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Fifth Circuit Cuts $4.3M Fee Award in Defective Toilet Case

January 12, 2022 | Posted in : Fee Award, Fee Award Factors, Fee Issues on Appeal, Fee Jurisprudence, Fee Reduction, Fees & Judicial Discretion, Hours Billled, Lodestar, Practice Area: Class Action / Mass Tort / MDL, Settlement Data / Terms

A recent Law 360 story by Jonathan Capriel, “5th Circ. Cuts $4.3M Atty Fee in Defective-Toilet Settlement,” reports that the Fifth Circuit has ordered a lower court to slash a $4.3 million attorney fees award in a class action settlement between Porcelana Corona De Mexico and consumers over defective toilet tanks, saying class counsel who "achieved little" can't receive pay for claims that did not pan out.  In a published split decision, the appeals court said that the Texas federal judge on the case abused his discretion by declining to wade into whether hours attorneys at Carpenter & Schumacher PC spent on litigating unsuccessful consumer claims could be lopped off the lodestar.

The original January 2017 lawsuit sought punitive damages against the Porcelana for consumers who bought six different toilet models made over nine years.  Class counsel succeeded on "only a fraction" of the original claims with several toilet types and model years dropped from the final settlement, said Circuit Judge Edith H. Jones, who wrote the opinion for the majority.

"To allow recovery on these unsuccessful claims would incentivize fishing expeditions into every tangentially related product after the discovery of a singular defective item," Judge Jones said.  "Instead, Class Counsel must shoulder the burden of proving that the hours submitted are for claims sharing a common core of facts."

The attorney award had already been reduced from the $12 million that counsel initially requested when the trial judge determined that attorneys did not earn a 2.9 times multiplier.  But the lower court allowed the $4.3 million lodestar to remain almost undisturbed.  At the time the lower court said that was because class counsels' efforts "did not prove fruitless."  But a majority on the panel took exception to this. The lawsuit resulted in two "much narrower" settlements, Judge Jones said.

The first settlement only covered two toilet models made in 2011 and promised replacement and installation reimbursements up to $300 and property damage reimbursements up to $4,000, but only for those to whom Porcelana had not already paid out.  The other settlement, which covered two other toilet models for owners in Texas, promised $300 payouts to those who needed their entire toilet replaced.  Class members otherwise received $35.

Judge Jones said the lower court can't assume that all class counsels' work on failed toilet claims could be considered related to the successful claims.  The district court must engage in a "proper lodestar calculation" and not rely on speculation, he said.  Furthermore, the lodestar must be proportionate to what was actually achieved in the lawsuit, which Judge Jones said the district court seems not to have done.

However, it is "practically impossible" to figure out which attorney hours were used to push claims for specific toilet models, Circuit Judge James E. Graves Jr. wrote in his dissent.  Because all claims relied on the same legal theory, the district court was correct to assume unsuccessful and successful claims were related enough to be counted together.