The U.S. Court of Appeals for the Third Circuit in the case of John M. Dewey et al. v. Volkswagen of America Inc. et al. upheld a $9.2 million attorney fee award in a class action against Volkswagen over leaky sunroofs, finding that the federal magistrate judge correctly utilized the percentage of recovery method instead of lodestar to calculate attorney fees.
The settlement was valued at $69,277,430. Judge Patty Schwartz awarded $9,207,248 in attorney fees. She arrived at this figure by applying a 15.83 percentage of the recovery rate to the settlement amount, which amounted to $10,967,773. She next applied a lodestar “cross-check” to compare her determination using the percentage of recovery method to calculations of other federal courts in the Circuit using the lodestar method and arrived at a lodestar of 2.38. However, after finding that the case was not sufficiently extraordinary to warrant such a multiplier, she reduced the lodestar multiplier to 2.0, which in turn reduced the fee award to $9,207,248—13.3 percent.
On appeal, fee objectors argued Judge Schwartz improperly relied on federal law when calculating and approving the attorney fee award. The fee objectors argued that Judge Schwartz should have relied on New Jersey state law which limits the amount that lodestar amounts can be multiplied. The fee objectors relied on Rendine v. Pantzer for the proposition that New Jersey courts must apply the lodestar analysis, not the percentage of the fund analysis when calculating attorney fees in common fund class action settlements.
In its ruling (pdf), the three judge Circuit panel disagreed finding nowhere in Rendine did the New Jersey Supreme Court prohibit the percentage of fund analysis. As such, Judge Schwartz did not abuse her discretion by correctly using federal law to apply the percentage of recovery rate to the settlement valuation and applied a lodestar “cross-check” to compare her determination using the percentage of recovery method to calculations of other federal courts in the Third Circuit using the lodestar method.