PHILADELPHIA (Legal Newsline) - Citing its “special responsibility” to scrutinize plaintiff fees in class action litigation, the Third Circuit Court of Appeals reversed a $3.7 million fee awarded to three law firms in a lawsuit over allegedly defective BMW engines because they didn’t provide detailed enough billing records.
As part of a settlement estimated to be worth as much as $27 million, BMW agreed not to challenge a fee award up to $1.7 million to lawyers at Kantrowitz Goldhamer & Graifman, Thomas P. Sobran P.C. and Nagel Rice. The plaintiff lawyers, in turn, agreed not to seek more than $3.7 million.
The lawyers then submitted billing records listing the hours worked over three years by lawyers and paralegals at each of the firms. Partner Gary Greifman worked 376 hours at $895 an hour worth $337,000, for example, while Thomas Sobran sought $667,000 for 890 hours at $750 an hour. A magistrate judge said the records were “more than sufficient” and recommended a “lodestar” amount of $1.9 million multiplied by 1.9 to reflect the risk of the case for a total of $3.7 million – precisely the upper end of what the plaintiff lawyers said they would submit.
BMW appealed, and the Third Circuit Court of Appeals, in a Sept. 9 decision, reversed the fee award.
The plaintiff lawyers argued BMW lost its right to challenge the fees because after the trial judge asked if there was anything to add to the record a defense lawyer said, “We put it in the hands of the court, and you’ve made your decision, judge.” They also argued BMW effectively had waived its right to challenge the fees anyway, because they fell within the ranges in the agreement.
The Third Circuit disagreed, saying BMW didn’t expressly waive its rights under the contract as required in class actions. It also said that the “unique relationship among plaintiffs’ counsel, plaintiffs, and defendants in class actions imposes a special responsibility to hear challenges to fee awards.”
Critics of the class-action system, and a growing number of judges, say the process gives an incentive for plaintiff lawyers to collude with the defense to settle cases in a way that awards them large fees without regard to how much money class members actually obtain. In this case, for example, the lower court estimated the value of the BMW settlement at $27 million without knowing how many consumers would be eligible to make claims or how much would be paid out.
The Third Circuit focused its analysis on the billing records, which listed hours worked and a suggested hourly rate. They “provided no dates to inform the District Court of when the task was performed; nor information to show what any specific activity was, how much time was devoted to any specific activity, on any specific date, by which specific individual, for a particular charge.”
“We simply cannot discern from the charts whether certain hours are duplicative (a determination that is particularly crucial here, given that three plaintiffs’ firms seek fees for performing the same categories of work) or whether the total hours billed were reasonable for the work performed,” the court concluded.
The Third Circuit also urged the lower court to reconsider awarding plaintiff lawyers a multiple of the lodestar hours they reported having worked, saying it wasn’t enough merely to find that the multiple was in line with other awards in the judicial district.