Volkswagen AG is accusing a lead attorney in the diesel emissions litigation of double-counting his billable hours, the latest pushback the automaker has lodged over legal fees requested by plaintiffs attorneys.
As part of its $14.7 billion settlement, Volkswagen agreed not to contest $175 million in fees and expenses sought by lead plaintiffs attorneys in resolving consumer claims over nearly 500,000 diesel vehicles. Four months later, with its hands seemingly tied in that prong of the case, Volkswagen is fighting back against additional fee requests.
On March 9, Volkswagen alleged that Steve Berman, the lead plaintiffs attorney in its separate $1.2 billion settlement with franchise dealers, “double-counted” his billable work in a request for $28.5 million in attorney fees. Specifically, Volkswagen claims Berman’s firm, Seattle’s Hagens Berman Sobol Shapiro, wants credit for nearly $1.5 million in billable hours in the dealer case when those same hours were already submitted as justification for the $175 million request in the consumer case, in which Hagens Berman is one of 22 firms on the plaintiffs’ steering committee.
In an email, Berman wrote that Volkswagen’s complaint is based on an “erroneous assumption” that the fee requests in both cases are based on law firm billing records, rather than a percentage of the settlement fund.
Volkswagen’s “arguments about supposed ‘double-counting’ are designed to play in the press and divert attention away from its seven years of ongoing outrageous criminal behavior at the root of this case,” Berman wrote in a response filed on Monday.
Volkswagen has a history of contesting attorney fees, so it’s no surprise to see the German automaker scrutinizing time records.
The episode also highlights the tension that can erupt in class actions as judges demand detailed time records in support of attorney fee requests, even where awards are not directly tied to hours worked. The so-called lodestar, the amount of hours that attorneys spent working on the case multiplied by their hourly billing rates, is used as a benchmark to prevent excessive attorney fee awards.
This month, three firms admitted that they had double-counted hours in a $300 million securities class action settlement with State Street Bank for which they were paid $75 million. The three firms, which include San Francisco’s Lieff Cabraser Heimann & Bernstein, have agreed to pay $2 million for a retired federal judge to probe into their fee request. (Lieff Cabraser partner Elizabeth Cabraser is lead counsel in the $14.7 billion Volkswagen settlement.)
Volkswagen’s underlying complaint goes well beyond Berman’s timekeeping. The carmaker says it agreed to pay $175 million in attorney fees on the belief that it was resolving all emissions litigation over its 2.0-liter diesel vehicles. In addition to Berman’s fee request, Volkswagen objected last month to fees sought by more than 200 individual law firms that aren’t on the committee but are claiming attorney liens or other compensation tied to the consumer settlement.
“Volkswagen’s agreement not to oppose the PSC’s request for $175 million in fees and expenses is to compensate PSC members for all their work on the 2.0-liter litigation,” wrote Volkswagen attorney Robert Giuffra, a partner at New York’s Sullivan & Cromwell. “This was Volkswagen’s understanding in not opposing the PSC’s fee request.”
In their original request for $28.5 million in fees, Berman and another lead attorney in the dealership case, Richard Sox, a partner at Bass Sox Mercer in Tallahassee, Florida, noted that their request was substantially low given that the settlement of more than $1 billion could have justified a fee of “several hundred million dollars.”
Then, on Feb. 23, in response to the judge’s request, Berman submitted a lodestar estimate of about $3.5 million, of which nearly $1.5 million was “hybrid time” his firm spent on both the consumer and dealer case. Berman suggested that the “hybrid time” be removed from the consumer case “to avoid even the appearance of double-counting.” In a March 6 declaration, Cabraser backed the change, insisting it would have no effect on the $175 million fee request.
To Volkswagen’s attorneys, that seems ilke gaming the system. Volkswagen already has noted several times in recent court papers it wasn’t aware when it agreed to the $175 million request that the steering committee’s estimated lodestar was just $63.5 million. Shifting the $1.5 million would not only reduce the lodestar even more in the consumer case but would bolster Berman’s billable hours in the dealer case by about 40 percent.
“Volkswagen is unaware of any law that would allow counsel to call work done for one case ‘hybrid,’ submit time for that work in a fee application for that case, and then later, when convenient, move that time to another fee application in a different case brought on behalf of different clients,” Giuffra wrote.
In a footnote, Volkswagen, whose official opposition to attorney fees in the dealer case is due March 16, said it would be moving to compel production of Berman’s time records in both cases.
In his email, Berman said the lodestar amounts don’t matter since the fee requests in both cases are based on a percentage of the total settlement funds. The fee request in the dealer case makes up 2 percent of a fund estimated to surpass $1.3 billion, when including incentive payments, he noted.
Even if the dispute gets resolved, Volkswagen might have more fee fights in the future. The committee has yet to make a request for fees in the $1.2 billion settlement over 75,000 3.0-liter diesel vehicles, which was preliminarily approved last month. In a footnote to its objection over the individual firm fees, Volkswagen noted that it retained its rights to seek audits of the lodestar amounts in any request made in relation to the 3.0-liter settlement or to “object to the misallocation of any PSC work in connection with 2.0-liter claims to the 3.0-liter lodestar figure.”