On February 12, 2014, the United States Court of Appeals for the Third Circuit in the case of John M. Dewey et al. v. Volkswagen of America Inc. et al., Case Nos. 13-1123/1124, upheld a $9.2 million attorneys’ fee award included in a settlement in a class action against Volkswagen of America Inc. over leaky sunroofs, finding that the federal magistrate judge currently utilized the percentage-of-recovery method instead of lodestar to calculate attorneys’ fees. Partner Angelo J. Genova and Counsel Dina M. Mastellone served as Local Counsel for Schoengold & Sporn PC, counsel for the Dewey Plaintiffs, for the entirety of the 6 year litigation.
The appeal, filed by Objectors David and Jennifer Murray, argued Judge Patty Shwartz improperly relied on federal law when calculating and approving the attorneys’ fee award. The Objectors argued that Judge Shwartz, appointed as United States Circuit Judge for the Third Circuit on April 10, 2013, should have relied on New Jersey State law which limits the amount that lodestar amounts can be multiplied. The Murrays relied on Rendine v. Pantzer, 661 A.2d 1202 (N.J. 1995), for the proposition that New Jersey courts must apply the lodestar analysis, not the percentage-of-fund analysis, when calculating attorney’s fees relating to common fund class action settlements.
The three-judge Circuit panel disagreed finding nowhere in Rendine did the New Jersey Supreme Court prohibit the percentage-of-fund analysis, nor did the case even include a class action settlement. As such, Judge Shwartz did not abuse her discretion by correctly using federal law to apply the percentage-of-recovery method in class actions when attorneys’ fees are derived from a common fund shared by plaintiffs. Judge Shwartz arrived at her figure by applying the percentage-of-recovery rate to the settlement valuation and applied a lodestar “cross-check” to compare her determination using the percentage-of-recovery method to calculations of other federal courts in the Third Circuit using the lodestar method. Lastly, the Third Circuit also denied the appeal filed by Peter Braverman, a nonparty and attempted intervener, saying he failed to show that Judge Shwartz erred in allowing him to intervene or that there was a conflict between the class and class counsel.
A settlement was first reached in the case in 2010, but nonparty class members and Volkswagen appealed Judge Shwartz’ preliminary approval of the deal to the Third Circuit, which then remanded the case finding that the class could not be certified under the parties’ prior settlement because the representative plaintiffs were not adequate to represent the interests of the entire class. See Dewey v. Volkswagen Aktiengesellschaft, 681 F.3d 170 (3d Cir. 2012). A revised settlement was thereafter approved on remand by Judge Shwartz on December 14, 2012.
For the full decision, please click here.
Law 360 and the New Jersey Law Journal covered the decision.