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Justices Won’t Hear Fee Allocation Dispute in VW Settlement

October 21, 2019 | Posted in : Class Action / MDL, Expenses / Costs, Fee Allocation / Splitting, Fee Award, Fee Dispute, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Hourly Rates / Hourly Billing

A recent Law 360 story by Ryan Boysen, “Justices Won’t Hear Firms’ Fee Dispute in $10B VW Settlement,” reports that Nagel Rice LLP and a dozen other firms that claim they were unfairly cut out of the $175 million awarded to class counsel in the $10 billion Volkswagen AG emissions cheating settlement have hit the end of the line, after the U.S. Supreme Court declined to take up their case.  Nagel Rice LLP, Hyde & Swigart and other smaller firms suing alongside them filed a petition for a writ of certiorari in May, arguing the Ninth Circuit overlooked decisions by its sister circuits that supported their position and created a "glaring paradox" by deciding against them in February.

The Supreme Court announced that it wouldn't take up the petition, however, meaning the Ninth Circuit's decision to fully deny them a cut of the $175 million award will stand.

In an emailed statement, Elizabeth Cabraser of Lieff Cabraser Heimann & Bernstein LLP told Law360 she was pleased the Supreme Court had declined to take up the case.  "On behalf of plaintiffs' class counsel, the plaintiffs' steering committee, and the dozens of law firms who stepped up to perform important work for the common benefit of the VW 'clean diesel' classes in compliance with [U.S. District Judge Charles R. Breyer's] case management and common benefit orders, we are pleased that the Ninth Circuit and district court decisions on this matter will stand as guidance in future MDL and class proceedings," she said.

Nagel Rice and the other firms say they led the charge in filing some of the first consumer lawsuits against Volkswagen in 2015, after initial revelations that the auto giant had systematically gamed emissions regulations by outfitting its diesel engine cars with special software known as "defeat devices" to trick inspectors.  Those suits were later consolidated into a sprawling Volkswagen multidistrict litigation.

In 2016, that MDL was settled for $10 billion, with Lieff Cabraser having secured the top spot as lead counsel for the case. Lieff Cabraser's request for $175 million in attorney fees and costs was ultimately granted, with Lieff Cabraser then doling out some of that money to several dozen other firms of its choosing, whom Nagel Rice has derided as "the chosen ones."

Lieff Cabraser later received an additional $125 million in class counsel fees for its work on a second, closely related $1.2 billion VW emissions cheating settlement.

Nagel Rice claims the suits it filed, the meetings it organized to keep the MDL on track, the consolidated complaints it helped to draft and other work it performed on the Volkswagen case was identical to what Lieff Cabraser did.  The only difference, Nagel Rice and the other firms claim, is that they had failed to secure the all-important "lead counsel" title.  That meant they were ultimately unable to bill for their work at all, an outcome made all the more painful by the $2,000-an-hour rates some Lieff Cabraser attorneys were able to submit, according to their petition.

In affirming Judge Breyer's March 2017 order denying the nonclass attorney fees applications, however, the Ninth Circuit said it was clear they had not performed "work that benefited the class, and that they neglected to follow the protocol mandated by the district court."

In their petition, Nagel Rice and the other firms said that decision clashes with the Tenth Circuit's 1994 decision in Gottlieb v. Barry and the Third Circuit's 2005 decision in In re: Cendant.  They quoted the Gottlieb panel's remark that "we fail to see why the work of counsel later designated as class counsel should be fully compensated while the work of counsel who were not later designated class counsel … should be wholly uncompensated."

Nagel Rice and the other firms also argued that the Ninth Circuit's decision had created "two unequal plaintiff classes: one whose recovery is reduced by attorneys' fees and costs and another, represented by select counsel, who get the full benefit of the recovery with no reduction for fees and costs."

They went on to say that the Ninth Circuit's decision was built atop a "glaring paradox" and a "stark anomaly," namely their claim that "the efforts of non-class counsel in the pre-appointment stage of the case had the exact same benefit for the class as the efforts and work product of those firms that were later appointed to lead the litigation."