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Attorney Fees at Issue in Aftermath of VW Accord

July 6, 2016 | Posted in : Contingency Fees / POF, Expenses / Costs, Fee Award, Fee Award Factors, Fee Calculation Method, Fee Request

A recent American Lawyer story “Fees Could Become Bone of Contention in Aftermath of VW Accord,” reports that plaintiffs lawyers have repeatedly made reference to the arduous negotiations that led to a $14.7 billion settlement agreement last week with Volkswagen A.G. over the automaker’s emissions scandal, but a more difficult road could be ahead over their fees.

In settlement papers filed with the court June 28, lawyers on the plaintiffs steering committee didn’t ask for fees as part of the deal.  But according to the settlement agreement, which compensates owners and lessees of 475,000 Volkswagen and Audi two-liter diesel vehicles, they plan to begin fee negotiations with Volkswagen by Aug. 12 if they haven’t yet reached a subsequent deal over 85,000 additional three-liter vehicles.

“They have a lot of money they negotiated, but also a defendant that came out of the box admitting liability,” said Elizabeth Burch, a professor at the University of Georgia School of Law.  “You don’t have the same sort of protracted litigation, so it’s going to be hard for them to justify a 30 percent or 20 percent fee.”

Many of the attorneys on the plaintiffs steering committee served in lead roles in the $1.6 billion class action settlement with Toyota Motor Corp. to resolve consumer lawsuits filed over sudden-acceleration defects.  In that 2013 deal, the 31 firms on the steering committee got $200 million in feesabout 12.3 percent of the total settlement.

The judge in that case found that the fee request was within the U.S. Court of Appeals for the Ninth Circuit’s benchmark of 25 percent.  Under that benchmark, the lawyers in Volkswagen would get nearly $3.7 billion.  Using the same 12.3 percent assessed in Toyota, they could get $1.8 billion in fees.

But there are significant differences between the two cases.  The Toyota deal took more than three years to litigate.  That included $100 million in costs and billable hours and settlement talks that lasted more than a year, according to court records.

Volkswagen, by contrast, settled within a matter of months.  The litigation began less than a year ago, after the U.S. Environmental Protection Agency found that Volkswagen’s vehicles emitted as much as 40 times the standard for nitrogen oxides.

And unlike Toyota, which never admitted that an electronic defect was to blame for suddenly accelerating vehicles, Volkswagen confessed that it installed a “defeat device” in its clean diesel vehicles to evade emissions tests.

Some plaintiffs lawyers have acknowledged the distinction.  In applying to be on the steering committee, member Steve Berman, managing partner of Hagens Berman Sobol Shapiro, who also served as co-lead counsel in the Toyota case, admitted that the Ninth Circuit’s 25 percent benchmark was “excessive” given the reduced risk in Volkswagen.

But they also emphasized that the case wasn’t easy.  “Indeed, for the past few months, weekends and weekdays were synonymous and holidays did not exist” and “intensive settlement efforts went on around the clock,” they wrote in their motion to approve the settlement.

But they had help.  In the Volkswagen case, the EPA, the U.S. Federal Trade Commission and California regulators were involved in negotiating the settlement, which includes $4.7 billion in environmental mediation programs.  By contrast, no government agency played a role in the Toyota litigation.

Volkswagen also could put up more of a fee fight than Toyota did.  In fact, the June 28 settlement agreement included the provision: “Volkswagen reserves all rights to object to an award of attorney’s fees and/or costs beyond what it believes to be reasonable.”