Hess v. Volkswagen of Am., Inc.

341 P.3d 662

2014 OK 111

Rajina Hess & Kelly PARSONS, Individually and on behalf of persons similarly situated, Plaintiffs/Appellees

v.VOLKSWAGEN OF AMERICA, INC., Defendant/Appellant.

No. 111978.

Supreme Court of Oklahoma.

Dec. 16, 2014.

John H. Tucker, Colin H. Tucker, Kerry R. Lewis, Rhodes Hieronymus Jones Tucker & Gable, Tulsa, Oklahoma, for Defendant/Appellant,

Daniel V. Gsovski, Herzfeld & Rubin, PC, New York, New York,

Terry W. West, Bradley C. West, The West Law Firm, Shawnee, Oklahoma, for Plaintiffs/Appellees,

T. Christopher Tuck (pro hac vice), A Hoyt Rowell, III (pro hac vice), Richardson, Patrick, Westbrook & Brickman, LLC, Mt. Pleasant, South Carolina

Dennis E. Murray Sr. (pro hac vice), Donna Evans (pro hac vice), Murray & Murray, Sandusky, Ohio,

Juan Bauta (pro hac vice), The Ferraro Law Firm, Miami, Florida

Clyde A. Muchmore, Melanie Wilson Rughani, Crowe & Dunlevy, Oklahoma City, Oklahoma, for amicus curiae, State Chamber of Oklahoma.

Opinion

WATT, J.

¶ 1 To dispose of the appeal, we must determine a single issue:¹ whether granting attorney fees exceeding $7 million in a multi-jurisdictional, class action law suit constitutes an abuse of discretion where $45,780 was awarded to the class as a whole. Here, the trial court originally determined the appropriate attorney fees to be $3,610,719.15 based on State ex rel. Burk v. City of Oklahoma City, 1979 OK 115, 598 P.2d 659 and the directives of 12 O.S. Supp.2009 § 2023.² Hess filed a motion to reconsider based on the fees awarded in Berry v. Volkswagen Group of America, 397 S.W.3d 425 (Mo.2013), a Missouri Supreme Court case involving a class action against Volkswagen related to defective window regulator claims. The trial court considered the Missouri case; and, adopting the identical analysis utilized in reaching a determination that the appropriate fee award was approximately $3.6 million, the trial court amended its order to reflect a multiplier of 1.9 for an adjusted award of $7,221.438.30.³

¶ 2 In calculating the lodestar, the trial court included hours in failed, out-of-state litigation concerning similar issues to those presented here. Based on these facts, we hold that the $7 million attorneys' fee award constituted an abuse of discretion.

RELEVANT FACTS AND PROCEDURAL HISTORY

¶ 3 In 2005, Hess filed a class action suit against Volkswagen for breach of express and implied warranties relating to an improperly designed front spoiler. The claimants argued that there were design defects which caused the Jetta's⁴ front spoiler cover to catch on curbs or wheel-stops resulting in damage to the front spoiler. Certification of the class was upheld by the Court of Civil Appeals in 2009.⁵ Plaintiffs in Ohio filed a similar action in 2004. Volkswagen successfully decertified a Florida cause in July of 2005.⁶

¶ 4 The parties entered a settlement agreement in December of 2011. Ohio residents filed an application to intervene on July 31, 2012. The Amended Order of Final Judgment Granting Final Approval of Settlement and Certification of Class was entered in November of the same year.

¶ 5 In conformance with the settlement, Volkswagen notified in excess of two million owners and lessees of class vehicles nationwide.

The parties agree that the average pay-out to each successful applicant for repair costs constituted a full recovery. No Oklahoma citizens received any settlement pay-out. Claims from other states totaled 310 for a distribution by Volkswagen of $45,780 or approximately $140.00 per claimant.⁷

¶ 6 As a part of the settlement, Volkswagen agreed to pay the claimants' reasonable attorney fees and costs.⁸ Hess filed its Brief in Support of an Award of Attorneys' Fees, Expenses and Class Representative Incentive Awards on October 2, 2012 seeking a combined fee and expense request of $15,000,000.00.⁹ On April 10, 2013, the trial court entered an order granting Hess attorney fees of $3,610,719.15 and expenses of $146,133.06. The attorney fee award included a downward adjustment¹⁰ of 5% to accommodate for fees incurred in the failed Florida litigation. In support of the award, the trial court provided detailed analysis of the legislatively enacted factors found in 12 O.S. Supp.2013 § 2023.

