Blog Post 08.25.20
Alert
Alert
By Robert L. Wallan,
12.03.20
The Ninth Circuit Court of Appeals recently issued a significant opinion that will materially impact class action settlements that provide coupon relief and in particular how the realized value of those coupons limits class counsel’s fee awards.
In Whirlpool Corp., et al. v. Chambers, et al., Case No. 8:11-cv-01733-FMO-JCG, eight plaintiffs filed a putative class action lawsuit in a California federal court against defendants—three well-known dishwasher machine manufacturers—asserting breach of warranty and other state law claims. The complaint alleged certain of defendants’ dishwashers suffered from a design defect that caused electronic control boards to overheat and malfunction. While the initial complaint sought certification of a nationwide class of dishwasher purchasers, the final iteration of plaintiffs’ complaint dropped the nationwide class and replaced it with 11 state classes.
Before the district court ruled on any substantive motions, the parties reached a settlement premised on a nationwide class. The settlement provided both class and non-class members monetary relief if they had already experienced an overheating incident. The settlement also provided coupons to customers for the purchase of a new dishwasher.
The district court granted preliminary settlement approval and class certification, and direct mail notice was sent to over 3.5 million class members. Of the 133,040 claims that were filed, approximately 96 percent were for coupons. The parties substantially disagreed on how many of these coupons would be redeemed, as illustrated by the competing valuations of the settlement: defendants estimated the settlement value to be as low as $4.2 million, while plaintiffs put the high end at $116.7 million. Because the parties could not agree on the amount of legal fees to be paid by defendants under the settlement, they agreed that the district court should decide the amount.
The district court granted the bulk of plaintiffs’ fee request, awarding $14.8 million based on a settlement value in the range of $55.7 million to $116.7 million, figures that took into consideration the coupon portion of the settlement. The district court arrived at this award by using lodestar methodology (reasonable number of hours billed times a reasonable hourly rate) of $8,818,449.23, to which a 1.68 multiplier was applied due to several factors, including the “impressive results” obtained by class counsel.
Defendants appealed the district court’s decision to award $14.8 million in attorneys’ fees. The Ninth Circuit Panel made the following significant holdings:
The Panel’s holdings will likely have a significant and far-reaching effect on class litigants’ willingness to use coupons in future class action settlements. Class counsel’s hopes for windfall fee awards may also discourage some new class action filings in the Ninth Circuit. A few immediate observations can be made:
Plaintiffs’ class counsel in consumer cases are less likely to receive windfall fee awards under this new decision. Time will tell, but we may continue to see more class action forum shopping at the state court level using narrower and smaller classes.