Friday, August 6, 2010

Settlement approved in Dewey v. Volkswagen

Wednesday, August 4, Judge Patty Shwartz (D.N.J.) approved the Dewey v. Volkswagen settlement to which the Center for Class Action Fairness had objected.

In one sense, the decision is a partial victory for CCAF: one reason the proposed settlement was unreasonable was because of the plaintiffs' attorneys's unreasonable request for $22.5 million in fees. The court adopted some of our arguments that the plaintiffs' attorneys claim that the settlement was worth $141 million overvalued the settlement by assuming 100% class participation and double- or even triple-counting many of the class benefits. The court approved only $9.2 million in fees, a $13.3 million reduction, though still a very healthy pay day of over $1100/hour for some of the self-appointed lawyers that negotiated a settlement that left a million of their putative clients in the cold.

Yet I still feel disappointment: though the opinion was 101 pages long, the court did not address our arguments that a million class members received nothing under the settlement, did not address our arguments that the settlement structure created impermissible intra-class conflicts, and did not address our arguments about the validity of the economic testimony finding value.  We argued that the settlement structure was impermissibly self-dealing; the court rejected that argument with a cite to a Third Circuit opinion that did not consider the argument we made.  The court's ultimate finding that the settlement was worth $69.3 million still reflects enormous inflation, given that only $8 million of the settlement reflects pecuniary benefits to class members; the court confused expense to the defendant with benefit to the class, encouraging future settlements that are structured inefficiently to maximize attorneys' fees at the expense of the both the class and defendants.  We were hamstrung by a jaw-dropping ruling by the court that there was no need for an objector to a settlement to cross-examine the plaintiffs' expert witness because the direct examination and the court's own questions had already asked the expert what he thought about our objection.  The cross-examination would have demonstrated severe contradictions between basic economic principles and the methodology used by the expert to calculate damages. That the court went on to entirely ignore our argument for why the expert report flunked Daubert was disturbing. All of this is reversible error in the Third Circuit: if nothing else, an appellate court cannot decide whether the rejection of an objection was an abuse of discretion unless the trial court expresses its reasons for rejecting the objection.

We have thirty days to decide whether to appeal, a decision we will make in conjunction with the four class members we represented in our objection.  Our decision may be made easier if the plaintiffs' attorneys appeal the fee decision, in which case we would cross-appeal at a minimum.

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