Berry v. Volkswagen Grp. of Am., Inc.

• Decision Date: 28 May 2013
• Docket Number: No. SC 92770.,SC 92770.
• Parties: Darren BERRY, et al., Respondents, v. VOLKSWAGEN GROUP OF AMERICA, INC., Appellant.
• Court: Missouri Supreme Court

397 S.W.3d 425

Darren BERRY, et al., Respondents,

v.VOLKSWAGEN GROUP OF AMERICA, INC., Appellant.

No. SC 92770.

Supreme Court of Missouri, En Banc.

April 9, 2013.

Rehearing Denied May 28, 2013.

John W. Cowden and David M. Eisenberg of Baker Sterchi Cowden & Rice LLC in Kansas City, and Daniel V. Gsovski of Herzfeld & Rubin PC in NY, for Volkswagen.

Patrick J. Stueve, Todd E. Hilton, Jack D. McInnes and Bradlet T. Wilders of Stueve Siegel Hanson LLP in Kansas City, for consumers.

Bradford B. Lear and Todd C. Werts of Lear & Werts LLP in Columbia, for The Missouri Association of Trial Attorneys.

Hugh F. Young Jr. of the Product Liability Advisory Council Inc. in Reston, VA, Mark A. Behrens of Shook, Hardy & Bacon LLP in Washington, DC, and Robert T. Adams of Shook Hardy & Bacon LLP in Kansas City, for the Product Liability Advisory Council Inc.

GEORGE W. DRAPER III, Judge.

Introduction

Volkswagen Group of America, Inc. (hereinafter, “Volkswagen”) seeks review of the trial court's judgment awarding the attorneys in the underlying class action lawsuit attorneys' fees. Volkswagen raises five points on appeal challenging the lodestar amount and the multiplier that the trial court applied.

This Court finds that the lodestar amount was within the trial court's discretion. Further, while this is the first time this Court is addressing the use of a multiplier, there is no reason to usurp the long-standing principle in Missouri that our trial judges are considered experts in determining the proper amount of attorneys' fees. Accordingly, the judgment is affirmed.

Facts and Procedural History

In 2005, Darren Berry filed suit against Volkswagen, alleging violations of the Missouri Merchandising Practices Act (hereinafter, “MMPA”), chapter 407 et seq., RSMo 2000,¹ in that certain Volkswagen vehicles contained defective window regulators. Berry sought to certify a nationwide class on behalf of owners and lessors of Volkswagen vehicles. In 2007, the nationwide class certification was denied, and the trial court limited the class to plaintiffs in Missouri (hereinafter, “Class”).

Class and Volkswagen engaged in lengthy pretrial matters and multiple attempts to settle. On May 17, 2010, as Class prepared to go to trial, Volkswagen offered to settle with terms favorable to Class. The proposed settlement divided Class members into two groups. The first group, who repaired the window regulators in their vehicles, would be reimbursed for the repair or replacement and compensated $75 for each incident. The second group contained Class members who had not repaired a window regulator, which would receive a payment of $75 and have the window regulator repaired at an authorized Volkswagen dealer within ninety days of the date of the mailing of the notice. Volkswagen agreed to pay the costs of notifying Class, administering the settlement, and payment of reasonable attorneys' fees to Class counsel.

The trial court preliminarily approved the settlement and ordered notice to be sent to Class in June 2010. A third-party company acted as the claims administrator, publishing a Class notice in four Missouri newspapers and mailing notice to 22,304 Class members. Of the mailed notices, 6,150 were returned as undeliverable; the claims administrator later resent notice to 4,083 updated addresses.

Class members were required to submit their claims by October 11, 2010. Class members in the first group were required to submit a receipt for purchase of the part and/or to submit “one or more receipts(s) that describe(s) each documented incident or workshop visit,” showing that “a Window Regulator failure was diagnosed, repaired, replaced or purchased and ... contain[ing] the date and location of the facility.” The claims form defined “receipt” and provided for an alternative certification procedure if a receipt was not available. Class members in the second group were required to “set forth ... a statement of the date, nature and circumstances of each such failure, the reasons why [Class member had not] had the failure repaired until now, and the names, addresses and telephone numbers of the other persons who have knowledge of these facts and can verify them.”

When the claims period terminated, 177 claims had been made, and 130 of those were determined to be valid. The total payout to Class members was $125,261.

