a settlement of $60 million was reached.

Of that $60 million, attorneys took $20 million for attorney fees and expenses, leaving $40 million for a general fund to be distributed to the class members. According to court documents, class members would receive anywhere from $500 to $10,000 per affected engine. An option for reimbursement for up to $15,000 for consequential losses also was available.

More than 35,000 engines were known to be part of the settlement. When the settlement terms were submitted to the court in August 2016, approximately 1,368 engine claims had been filed. More were expected as the claims deadline ran until March 20, 2017.

According to a letter submitted to the court on Tuesday, April 17 from Epiq Vice President Michael O’Connor, more than 3,000 claimants filed more than 4,000 total claims covering 16,811 engines.  Payments were approved for 2,083 claimants covering 11,685 engines.

Settlement woes
On March 30, Epiq issued payments to those 2,083 claimants. Checks were attached with a note informing class members that due to approved claims exceeding available funds, payment amounts were reduced to 45.8 percent of the claimed amounts.

Less than a week later, Class Action Capital, a third-party filer that filed claims on behalf of 27 entities, told Epiq the payments were inaccurate and too low, prompting an internal review. Epiq concluded it had likely committed an error when Class Action Capital’s claims were reviewed.

According to the explanation submitted to the court, an error had occurred when reviewing online submissions.

“For CAC’s claims, it listed one or more engines in the fields provided,” the letter explains. “It then uploaded a spreadsheet of additional engines that it wished to include as part of its claims via the supporting documents portal (the ‘Spreadsheet Engines’). There were no cover letters for the spreadsheets indicating that this was CAC’s intent.”

Consequently, Epiq analysts overlooked the “spreadsheet engines” as part of its claim. For example, one claim included one engine listed on the claim form and 99 additional engines listed on a spreadsheet uploaded to “supporting documents.” Epiq only approved one engine for payment, not knowing the other 99 engines were part of the claim.

Class Action Capital filed 28 claims in this manner, according to O’Connor. Epiq suspected other claimants not part of Class Action Capital may have filed in a similar way. In total, 173 claims were filed using this method.

After doing the math, Epiq determined that Class Action Capital clients could have been underpaid by more than $1 million. Epiq decided to stop payment on all checks sent out on March 30 to correct the error.

Although the vast majority of the original 2,083 claimants received checks, 14 received wire transfers totaling nearly $13 million. Those claimants were told it was likely some of that money would need to be reclaimed. For those who already cashed their checks, Epiq will ask those claimants to return any portion that exceeds the amount they will ultimately be entitled to in the final calculation.

Epiq is now conducting a “Round 2 Claims,” which it expects to be completed in approximately 60 days. The second round of claims will include recalculation of the amounts due to successful claimants. As of press time, Epiq said it didn’t know the difference between the initial award calculations and the corrected calculations.

“Once the dust has settled, and claimants are paid correctly, we can turn our focus inward,” O’Connor said. “We need to very carefully examine how we are handling and reviewing incoming documents and the resources we are utilizing to look at those materials. In every case I have been a part of with Epiq, no matter how clear your instructions to claimants are that claims can only be submitted via method X and must include materials Y, there will be many claimants who submit claims via methods R, T and Z and include every material except Y.”