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(The opinions expressed here are those of the author, a columnist for Reuters.)
By Alison Frankel
NEW YORK, March 10 (Reuters) - In an unusual filing in the consolidated litigation over Volkswagen’s emissions cheating software, the car company has accused the leading plaintiffs' firm Hagens Berman Sobol Shapiro of attempting to inflate its account of hourly billings in the class action by VW dealers to justify its $28 million fee request.
VW dealers reached a $1.36 billion class action settlement with the automaker. Hagens Berman was lead counsel for the dealers. But Hagens partner Steve Berman was also a member of the plaintiffs' steering committee in the consumer class action by VW owners and leasers.
In a declaration last month, filed in response to a request from U.S. District Judge Charles Breyer for information about the firm’s billings in the dealer case, Berman said much of his firm’s time couldn’t easily be allocated between dealers and car owners since the work benefited both classes.
Berman added $1.5 million in so-called hybrid billings to the approximately $2 million in Hagens Berman billings exclusively in the dealers’ class action to report a total of about $3.5 million in billings in the dealers’ case.
Plaintiffs’ lawyers in the car owners’ class action, meanwhile, told Judge Breyer that, all told, members of the steering committee put $63.5 million in hourly billings into that case. Volkswagen agreed not to oppose their request for fees and costs of $175 million in the car owners’ class action.
Berman originally told Judge Breyer that he did not think any of his hybrid billings were part of the $63.5 million reported by plaintiffs’ lawyers in the car owners’ case.
Almost immediately after his original declaration, though, Berman filed a corrected version, conceding that the $1.5 million in hybrid fees that he wanted to include in his tally in the dealer case “may have previously been reported in the consumer case.”
To “avoid even the appearance of double-counting,” Berman suggested that Judge Breyer count the $1.5 million just in the dealers’ case, not in the car owners’ class action.
In a March 6 declaration, lead counsel in the car owners’ case, Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein, said the $1.5 million had, in fact, been included in the car owners’ billings tally.
She told Judge Breyer that she had now removed those billings from the total in the car owners’ class action and that Hagens Berman would not receive fees in that case for hybrid time.
Cabraser said the revised total for plaintiffs’ billings in the car owners’ case, $62 million instead of $63.5 million, still justified an award of $175 million in fees and costs.
Cabraser’s declaration seems to have prompted Thursday’s filing by VW’s lawyers at Sullivan & Cromwell. VW wants Judge Breyer to refuse to allow Berman to shift that $1.5 million in billings from the car owners’ tally to the total Hagens Berman is reporting in the dealer class action.
“This court should not permit dealer counsel to inflate time spent in connection with the franchise dealer litigation by including time spent working on (the car owners’ case),” VW said.
VW’s motive for filing an unusual response to the Berman and Cabraser declarations is clear. It already agreed to not to oppose the $175 million fee request by plaintiffs’ lawyers in the car owners’ case but it has not acquiesced to Hagens Berman’s $28 million fee request in the dealer case.
Subtracting $1.5 million in what VW calls “double counted time” from Hagens Berman’s billings tally in the dealer case leaving billings of just $2 million – which, according to VW’s filing, hardly justifies a fee award of $28 million.
In a way, the $1.5 million in billings is a red herring because Hagens Berman’s fee request is based on the $1.3 billion recovery it obtained for VW dealers, not on the firm’s hourly billings.
Judges in the vast majority of class actions award fees as a percentage of the settlement fund for class members. Judges adjust the percentage based on the size of the settlement, so lawyers typically receive a smaller percentage in megacases like the VW class action than in run-of-the-mill class actions, where fee awards are usually between 15 and 25 percent of the settlement fund.
In an email addressing VW’s filing, Berman told me his $28 million fee request in the dealer case is just 2 percent of the class settlement.
“This is an historically low request for an historically huge common fund,” he wrote. “In fact, there has never been a case that paid as much to class members (on average over $2.1 million each) and we know of only one case in history where lawyers have asked for as little of a percentage as is requested here.”
Hagen Berman’s total billings, or lodestar, is irrelevant in this case, Berman said, because the fee is such a low percentage of the settlement fund.
Judges often look at lodestars to cross-check fees awarded as a percentage of class recovery. But Berman said the lodestar cross-check is “highly disfavored for any purpose” when judges award class counsel only a tiny percentage of the settlement.
VW has disputed Berman’s characterization of the dealers’ recovery as a settlement fund, arguing that because dealers will be compensated directly by VW, rather than through a fixed pool of money, Judge Breyer must consider lodestar billings to assess reasonable fees for class counsel.
Berman also said VW is making an erroneous and hyperbolic argument about double-counting. There is no double-counting, he said. “Time included in the dealer lodestar has been removed from the consumer lodestar,” Berman’s email said. “That ends the inquiry.”
The disputed $1.5 million in billings might be nothing more than a kerfuffle, but these are worrisome days for class action lawyers.
On Thursday, the U.S. House of Representatives passed the Fairness in Class Action Litigation Act, a sweeping bill that, among other purported “reforms,” will make it much more difficult for plaintiffs’ lawyers to obtain settlements in consumer class actions.
The Senate has rebuffed previous – and less drastic – House attempts to curtail class actions, but groups like the U.S. Chamber of Commerce are pushing hard for senators to follow the House lead.
During the House debate, class action proponents cited the VW litigation as a shining example of the good these cases can accomplish, according to the National Law Journal. As the class action bar girds for a fight in the Senate, the last thing it needs is questions about the conduct of lawyers in VW class actions. (Reporting by Alison Frankel. Editing by Alessandra Rafferty.)