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Hess v. Volkswagen Group of America, Inc.

Court of Appeals of Oklahoma, Division IV

March 13, 2017

RAJINA HESS and KELLY PARSONS, individually and on behalf of persons similarly situated, Plaintiffs/Appellees/Counter-Appellants,
VOLKSWAGEN GROUP OF AMERICA, INC., Defendant/Appellant/Counter-Appellee, CHARLES MILLER and VIVIAN MILLER, individually and on behalf of other persons similarly situated, Intervenor Plaintiffs/Counter-Appellants.

          Mandate Issued: 07/11/2017


          Terry W. West, Bradley C. West, THE WEST LAW FIRM, Shawnee, Oklahoma T. Christopher Tuck (admitted pro hac vice), A. Hoyt Rowell, III (admitted pro hac vice), RICHARDSON, PATRICK, WESTBROOK & BRICKMAN, LLC, Mount Pleasant, South Carolina Dennis E. Murray (admitted pro hac vice), MURRAY & MURRAY, Sandusky, Ohio, and Juan Bauta (admitted pro hac vice), THE FERRARO LAW FIRM, Miami, Florida, for Plaintiffs/Appellees/Counter-Appellants and Intervenor Plaintiffs

          John H. Tucker, Colin H. Tucker, Kerry R. Lewis, RHODES, HIERONYMUS, JONES, TUCKER & GABLE, Tulsa, Oklahoma and Daniel V. Gsovski, HERZFELD & RUBIN, PC, New York City, New York, for Defendant/Appellant/Counter-Appellee


         ¶1 The trial court previously granted attorney fees against Defendant/Appellant/Counter-Appellee Volkswagen Group of America, Inc., (Volkswagen) in an amount exceeding $7 million in this multi-jurisdictional, class action law suit. In an appeal from that award, the Oklahoma Supreme Court concluded the trial court abused its discretion by failing to deduct the entirety of fees claimed in certain "failed Florida litigation" when calculating the lodestar fee; the Court also concluded the trial court abused its discretion by multiplying the lodestar fee of approximately $3.6 million by 1.9. See Hess v. Volkswagen of Am., Inc., 2014 OK 111, ¶¶ 38 & 39, 341 P.3d 662. Thus, the Court reversed the trial court's order and remanded the case with instructions that "[t]he attorney fees, as herein modified, are to be assessed against Volkswagen... in a manner consistent with this opinion and as ordered by the trial court." Id. ¶ 40. The Court emphasized that the total recovery in this case against Volkswagen of only $45, 780 is "minuscule" when "the pay-out is spread across the entirety of the defined class[.]" Id. ¶ 35. However, the Court stated in its conclusion that "[t]here is a strong presumption that the lodestar method, alone, will reflect a reasonable attorney fee." Id. ¶ 39 (footnote omitted). The Court declined to address Volkswagen's "due process challenge, as attorney fees must be recalculated on remand." Id. ¶ 1 n.1.

         ¶2 Volkswagen now appeals from the trial court's Order awarding, on remand, an attorney fee in the amount of $983, 616.75, together with expenses and postjudgment interest "from the date of Judgment of June 14, 2013, through the present date." Volkswagen does not contest that the trial court, as instructed, subtracted the fees generated in the failed Florida litigation from the lodestar fee. Moreover, Volkswagen admits the trial court "then reduced the lodestar by 70%[.]" However, Volkswagen asserts on appeal that the new attorney fee award - an award which constitutes a mere 13.6% of the prior attorney fee award - is still too high. Volkswagen points out that the new award equals approximately "21.5 times as much money as... recovered for the entire class, " and argues that the award constitutes both "an abuse of discretion under Oklahoma law" and "violates due process." Volkswagen also argues the trial court erred in finding that postjudgment interest is to run from June 14, 2013, rather than from June 18, 2015 - the date of the Order which is the subject of the present appeal.

         ¶3 Plaintiffs/Appellees/Counter-Appellants Rajina Hess and Kelly Parsons, and Intervenor Plaintiffs/Counter-Appellants Charles and Vivian Miller, individually and on behalf of persons similarly situated (collectively, Plaintiffs), counter appeal. They argue the trial court erred in reducing the lodestar fee.

         ¶4 For a more detailed recitation of the facts and procedure of this case leading up to the prior appeal, see Hess, 2014 OK 111. This case was also the subject of an even earlier appeal - as noted by the Supreme Court, "[a] more detailed account of the underlying certification process can be found in Hess v. Volkswagen of America, Inc., 2009 OK CIV APP 84, 221 P.3d 132." 2014 OK 111, ¶ 3 n.5.


