Approximately 120,000 owners of 2003-2008 Honda Civic Hybrids filed a class-action lawsuit in the United States District Court for the Central District of California, and they have now been presented with a proposed settlement. The lawsuit is based on the claim that Honda knowingly advertised MPG figures that were unrealistic and misled their customers.

The class-action lawsuit has already been shot down once before in 2006, with the court awarding Honda summary judgment on all claims.

Since the lawsuit first failed, it has since been taken up by two named plaintiffs -- John True and Gonzalo Delgado, as well as 120,000 Civic Hybrid owners. Although the lawsuit points out the 49 city and 51 highway miles per gallon EPA rating, (which has since been adjusted with the latest model and EPA test to reflect a more realistic 40 city and 45 highway mpg) the new lawsuit is not arguing that the EPA ratings were incorrect.

The lawsuit does not attack the EPA ratings as they are protected by federal law, but instead accuses Honda of knowingly and directly advertising the EPA figures as obtainable with normal driving in their advertisements. The lawsuit proposes that Honda was aware that the numbers were egregiously incorrect, and in reality were closer to an average of 31 mpg.

According to The New York Times, Honda says that the accusations are illogical, and that it simply followed the figures and guidelines provided by the EPA and federal government. Despite Honda not agreeing to any wrongdoing, it has agreed to settle the lawsuit.

The settlement calls for the two named plaintiffs, Mr. True and Mr. Delgado, to receive cash payments in the amount of $12,500 and $10,000 respectively. Also named in the settlement is the award of a coupon voucher for the remaining 120,000 owners for $1,000 off of a new Honda - with stipulations.

The voucher cannot be used on the new Honda Insight Hybrid, Civic Hybrid, Fit, or any used or certified Honda or Acura. Furthermore, the voucher is non-transferable and the Civic Hybrid named in the lawsuit must be sold or traded-in for the voucher to be valid.

For the customers who are unable, or uninterested in purchasing any of the qualifying vehicles they will be eligible for a $100 cash settlement, as well as an educational DVD on how-to obtain better fuel economy.

The attorneys responsible for filing the class-action lawsuit are being proposed $2.95 million in cash, without stipulations.

According to The New York Times, some groups are complaining that the payout proposal is a bad deal for the owners.

"The purchaser of a Honda Civic Hybrid is a person who is interested in fuel economy," said Clarence Ditlow, the executive director of the Center for Auto Safety, a consumer advocacy group that opposes the settlement.

"So, the settlement allows them to buy any vehicle but a fuel-efficient vehicle. In other words, you get a coupon for the purchase of a vehicle that you don't want," said Ditlow.

Texas' attorney general, Greg Abbott, argues in a court filing that the true victims in this case will get "very minimal relief" and that the settlement is biased in favor of helping Honda sell more cars.

As of Monday Texas joined 25 other attorneys general in asking the judge to reject the proposed settlement.