¶ 7 The day before the order awarding attorney fees issued, the Missouri Supreme Court decided Berry v. Volkswagen Group of America, 397 S.W.3d 425 (Mo.2013). In Berry, the Missouri court determined that no abuse of discretion occurred by the trial court's application of a 2.0 multiplier to the lodestar. Relying on the Missouri case, Hess filed a Motion for Reconsideration of the Order Granting an Award of Fees and Expenses on April 19, 2013.

¶ 8 The trial court considered Berry and, ultimately, applied a multiplier of 1.9 to its earlier determined lodestar of $3,800,757.00 resulting in an adjusted fee award of $7,367,571.36. Volkswagen appealed, filing a timely Petition In Error on July 12, 2013. On February 25, 2014, the claimants' motion to retain was granted. The State Chamber filed an amicus brief April 1st. After defects in the record were corrected, we received the same from the trial court on June 20, 2014.

STANDARD OF REVIEW

¶ 9 The reasonableness of attorney fees depends on the facts and circumstances of each individual case and is a question for the trier of fact.¹¹ The standard of review for considering the trial court's award of an attorney fee is abuse of discretion.¹² 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.¹³

¶ 10 Appropriate steps to determine attorney fees begin with perusal of detailed time records to determine a lodestar fee arrived at by multiplying the attorney's hourly rate by the time expended. Next, in class action suits, the fee may be enhanced by application of certain factors to be considered in arriving at a fair and reasonable fee for class counsel. The considerations are delineated by the Legislature in 12 O.S. Supp.2013 § 2023 and include: 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.¹⁴ In all cases, the attorney fees must bear some reasonable relationship to the amount in controversy.¹⁵

¶ 11 UNDER THE FACTS PRESENTED, THE TRIAL COURT ABUSED ITS DISCRETION IN COMPUTING THE LODESTAR AND IN APPLYING A MULTIPLIER OF 1.9 TO THE SAME.

¶ 12 Hess originally sought $15 million in attorney fees. Here, the claimants assert that the trial court did not abuse its discretion in granting the motion for reconsideration and applying an incentive fee of 1.9 to its originally calculated lodestar, which included fees from the Florida failed certification proceeding. It argues no error resulted from the trial court's reliance on a single out-of-state opinion in making its incentive decision, noting that Oklahoma law compels consideration of awards in similar causes.

¶ 13 Volkswagen argues that including the hours attributable to the failed Florida litigation in determining the lodestar was inappropriate and that application of an incentive fee of 1.9 to the calculated fee was unwarranted. The claimants contend that the Missouri case upon which the court relied is contrary to Oklahoma law and distinguishable. We agree with Volkswagen's assertions.

¶ 14 a. Including attorney fees incurred in the failed Florida litigation in computing the fee award was a clear abuse of discretion.

¶ 15 Juan B. Bauta represented Florida class members in Volkswagen of America, Inc. v. Sugarman, 909 So.2d 923 (Fla.App.2005) for relief identical to that sought in the instant cause. The Florida claimants alleged that, as a result of a design defect, the class suffered repeated damage to the front spoiler assembly of their Volkswagen Jettas.

¶ 16 The trial court certified the class. The Florida Appellate Court determined that the trial court abused its discretion in reaching the certification ruling. It reasoned that the element of causation would require an individual inquiry into each plaintiff's claim. Therefore, the cause was reversed and remanded for decertification. Rehearing was denied.

¶ 17 Volkswagon asserts that Juan B. Bauta (Bauta) billed some 803.13 hours in the failed Florida litigation. It asserts that including these hours in the raw lodestar total in the instant cause constituted an abuse of discretion. Hess argues that inclusion of the hours was appropriate as Bauta's experience in Florida contributed to the successful settlement of the instant cause and allowed Florida residents to be included within the settlement class for payment of damages. We disagree with the claimant's arguments.

¶ 18 Here, this Court had no opportunity to review the certification decision. Volkswagen failed to timely file its certiorari petition, requiring this Court to dismiss the cause on September 21, 2009. Therefore, the Court of Civil Appeals ruling on certification is the law of the case.

¶ 19 In Hess v. Volkswagen of America, Inc. [Hess I ], 2009 OK CIV APP 84, 221 P.3d 132, the Court of Civil Appeals stated:

VW relies on a Florida case, Volkswagen of America, Inc. v. Sugarman, 909 So.2d 923 (Fla.Ct.App.2005), which, like the instant case, concerns a class composed of Jetta owners whose front bumper assemblies had been damaged as a result of contact with a wheel stop or curb. The Florida appellate court noted that, under Florida law, the “predominance requirement is not satisfied when the claims involve factual determinations which are unique to each plaintiff.” Id. at 924. It reversed class certification

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