         ¶5 As stated by the Supreme Court in the prior appeal,

The reasonableness of attorney fees depends on the facts and circumstances of each individual case and is a question for the trier of fact. The standard of review for considering the trial court's award of an attorney fee is abuse of discretion. Reversal for an abuse of discretion occurs where the lower court ruling is without rational basis in the evidence or where it is based upon erroneous legal conclusions.

Hess, 2014 OK 111, ¶ 9 (footnotes omitted).


         I. Is the new attorney fee award so high as to constitute an abuse of discretion?

         ¶6 The fundamental goal of the trial court in this case was to "arriv[e] at a fair and reasonable fee for class counsel, " and the trial court's upward or downward adjustment, if any, of the lodestar fee - i.e., the "fee arrived at by multiplying the attorney's hourly rate by the time expended" - was to be based on application of those factors delineated by the Legislature in 12 O.S.Supp. 2013 § 2013 (G)(4)(e). Hess, ¶ 10. Those factors, as summarized by the Supreme Court, are:

time and labor required; novelty and difficulty of the questions; skill required to perform the legal services; preclusion of other employment; customary fee; whether the fee is fixed or contingent; time limitations; amount involved and results obtained; experience, reputation, and abilities of attorneys involved; undesirability of the case; nature and length of the professional relationship with the client; awards in similar causes; risk of recovery; and whether any benefits of the recovery take a non-cash form.

Hess, ¶ 10 (footnote omitted). [1]

         ¶7 The trial court accomplished this task in its detailed and well-reasoned Order. The trial court first calculated the lodestar fee: that is, "$3, 800, 757.00 in raw lodestar billings tendered by all class counsel, less the $522, 034.50 attributable to the [failed Florida] litigation, which is deducted from the lodestar, " to arrive at a lodestar fee of $3, 278, 722.50. The trial court noted that this amount is consistent with "the directives of the Supreme Court and the evidence previously received[.]" Volkswagen does not contest the fact that $3, 278, 722.50 constitutes the appropriate lodestar fee in this case.

         ¶8 The trial court further stated in its Order as follows:

Plaintiffs argue correctly that the Supreme Court concluded its opinion by stating that there is a strong presumption that the lodestar method alone will reflect a reasonable attorney fee. [ Hess, ¶ 39.] [Volkswagen] responds by correctly asserting that the Supreme Court stated in its opinion that "[i]n all cases, the attorney fees must bear some reasonable relationship to the amount in controversy." [ Id. ¶ 10.]
The Supreme Court previously held that a lodestar adjustment based on results obtained can be downward as well as upward, and substantial in amount as held in Arkoma Gas Company v. Otis Engineering Corp., 1993 OK 27, 849 P.2d 392. Therefore it is apparent to the Court that it has latitude in deciding a fee award between the amounts sought by [Plaintiffs] of $3, 290, 669.50 and that argued for by [Volkswagen] of $91, 560.00.

         ¶9 In Arkoma, the Supreme Court affirmed the trial court's reduction of a lodestar fee of $24, 627.23 down to $5, 500. The plaintiff in that case originally sought $70, 000 in damages. However, after a three-day jury trial the plaintiff recovered only $100. As stated by the Supreme Court,

The trial judge found that the hours and rates asserted by plaintiff were reasonable, but felt that an award of $24, 627.23 as attorneys' fees would be excessive and unfair where plaintiff recovered only $100.00. The trial judge recited that he had considered all of the factors in [ Burk ], but felt that he was required to consider the entire circumstances to ensure that such award was fair and reasonable under the circumstances.

Arkoma, 1993 OK 27, ¶ 4. In addition to the low recovery, there were also no "difficult questions of law in the case, " and "[t]here was no suggestion that any actions by the defense caused plaintiff's attorneys to expend an excessive amount of time." Id. ¶ 8. The Supreme Court concluded the trial judge appropriately "considered the amount of the attorneys' fees in relation to the result achieved by plaintiff and [in light of] the lack of novelty or complexity of the case." Id.

         ¶10 In the present case, Plaintiffs recovered only $45, 780. As noted by the Supreme Court in the prior appeal,

A nationwide class of 2, 103, 229 owners was certified here. At certification, Volkswagen admitted having received complaints from 663 persons involving the Jetta front spoilers being damaged from contact with a parking block or wheel stop. If all of the class had been awarded the $140 in damages provided to claimants, the total settlement amount would have approached $295 million. History has shown that only 310 valid claims have been filed and there has been a pay-out for damages for the minimal amount of $45, 780.

Hess, 2014 OK 111, ¶ 34.

         ¶11 The minimal actual recovery in this case of only $45, 780 is comparable to the minimal recovery of only $100 in Arkoma where the plaintiff originally sought $70, 000 in damages. Given the minimal recovery and the lack of complexity in Arkoma, the trial court reduced the lodestar fee by approximately 78% to $5, 500. Notably, the attorney fee ...

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