In re Lawnmower Engine Horsepower Mktg. & Sales Practices Litig.

733 F.Supp.2d 997

In re LAWNMOWER ENGINE HORSEPOWER MARKETING & SALES PRACTICES LITIGATION. This Document Relates to All Cases.

MDL. No. 08-1999.

United States District Court, E.D. Wisconsin.

Aug. 16, 2010.

Jonathan E. Fortman, Law Office of Jonathan E. Fortman LLC, Richard J. Burke, Richard J. Burke LLC, St. Louis, MO, Brian M. Sund, Morrison Fenske & Sund PA, Minnetonka, MN, Greg L. Davis, K. Scott Wagner, Law Office of Greg Davis, Montgomery, AL, Vincent J. Esades, Heins Mills & Olson PLC, Minneapolis, MN, Edward K. Wood, Wood Law Firm LLC, Joe R. Whatley, Jr., Whatley Drake & Kallas LLC, James R. Grisham, Gulas & Stuckey PC, Birmingham, AL, Daniel E. Becnel, Jr., Becnel Law Firm LLC, Reserve, LA, Frank E. Piscitelli, Jr., Frank Piscitelli Co. LPA, Cleveland, OH, John Dale Sloan, Jr., Garrett W. Wilson, Sloan Bagley Hatcher & Perry, Longview, TX, Andres F. Alonso, Great Neck, NY, Marc Allan Busman, Busman & Busman PC, Fairfax Station, VA, Cheryl Marie Gill, Johns Flaherty & Collins SC, La Crosse, WI, Anthony D. Shapiro, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Murray Ogborn, Ogborn Summerlin & Ogborn LLC, Denver, CO, Edgar Dean Gankendorff, Provosty & Gankendorff LLC, New Orleans, LA, Garrett J. Bradley, Thornton & Naumes LLP, Boston, MA, Dean M. Googasian, Googasian Law Firm, Bloomfield Hills, MI, Eric B. Fastiff, Joseph R. Saveri, Lieff Cabraser Heimann & Bernstein LLP, San Francisco, CA, Brian D. Long, Rigrodsky & Long PA, Wilmington, DE, James Howard Young, Young & Young, Indianapolis, IN, David C. Indiano-Vicic, Indiano & Williams PC, San Juan, PR, for Plaintiffs.

Debbie L. Berman, Jenner & Block LLP, Scott M. Mendel, Michael E. Martinez, Michelle S. Taylon, K & L Gates LLP, Thomas O. Kuhns, John R. Worth, Kirkland & Ellis LLP, David B. Johnson, Charlene M. Yaneza, Michael C. Andolina, Sidley Austin LLP, Nika Gembicki, Paula D. Friedman, Roger L. Longtin, DLA Piper U.S. LLP, Stephen L. Agin, Eric N. Macey, Alexander L. Berg, Julie A. Johnston-Ahlen, Novack & Macey LLP, Chicago, IL, Douglas M. Poland, Howard A. Pollack, Godfrey & Kahn SC, Gerardo H. Gonzalez, Richard H. Porter, Gonzalez Saggio & Harlan LLP, Milwaukee, WI, Suzanne K. Richards, Vorys Sater Seymour & Pease LLP, Columbus, OH, Mark S. Baldwin, Brown Rudnick LLP, Hartford, CT, Joel A. Blanchet, Kirkland & Ellis LLP, James H. Neale, Robert D. Owen, Fulbright & Jaworski LLP, New York, NY, Carl J. Pesce, John E. Galvin, Thompson Coburn LLP, St. Louis, MO, William H. Manning, Joel A. Mintzer, Robins Kaplan Miller & Ciresi LLP, Minneapolis, MN, for Defendants.

DECISION AND ORDER

LYNN ADELMAN, District Judge.

The present litigation consists of multiple class actions that the Panel on Multidistrict Litigation transferred to this district and consolidated for pretrial purposes. The predominant issue in all actions is whether manufacturers of lawnmowers and/or lawnmower engines conspired to materially overstate and/or fraudulently advertise the horsepower produced by their lawnmower products. The parties have reached a global settlement. In prior orders, I certified settlement classes and preliminarily approved the settlement agreements. On June 22, 2010, I held a final fairness hearing. Before me now are plaintiffs' motion for final approval of the settlements, plaintiffs' motion for attorneys' fees, and several related motions. This order also addresses a dispute that has arisenamong the defendants concerning their rights to contribution and indemnification against each other.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs have filed class action complaints in all fifty states, the District of Columbia and the Commonwealth of Puerto Rico, alleging that, since 1994, defendants ¹ have been engaged in a conspiracy to inflate the price of lawnmowers by manipulating the horsepower ratings of lawnmower engines. According to plaintiffs, lawnmower engines with greater horsepower produce more power, more power means "better and faster" lawnmower performance, and consumers generally consider lawnmowers with greater horsepower to be "better" lawnmowers. Defendants thus sell lawnmowers represented as having greater horsepower at higher prices than those with supposedly less horsepower.

