A recent NLJ story, “Bluetooth Litigants Defend Settlement Against 9^th Circuit Qualms” reports that lawyers on both sides of a settlement over hearing loss claims involving Motorola’s Bluetooth headsets are insisting the attorney fees were not inflated, despite concerns voiced by the federal appeals court that rejected the deal last year.  The U.S. Court of Appeals for the 9^th Circuit tossed out the settlement, concluding that U.S. District Judge Dale Fischer failed to adequately test whether the attorney fees were excessive.

The settlement provided $100,000 in cy pres awards – gifts to various charitable organizations – and $800,000 to the plaintiffs’ lawyers.  The potential class members received no money, except $12,000 for nine named representatives.  Plaintiffs’ attorney Daniel Warshaw, a partner at Pearson, Simon, Warshaw & Penny in Sherman Oaks, Calif., wrote that the 9^th Circuit failed to account for the value of the injunctive relief, which included the posting of warning labels on product packaging.  He estimated the injunctive value at about $878 million, meaning that an $800,000 attorney fee award would represent less than 1% of the settlement.

The 9^th Circuit stopped short of calling the settlement unfair or unreasonable, but said that Fischer had ignored numerous “red flags” in approving the deal, including a “clear sailing agreement” by which defendants agreed not to object to attorney fees, and a “kicker” providing that fees not awarded would revert to the defendants rather than to a cy pres fund or the class.  The panel also found that Fischer failed to explicitly calculate the attorney fees other than to deduce that they were less than $1.6 million.  She also failed to compare what attorneys would have received had they based their fees on a percentage of the settlement – in this case, about $240,500, given a 25 percent benchmark.