After the settlement for Class was approved and paid out, the trial court held a three-day hearing regarding attorneys' fees pursuant to section 407.025.2, which authorizes reasonable attorneys' fees in a class action under the MMPA. Class counsel testified they calculated they expended 7,910 hours during the lengthy litigation.²Class counsel determined their lodestar ³ amount to be $3,087,320. Additionally, Class counsel sought a multiplier of 2.6, arguing that the fee award represented approximately twenty-five percent of the potential total value of the settlement based upon their expert's calculation that each window regulator would fail 6.5 times over the life of the vehicle.

Volkswagen argued against the multiplier. Volkswagen stated it was not arguing that Class counsel “billed time that they shouldn't have billed” and was not “nit-picking with them about the number of hours they spent on certain matters or whether they should have spent a certain number of hours on the case.” Further, Volkswagen did not dispute the “experience, talent, and lawyering that was done in the case by [Class] counsel.”

The trial court determined the hourly rate and amount of time expended by Class counsel was reasonable and the lodestar amount was $3,087,320. The trial court stated it would apply a multiplier of 2.0 to the lodestar amount for a total award of $6,174,640 in attorneys' fees. The trial court further awarded Class counsel all of their expenses and assessed court costs against Volkswagen. Volkswagen appeals the trial court's judgment.

Volkswagen brings this five-point appeal, challenging the trial court's judgment in awarding Class counsel attorneys' fees. First, Volkswagen claims the trial court abused its discretion in its attorneys' fee award because the fee award was disproportionate to the result obtained for Class in that the fee award is forty-nine times the amount of Class recovery. Second, Volkswagen avers the trial court erred in its attorneys' fee award because the award fails to bear any relation to the award obtained for Class. Third, Volkswagen contends the trial court erred in applying the multiplier to the lodestar because there were no rare or exceptional circumstances. Penultimately, Volkswagen asserts the trial court's award offends public policy and undermines the purposes of a class action. Finally, Volkswagen argues the award violates its due process rights. Since all of Volkswagen's arguments challenge the trial court's award of attorneys' fees, they will be addressed together.

Motion to Dismiss the Appeal

Class filed a motion to dismiss Volkswagen's appeal, which was taken with the case. Class asserts that the appeal is in direct violation of the plain and unambiguous language of the written settlement agreement, which specified Volkswagen would pay attorneys' fees and expenses that were approved by the trial court.

The settlement required Volkswagen to pay Class counsel's “reasonable” attorneys' fees. Class counsel focused on the procedure to determine the amount of reasonable attorneys' fees and expenses, but nowhere in the settlement is there language waiving the right to appeal the final determination of attorneys' fees. To the contrary, the settlement contemplates an appeal of attorneys' fees and provides for the finality of the settlement, even in the circumstances when there is “any appeal from any order relating [to the fee application] or reversal or modification thereof....” The motion to dismiss the appeal is overruled.

Federal Use of a Multiplier

The United States Supreme Court has set forth its guidelines for federal cases in Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010), stating when it is appropriate to apply a multiplier after awarding the lodestar amount in fee-shifting cases.

In Perdue, the Supreme Court stated there is a strong presumption that the lodestar amount is the amount of reasonable attorneys' fees, but that presumption could be overcome. Id. at 1673. The Court identified six rules when evaluating whether a multiplier is appropriate. First, a reasonable fee is a fee that is sufficient to persuade an attorney to commence representation of a meritorious case; it is not to provide an economic windfall to the attorney. Id. at 1672–73. Second, awarding the lodestar amount presumptively achieves the objective of inducing a capable attorney to engage in meritorious litigation. Id. at 1673. Third, an enhancement to the lodestar amount “may be awarded in ‘rare’ and ‘exceptional’ circumstances.” Id. (internal citations omitted). Fourth, “an enhancement may not be awarded based on a factor that is subsumed in the lodestar calculation.” Id. Accordingly, the rationale that the case was novel or complex is not a ground for an enhancement because these factors are reflected in an attorney's billable hours. Id. Additionally, the “quality of an attorney's performance generally should not be used to adjust the lodestar because considerations concerning the quality of a prevailing party's counsel's representation normally are reflected in the reasonable hourly rate.” Id. (internal citation omitted). Fifth, the burden of proving an enhancement is necessary is placed on the fee applicant. Id. Finally, “a fee applicant seeking an enhancement must produce ‘specific evidence’ that supports the award.” Id.

An enhancement to the lodestar amount may be made when there are superior results obtained as a result of superior attorney performance. Id. at 1674. However, just because an attorney prevails, it does not mean axiomatically that the attorney's performance was...