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From Products Liability Law Daily, February 13, 2014

Calculation of attorneys’ fee award in class action settlement against car maker upheld

By Kathleen Bianco, J.D.

The United States Court of Appeals for the Third Circuit upheld a $9.2 million attorney’s fee award included in a class action settlement against Volkswagen of America, Inc., over defective sunroofs, ruling that the federal judge who calculated the award using the percentage-of-recovery method instead of lodestar had acted within her discretion in doing so (Dewey v. Volkswagen of America, Inc., February 12, 2014, Jordan, J.).

Background. This appeal relates to a class action settlement regarding several models of Volkswagen and Audi automobiles that allegedly had defectively designed sunroofs that leaked. After preliminarily approving an initial settlement and requiring notice to be issued, a Magistrate Judge held a fairness hearing to determine the value of the settlement and attorney’s fees. The Magistrate Judge determined that the settlement had a value of $69,277,430, including a combined value of $46,725,244 for service work performed on class vehicles; $1,443,299 for direct reimbursements; $8 million for the reimbursement fund; and $13,108,887 for the damage that would be prevented by the preventative-maintenance information. In determining class counsel’s fee award, the Magistrate Judge applied federal law, found that the fee should be based on the percentage-of-recovery method, and awarded class counsel fees in the amount of $9,207,248.19. 

The initial settlement was overturned because the named plaintiffs, all of whom were members of the reimbursement group, did not adequately represent the interests of the unnamed plaintiffs, who were members of the residual group and would not be able to access the reimbursement fund until after those of the former group exhausted their claims. On remand, the parties revised the settlement agreement to allow all affected class members to make initial claims to the reimbursement fund. However, the award of attorney’s fees remained unchanged. Several class members appealed the attorney’s fee award, arguing it had been improperly calculated under federal law.

Attorney’s fee award. Appellants argued that the Magistrate Judge had improperly applied federal law in calculating the attorney’s fees to be awarded. Appellants contend that New Jersey law should have been applied. Upon review, the appellate panel rejected that argument finding that both federal and New Jersey law permitted the court to apply the percentage-of-recovery method in class actions where attorney’s fees flow from a “common fund” shared by plaintiffs. As such, the Magistrate Judge was justified in performing a percentage-of-recovery analysis and did not abuse her discretion in doing so.

The appellants further asserted that if the common fund fee analysis was found to be permitted, the district court erred when it used the 2010 valuation of the settlement, instead of the actual claims data available in 2012.  This argument was also rejected by the appellate court, finding that the Magistrate Judge had acted within her discretion in determining the proper valuation of the settlement.

The case number is 13-1123/1124.

Attorneys: John J. Pentz for David T. Murray. Angelo J. Genova (Genova Burns Giantomasi & Webster) for John M. Dewey. Jeffrey L. Chase (Herzfeld & Rubin) for Volkswagen of America Inc. and Audi of America.

Companies: Volkswagen of America Inc.; Audi of America

MainStory: TopStory SettlementAgreementsNews ClassActLitigationNews DamagesNews MotorVehiclesNews DelawareNews NewJerseyNews PennsylvaniaNews VirginIslandsNews

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