Background
In August 2019, vehicle owners filed a petition to certify a class action against Kia Motors, Hyundai Motor Company, and their Israeli distributors (Telcar Ltd. and Kalmobil Ltd.), alleging a defect in the automatic transmission of certain vehicles. The defect allegedly caused delays in vehicle acceleration and dangerous overheating during low-speed driving with frequent stops.
In January 2025, the parties negotiated and reached a settlement, which was filed for court approval under Israeli class action law. Consumer advocacy organizations and the State of Israel filed objections. In September 2025, the District Court held a hearing addressing both the settlement and the objections, including disputes about the proper scope of the affected class.
In November 2025, the trial court approved the settlement but made a significant modification: it narrowed the class definition to include only vehicle owners who possessed their vehicles as of August 12, 2019 (the petition filing date), excluding owners who acquired vehicles afterward. The settling parties objected that the court lacked authority to unilaterally impose such a material change, prompting this appeal.
The Court’s Holding
The Supreme Court held that trial courts lack authority to unilaterally impose material modifications to class action settlements without the consent of the settling parties. Although section 18(7)(1) of the Class Action Law grants courts discretion to determine class scope and protect class members, this discretion operates within limits: it cannot be exercised to contradict or substantially rewrite terms the settling parties have negotiated and agreed to, even when objectors support such modifications.
Rather than rewrite the settlement or affirm the trial court’s modification, the Supreme Court vacated the approval order and remanded to the trial court for fresh reconsideration. The trial court must now choose between two options: approve the settlement as the parties originally negotiated it (thereby rejecting the objections), or reject the settlement entirely and permit the litigation to continue. The trial court retains full discretion to make this choice based on its best judgment of the interests at stake and may establish whatever procedural schedule it deems appropriate.
Key Takeaways
- Trial courts cannot unilaterally modify class action settlements without the settling parties’ consent, even when objectors would accept the modification
- Judicial discretion to protect class members through class definition adjustments has boundaries when dealing with negotiated settlements
- When a trial court improperly modifies a settlement, the appellate remedy may be remand for proper reconsideration rather than approval on appeal
Why It Matters
This decision establishes important protections for settlement finality while maintaining judicial oversight of class settlements. For defendants and settlement counsel, it confirms that negotiated settlement terms cannot be unilaterally rewritten by trial courts seeking to serve objectors’ interests. For consumer advocates and objectors, it clarifies that while courts will entertain settlement objections and may reject inadequate settlements, modifications cannot be imposed without settlement party agreement—meaning objectors must either secure settlement party consent for changes or accept rejection of the entire settlement.
The decision reflects a careful balance in class action jurisprudence between judicial gatekeeping and party autonomy. By remanding rather than deciding on appeal, the Supreme Court preserved the trial court’s role as the primary decision-maker while establishing clear boundaries on that court’s authority. The ruling suggests that Israeli courts, like their counterparts in other jurisdictions, recognize that while settlements must be fair to absent class members, they cannot be judicially rewritten to such a degree that they become something fundamentally different from what the settling parties negotiated.