Non-class counsel have standing to challenge VW settlement, but panel rules against them

The 9th U.S. Circuit Court of Appeals on Tuesday affirmed a trial court's denial of attorney fee requests by non-class counsel in a $14.7 billion settlement over Volkswagen's use of devices to evade national emission standards.

In an opinion written by Judge Milan D. Smith, Jr., the panel held the plaintiff attorneys have standing to challenge the multi-district litigation fee award by U.S. District Judge Charles Breyer, but it concluded the San Francisco district judge didn't abuse his discretion when he determined the efforts for which non-class counsel sought fees didn't benefit the class enough to warrant compensation.

Judges Jacqueline H. Nguyen and Jane A. Restani concurred.

The decision affirms Breyer's denial of 244 motions for attorney fees. The appellants included Nagel Rice LLP, described in the opinion as "an illustrative law firm that represented forty-three Volkswagen owners from various states" that was denied a cut of $175 million in attorney fees.

The money went to lead counsel Elizabeth J. Cabraser of Lieff Cabraser Heimann & Bernstein in San Francisco along with 21 additional firms that were part of the plaintiffs' steering committee and other firms that worked with Lieff Cabraser. In re Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation, 2019 DJDAR 568.

In an emailed statement, Cabraser said she's "pleased with the decision."

"It commends and affirms the case management authority and discretion of the district court, and recognizes the efforts of the Plaintiffs Steering Committee and dozens of other firms that were appropriately compensated for their approved work to help achieve one of the largest and most successful consumer class action settlements ever," Cabraser wrote.

Smith ruled first on the issue of whether the non-class counsel had standing to object at all and concluded they did.

"Appellants were aggrieved by the district court's denial of their motions for attorneys' fees," he wrote for the panel. "Therefore, we conclude that Appellants properly have standing to challenge the Fee Order."

Firm co-founder Bruce H. Nagel, who represented the plaintiffs in oral argument Dec. 19 in San Francisco, told the Daily Journal on Tuesday the standing issue "was a foolish argument that Volkswagen raised."

Nagel said the "real issue" is the fact his firm and the plaintiffs "put very significant effort" into litigation that began before most other firms joined the case, including Cabraser, but they walked away with nothing.

"The court never answered the paradox, which is why the work done by these firms was deemed valuable, so that they could make $4,000, $5,000 and $6,000 an hour when the identical work that was done before the appointment was deemed worthless," Nagel said.

Nagel said he plans to seek a rehearing by the full court.

Breyer approved the settlement in October 2016 then awarded fees to about 100 firms, including Lieff Cabraser and the committee members. The settlement master was Robert S. Mueller III, who is now leading the special counsel investigation into Russia's role in the 2016 presidential election. As of November 2017, more than 300,000 class members had received payments of nearly $7 billion, according to Tuesday's decision.

The panel emphasized pretrial orders in which Breyer outlined protocols for "common benefit work and expenses" and said recovery of fees and cost reimbursements would be limited to 'participating counsel,' which he defined as lead counsel and the steering committee members as well as "any other counsel authorized by Lead Counsel" or approved by the court as participating counsel.

Along with Nagel Rice, the judges said appellant James B. Feinman, a lawyer in Virginia, "extensively litigated on behalf of 403 individual clients in Virginia state and federal courts, in addition to monitoring the MDL."

"Undoubtedly, Appellants undertook various pre-consolidation efforts on behalf of their individual clients, but there is no indication, either in the voluminous record they provided or in the briefs, that this work contributed to the negotiation or crafting of the Settlement or otherwise benefited the class in any meaningful way," Smith wrote.