VW’s Exemplary Performance Of Settlement Terms And District Court’s Allowing Six Weeks For Fee Motion Challenges Were Big Factors Leading To Affirmance.
Volkswagen reached a settlement in a class action where it admitted installing “defeat devices” in certain 2.0-liter diesel cars. Under the terms of the settlement (brokered by settlement master Robert Mueller, now special counsel in the Russian interference probe), VW promised to pay a little over $10 billion to car owners to remedy problems, including a buyback option for some eligible car owners. The district court approved the settlement, and then set a date for the filing of a fee/expense motion by class counsel, followed by a date six weeks later for class members or objectors to challenge the fee motion. Subsequently, the district judge awarded $175 million to class counsel out of a requested $333 million in fees and expenses (roughly half, the subject of some separate appeals). Several objectors filed a “hodgepodge of challenges” ultimately rejected by the district judge, prompting some of them to file a multi-pronged appellate challenge to the settlement agreement and timing of the fee motion in In re Volkswagen “Clean Diesel” Marketing, etc. Litig., Nos. 16-17157 et al. (9th Cir. July 9, 2018) (published).
The Ninth Circuit affirmed Northern California District Judge Charles R. Breyer’s judgments certifying the class, approving the settlement, and denying an opt out motion by one class member. By the time of the decision in this case, VW had removed 83.8% of the unsafe cars from the road and had paid $7.4 billion to 350,000 class members (with an indication that it would pay or would be paying $8.1 billion to 450,000 class members total). With respect to fee issues, two challenges were rejected by the Court of Appeals.
The first challenge was to a reversion provision in the settlement, providing that any leftover money after the expiration of the claims deadlines went back to VW. Objectors argued that this showed a specter of collusion between VW and class counsel, because it lowered the amount to be paid by the defense in return for a higher common fund from which a higher percentage of fees could be claimed. Although theoretically true, the Ninth Circuit found no signs of collusion in this case, especially given VW’s exemplary performance in the class action settlement process (returning lots of money to car owners) and the fee order which was roughly half of what was asked for by class counsel.
The second challenge was to the timing and notice of the fee motion by class counsel. Although FRCP 23(h) is silent on the timing of a fee motion, it implicitly dictates that objectors must have a chance to challenge the fee motion. However, nothing in Rule 23(h) indicates that the fee motion cannot be heard after the settlement final approval motion on the merits. In this instance, the district court gave objectors six weeks after the post-settlement approval fee motion was filed, more than enough time from a due process perspective. With respect to the fee motion notice issue, that was dispatched based on the fact that it dealt with the fee order (not the settlement approval order), which was the subject of other appeals.
BLOG KUDOOS—We commend the Ninth Circuit panel for starting its opinion by quoting from Shakespeare, King Lear, act 2, scene 4: “Striving to better, oft we mar what’s well.”
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