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3rd Circuit Orders Re-Examination of Costs in $10M Honeywell Settlement

July 3, 2017 | Posted in : Expenses / Costs, Fee Award Factors, Fee Calculation Method, Fee Issues on Appeal, Lodestar / Multiplier

A recent Law 360 story by Emma Cueto, “3rd Circ. Forces Redo on Costs in $10M Honeywell Settlement,” reports that the Third Circuit gave its blessing to a $10 million settlement in a class action brought by New Jersey property owners against Honeywell International Inc. over alleged hexavalent chromium contamination, but ordered the lower court to re-examine its decision to approve the costs in the case.

Despite objections from one of the class members, who appealed the decision to greenlight the settlement, a Third Circuit panel determined that most of the property owners in the suit approved of the settlement, which included $2.5 million for attorneys' fees, and that the result was reasonable given the complexity of the case and the evidence collected.

“We are satisfied the district court did not abuse its discretion in approving the settlement,” U.S. Circuit Judge Anthony J. Scirica wrote in the opinion.  “Presented with a record developed over five years of fact discovery, the district court was in the best position in the first instance to evaluate the fairness of the settlement.”

The Third Circuit did, however, order the lower court to reopen its decision that the $1.1 million in costs were reasonable and that they could not be separated proportionally between classes, ruling that the court must make public to the class the records that led it to these conclusions.

“We are not persuaded class counsel is required to provide itemized expense records to objectors or to the class generally to support the award of costs,” the decision said.  “But if an award of costs is approved after in camera review of attorney time or expense records, the district court should provide sufficient reasoning so there is a basis to review for abuse of discretion.”

The homeowners in the case filed suit against Honeywell in 2010, two years after a 2008 dust study that found that all homes in samples in Jersey City contained hexavalent chromium, a substance that has been linked to cancer, birth defects and other health problems.

The case was settled in 2014, with Honeywell agreeing to pay $10,017,000 without admitting fault.  In addition to $2.5 million in attorneys' fees and $1.1 million in settlement reimbursements for class counsel, the settlement also included $219,278.87 for the claims administrator and $10,000 incentives for class representatives, leaving just over $6.1 million to divide among the homeowners.

Of the 3,497 properties entitled to reimbursement, 2,085 filed claims, according to the Third Circuit decision, with each property receiving $2,926.  Only 28 members actively opted out, and only three formally objected, according to the decision.

After the district court certified the settlement, one of the objecting homeowners, Maureen Chandra, appealed the case to the Third Circuit, arguing that the district court abused its discretion in approving the amount and that the attorneys' fees were not reasonable.

The court, however, was largely unconvinced.  The judges noted that most of the factors judges are bound to consider in evaluating a decision weighed in favor of approving the $10 million settlement.  In particular, the parties had been conducting discovery for five years and had yet to exchange expert reports or test the soil at the relevant properties, according to the decision.  Given the complexity of the case, and the likelihood that it would continue for years to come, it was not unreasonable to accept the settlement, the panel ruled.

The Third Circuit also upheld most aspects of the $2.5 million attorneys' fees award, stating that in a lodestar cross-check based on the submitted attorney hours, they calculated a lodestar fee of over $9 million.  The judges agreed that New Jersey rules concerning attorneys' fees did apply, and were not, as the district court claimed, supplanted by federal rules.  However, the panel did not think the award was unreasonable under either standard.

The panel did agree, though, that the class should have had access to the documents the lower court reviewed to justify the $1.1 million in costs.  The district court concluded after an in camera review that the costs were reasonable and could not be divided proportionally between the two classes, which were divided by property location, according to the decision.

The case is Mattie Halley et al. v. Honeywell International Inc. et al., case number 16-2712, in the Third Circuit Court of Appeals.