Under plaintiffs' theory of the case, defendants manipulate the horsepower labeling on their products in two different ways. First, defendants overstate the horsepower of their products, advertising products as having greater horsepower than they actually do. Second, defendants market and sell lawnmowers containing identical engines as two different products, one with supposedly greater horsepower than the other. Plaintiffs allege that defendants conspire with one another to ensure that they are all consistently misrepresenting their horsepower ratings. Plaintiffs further allege that defendants, though various trade groups, have adopted phony horsepower labeling standards designed to conceal their fraudulent acts and facilitate a price-fixing scheme. Plaintiffs contend that these actions violate federal and state antitrust statutes, the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68 ("RICO"), state consumer protection and warranty statutes, and state unjust enrichment and conspiracy laws.

Class counsel began investigating the lawnmower industry in 2003, shortly after learning of this alleged fraud and conspiracy from an industry insider. Counsel investigated and confirmed the insider's information and, in 2004, filed a nationwide class action in Illinois state court. Defendants responded by filing eighteen separate motions to dismiss. While the motions to dismiss were briefed and argued, plaintiffs initiated discovery. Shortly thereafter, defendants suggested that the parties begin settlement negotiations. The parties then engaged in mediation that continued into 2005. To further settlement negotiations, defendants provided plaintiffs with extensive sales and engineering data, and plaintiffs hired expert witnesses to analyze this data and evaluate plaintiffs' likelihood of success on the merits of their claims and the amount of damages they could establish at trial.

In May 2005, while global settlement talks continued, defendant MTD approached plaintiffs and offered to enter into a unilateral settlement. By June 2005, plaintiffs had reached a settlement agreement with MTD, pursuant to which plaintiffs released MTD from liability in exchange for MTD's agreement to cooperatewith plaintiffs against the remaining defendants. MTD also agreed to change its labeling practices so that they were no longer misleading. However, MTD did not agree to pay any money to the class.

According to plaintiffs' counsel, MTD's cooperation has been invaluable. Among other things, MTD provided plaintiffs with physical evidence showing that defendants sell identical engines with varying horsepower labels; information regarding a secret group, code named the "Eagle Group," which took concerted steps to institute an industry standard designed to cover defendants' fraudulent practices; details showing how defendants manipulate horsepower tests to mislead consumers; evidence showing that horsepower inflation was openly discussed at meetings among defendants; documents demonstrating the direct correlation between price and horsepower; evidence that certain defendants provided certain retailers with exclusive horsepower arrangements whereby the preferred retailer would get the exclusive right to use purportedly higher horsepower labels than other retailers for the same engines; and evidence substantiating plaintiffs' allegation that defendants provide different horsepower numbers to the EPA and state environmental protection agencies than they do to consumers.

Armed with the information provided by MTD, plaintiffs continued global mediation with the remaining defendants. Initially, the mediation was unsuccessful. However, defendant Honda agreed to participate in separate mediation sessions with a different mediator. These negotiations led to a separate settlement with Honda, which was finalized on December 21, 2006. Pursuant to the settlement, Honda agreed to pay $7.5 million to the class.

Meanwhile, defendants removed the Illinois state-court action to the U.S. District Court for the Southern District of Illinois pursuant to the Class Action Fairness Act and filed new motions to dismiss. Plaintiffs then filed a motion for preliminary approval of the MTD settlement. On March 30, 2007, the court made an entry on the docket indicating that the complaint was dismissed with leave to re-plead and that plaintiffs should resubmit the MTD settlement agreement for preliminary approval after filing an amended complaint. More than one year later, on May 8, 2008, the court issued a memorandum in which it explained its decision. The court dismissed the RICO claim with prejudice and dismissed the non-Illinois state-law claims without prejudice, indicating that plaintiffs could re-file class action complaints in each state whose laws were at issue. The court also stated that it was rejecting the MTD settlement because it would provide nothing of value to the class.

Following the court's decision, plaintiffs began filing class actions in every jurisdiction in the United States. Defendants then moved the Panel on Multidistrict Litigation to centralize all cases for coordinated pretrial proceedings. On December 5, 2008, the panel granted the motion and ordered that all cases be transferred to me for pretrial purposes. Shortly after the cases were transferred here, the parties indicated that they wanted to resume global settlement negotiations. Pursuant to the parties' request, I stayed all litigation on the merits so that they could focus on mediation with Edward Infante, a retired magistrate judge. Over the course of the next several months, the parties engaged in multiple rounds of mediation with Judge Infante. Eventually, plaintiffs reached a settlement with the "Group of Six" defendants-Sears...