Judge Rejects Settlement in Tablet Class Action

SAN FRANCISCO (CN) - A federal judge rejected a proposed class settlement against Asus Computer over its poorly designed Transformer Prime tablets, telling both sides the agreement leaves out too many potential class members.

Lead plaintiff Colin Fraser sued Asus Computer International and its parent company Asustek Computer Inc., which is based in Taipei, Taiwan. Fraser said he purchased the Transformer Prime tablet and discovered that the gadget's spun aluminum panel blocks GPS and Wifi signals.

Asus confirmed the design flaw in a Facebook post, telling consumers that the tablet's metallic unibody design "may affect the performance of the GPS when receiving signals from satellites." Fraser claimed that Asus responded by removing GPS from the product's spec list and - shortly before his tablet arrived - announced plans to release a new and improved Transformer Prime.

Asus told U.S District Judge William Alsup that it had spent "'significant money and engineering resources'" to develop a GPS extension kit known as a "dongle" that attaches to the tablet and boosts wireless signals. The company offered the free kit to purchasers who filled out a request form on the company's website.

Fraser and Asus signaled that they had begun settlement talks, and in May Alsup appointed interim class counsel and sent the parties to U.S. Magistrate Judge Jacqueline Scott Corley for mediation.

After months of negotiations, the parties tentatively agreed that the class would include any U.S. purchaser who had not returned the tablet for a refund. Class members could apply for a $17 cash payment and a free dongle, provided they submitted a claim within 45 days of a notice sent by Asus.

But on Dec. 21, Alsup - expressing concern that potential class members might never hear about the settlement and be left out - rejected the proposed settlement.

"In exchange for this nationwide blanket release, Asus would be obligated to pay only on a claims-made basis," Alsup wrote. "There would be no established settlement fund amount, and no additional benefit to the class such as cy pres [allowing money to be used to promote the interests of the class rather than going back to Asus] or other relief. Instead, after a short notice period, the claims of all class members failing to opt out would be extinguished - whether or not they received actual notice of the settlement agreement. Long experience has taught us that a small percentage will go to the trouble to submit a form for $17."

Alsup continued: "To be sure, there is a benefit to Asus in a class-wide release regardless of the number of claim forms submitted. From Asus' perspective, it has a legitimate business interest in 'buying peace' and moving on to its next challenge. The court is not critical of Asus and, indeed, understands its position. Nonetheless, what is fair to Asus is not necessarily fair to the absent class members. Fairness to absent class member counts. Convenience to the defendant does not."

The judge also pointed out that the proposed settlement's methods of providing notice to affected consumers is lacking. He doubted that publication on the Asus website and Facebook page would "provide adequate and timely notice to the over 100,000 class members" and rejected Asus' plans to send "push notifications" to the devices.

"To receive the 'push' notification, a class member would need to be using a TF201 device that is connected to the internet. The gravamen of this civil action is that the defects in question have led to reception issues. Therefore, it cannot be reasonably assumed that all or virtually all class members will receive the push notification. The very reception issues in suit create too much doubt on that score. Even if the reception worked, moreover, there is no reasonable assurance that the devices would be in use during the claims period, especially after time has passed," Alsup wrote.

Alsup also questioned whether the dongle would truly solve the Transformer Prime's reception issues, noting that an expert hired by both parties tested the kit on the GPS "and was specifically instructed not to consider Wifi functionality."

"Even if the expert's valuation were credited, an issue which this order does not decide, the expert's report only analyzes the value of the GPS feature and does not consider the value of Wifi functionality, which also is in the complaint," Alsup wrote. "Counsel do address this disconnect. Although the settlement agreement states that class counsel believe that the claims asserted in the complaint have merit, counsel now downplay or ignore the Wifi claim, perhaps because the very existence of the claim is cross-wise with the proposed avenue of giving notice."

The judge concluded by suggesting that "[t]he most likely way to resurrect this settlement would be to limit the release only to those who submit a claim or to provide for a cy pres disposition of unclaimed funds.""Please ask for no more stays," he added.

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