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Tenth Circuit Upholds Attorney Fees in Samsung Washer Settlement

May 7, 2021 | Posted in : Class Fee Objector, Expenses / Costs, Fee Agreement, Fee Allocation / Fee Apportionment, Fee Award, Fee Dispute, Fee Issues on Appeal, Fee Jurisprudence, Practice Area: Class Action / Mass Tort / MDL, Settlement Data / Terms

A recent Law 360 story by Mike Curley, “10th Circ. Won’t Undo Samsung Washer Settlement Over Fees,” reports that the Tenth Circuit refused to toss a settlement that ended multidistrict litigation alleging that a defect in Samsung Electronics America Inc. washing machines caused the lids to blow off mid-cycle, rejecting a lone objector's challenge to how attorney fees were handled in the deal.  In a published opinion, the three-judge panel denied John Douglas Morgan's bid to undo the final settlement approval over the "kicker" and "clear-sailing" agreements in the 2018 deal reached by the appliance buyers and defendants Samsung, Best Buy Co. Inc., The Home Depot Inc. and Lowe's Companies Inc.

The panel wrote that while a settlement including both provisions is subject to heightened scrutiny, the district court applied such scrutiny and was well within its discretion to approve the deal, particularly as the agreement provided class members with a benefit double the value of what they could have received had the case gone to trial.

The "kicker" agreement in the settlement holds that if the attorney fees and costs came in at under $6.55 million, the difference would revert to the defendants, while the "clear-sailing" agreement bound the defendants not to object to any request for attorney fees and costs up to $6.55 million.  The district court's final judgment on the fees and costs came to around $3.8 million.  Morgan had objected based on those agreements, saying that they deprived class members of potential relief and that the attorneys negotiated the deal for their own benefit, not the class members'. The district court overruled his objections, leading to the appeal.

According to the opinion, the settlement gives the average class member a rebate of 15.5% of the cost of a washing machine, rather than the amount that would have been provable damages at trial, which came to 7%.  This shows that class counsel fought hard for the class members and obtained more than equitable compensation, according to the opinion.  "Where class members were receiving compensation equivalent to or in excess of actual damages, it cannot be said that class counsel and defendants negotiated terms that favored attorneys' fees and costs at the expense of adequate and reasonable compensation for the class," the panel wrote.

The circuit court found that the attorney fees were within acceptable ranges whether the court used the lower estimate for the value of the settlement, $6.44 million, or the higher estimate of $11.31 million.  Morgan also challenged three factual findings that the court made in rejecting his motion to disqualify class counsel, and while the circuit court found that one such finding was clearly in error, and it said that error was harmless.

Morgan argued that the court was wrong in finding that he and the defendants did not finalize a side agreement under which a portion of the unspent attorney fees would have been distributed to the class, but the panel found no such error.  Morgan walked away from negotiations and the side agreement was never ratified, the panel wrote, so the district court was within its right to conclude that the deal might never come to fruition.

Morgan had also argued that class counsel should be disqualified for threatening to sue him over the side agreement, saying the court's determination that no such threat was made was in error.  Again, however, the panel found that the record undermines Morgan's assertion, saying that an allegation that Morgan had engaged in "misconduct" was far from a threat of litigation.

The Tenth Circuit did, however, agree that the district court was wrong to find that class counsel never took a position about the side agreement, saying it was clear they opposed it by accusing Morgan and the defendants of "misconduct."

But the panel also found that class counsel's objections were not baseless as they had reason to be skeptical, noting the side agreement allowed Morgan's attorneys from the Hamilton Lincoln Law Institute to seek attorney fees, while Morgan's niece served as president of the institute, calling into question his motives.