Kyla Asbury Mar. 12, 2014, 8:06pm

PHILADELPHIA (Legal Newsline) - A federal appeals court has decided that a magistrate judge was justified in calculating the amount of attorneys fees she decided in a case against Volkswagen and Audi.

The case against Volkswagen and Audi had already been before the U.S. Court of Appeals for the Third Circuit twice, according to the decision.

In 2010, then-Magistrate Judge Patty Shwartz of the U.S. District Court for the District of New Jersey certified a class, approved a settlement and awarded attorneys fees in a products liability suit concerning alleged defects in cars manufactured by Volkswagen, Audi and related entities.

"We reversed and remanded because the class could not be certified under the parties' prior settlement agreement, given our determination that the representative plaintiffs were not adequate to represent the interests of the entire class," the decision states.

On remand, and after changes to the settlement agreement, the magistrate judge re-certified the class, re-approved the settlement and re-awarded attorneys fees. This time, the settlement placed all class members on equal footing, essentially eliminating the adequacy defect.

Two class members, David Murray and Jennifer Murray, appealed, challenging primarily the magistrate judge's determination that federal law, as opposed to New Jersey law, applied to the calculation of attorneys fees. Another class member, Peter Braverman, appealed the magistrate judge's refusal to allow him to intervene in the proceedings on remand, as well as the Murrays' challenge of attorneys fees.

The appeal relates to a class action settlement regarding several models of Volkswagen and Audi vehicles that allegedly had defectively designed sunroofs that leaked.

The district court approved the parties' request to refer the case to a magistrate judge to conduct all settlement proceedings and enter final judgment, according to the decision.

After the case was referred, the parties requested certification of a settlement class consisting of two different groups: A reimbursement group, which was entitled to make initial claims to an $8 million reimbursement fund for certain reimbursable repairs; and a residual group, which was only permitted to make claims after the reimbursement group's claims were fulfilled, as long as value remained in the fund.

The settlement agreement also provided certain inspection, modification and repair services for roof drainages, along with preventative maintenance information.

On Aug. 3, 2010, after preliminary approval of the settlement, the magistrate judge held a fairness hearing to determine the value of the settlement and attorneys fees, and she issued an order certifying the class, approving the settlement and granting the representative plaintiffs' fee petition.

The magistrate judge determined the settlement had a value of $69,277,430, including a combined value of $46,725,244 for service work performed on class vehicles, $1,443,299 for direct reimbursements, $8 million for the reimbursement fund and $13,108,887 for the damage that would be prevented by the preventative-maintenance information.

In determining class counsel's fee award, Shwartz applied federal law, found that the fee should be based on the percentage-of-recovery method and awarded class counsel fees in the amount of $9,207,248.19, according to the decision.

Following final approval of the class settlement, two groups of objectors appealed, raising a host of issues, and the appeals court reversed the certification order and remanded for further proceedings.

On remand, the parties revised the settlement agreement to allow all affected class members to make initial claims to the reimbursement fund, and the plaintiffs then filed a motion for final approval of the revised settlement agreement.

That agreement provided the balance of $3 million plus accumulating interest will remain available for a period of five years to be paid to class members through Volkswagen's goodwill program for further water-damage claims. Any amount that remains in the fund after five years will be donated, with the district court's approval, to an appropriate U.S. research or charitable institution for general advancement of new automotive technologies.

Five members filed objections, and two sets of objections were overruled and those objectors did not appeal. However, the other three, which were filed by the appellants in this action, were also overruled.

"Because the magistrate judge was justified in performing a percentage-of-recovery analysis in calculating attorney's fees under both federal and New Jersey law, she did not abuse her discretion in doing so," the decision states.

Braverman pointed to nothing in the record to "suggest any conflict of interest between the plaintiffs and class counsel. Thus, even if Braverman properly preserved his argument, the denial of his motion to intervene was not an abuse of discretion," the decision says.

The appeal was assigned to Circuit Judges Kent A. Jordan, Thomas I. Vanaskie and Franklin Stuart Van Antwerpen.

U.S. Court of Appeals for the Third Circuit case numbers: 13-1123, 13-1124

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