WATT, J.
¶ 1 To dispose of the appeal, we must determine a single issue:
¶ 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.
¶ 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's
¶ 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.
¶ 6 As a part of the settlement, Volkswagen agreed to pay the claimants' reasonable attorney fees and costs.
¶ 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.
¶ 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.
¶ 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.
¶ 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.
¶ 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
¶ 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:
¶ 20 Most certainly, in arguments before the Court of Civil Appeals, Hess opposed application of Sugarman to the certification decision. Such opposition leads to the conclusion that Hess asserted either that Florida law was substantially different from that of Oklahoma's for certification purposes or that Bauta's representation may have been inadequate. Nevertheless, whether either, both, or none of these deductions are correct, arguments that Mr. Bauta's experience in the failed Florida litigation was beneficial to the conclusion of the instant cause is unconvincing.
¶ 21 There was no issue of settlement addressed in Sugarman and the Court of Appeals concluded that the Florida law on certification did not comport with Oklahoma's on the same subject. Furthermore, Hess provides no citation of authority for the proposition that fees incurred in a cause independent of another may be collected in related litigation.
¶ 22 Under the facts presented and without supporting jurisprudence, it is difficult for this Court to conceive how Bauta's experience in Florida was of assistance to Hess here, especially where the attorney was unsuccessful at the certification stage in Florida. Therefore, we hold that the inclusion of Bauta's legal fees attributable solely to the Florida litigation in the lodestar calculation was an abuse of discretion.
¶ 24 The trial court originally awarded $3,610,719.15 in attorneys' fees. In so doing, the court found "that the results obtained by Class Counsel do not mandate an increase in the fee award." It determined further that "a slight reduction in the lodestar is warranted based on the inclusion of attorney fees from the Sugarman litigation." Taking in consideration the monetary outcome of the case and balancing that with the fees awarded, the trial court determined that "a 5% reduction in the lodestar is justified."
¶ 25
¶ 27
¶ 28 Berry brought a class action against Volkswagen related to defective window regulators installed in some of its vehicles. On appeal from the trial court's award of attorney fees, the Missouri court determined that the trial court did not abuse its discretion in determining the lodestar amount of $3,087,320 or in applying a multiplier of 2.0 for a total award of $6,174.650 in attorneys' fees.
¶ 29 Like the fees in Berry, fees here were contingent in nature. Nevertheless, the trial court noted that there was "no evidence of any lost opportunity by any Class Counsel" to take on other clients or cases. Rather, it appears that there is evidence that counsel had every opportunity to participate in other litigation and nationwide class actions.
¶ 30 Perhaps more instructive here than Berry is In re Volkswagen & Audi Warranty Extension Litigation, 692 F.3d 4 (1st Cir. 2012). Although Audi concerned the primary issue of whether federal or state law would govern the settlement of a class action, its analysis of the application of a multiplier provides guidance here.
¶ 31 Audi involved a class action alleging improprieties in Volkswagen's warranty extension or reimbursement program as it related to engine defects in certain Volkswagen and Audi vehicles. As is the case here, protracted litigation resulted in a settlement
¶ 32 The claimants' attorneys in Audi argued that they should receive $37.5 million in attorneys' fees from what they anticipated would be a $414 million recovery. A special master recommended an award of $30 million. Applying a lodestar calculation, the district court calculated fees at $500.00 per hour to produce a base lodestar value of $7,734,000. It applied a multiplier of 2.5, resulting in a fee of $19,335,000. It utilized these figures to support a $30 million fee award.
¶ 33 On appeal, the appellate court first determined that state rather than federal law was applicable to attorney fee calculations. The cause was remanded for application of Massachusetts law. As to the enhancement figure, the Court of Appeals for the First Circuit noted:
Although the settlement value in Audi was estimated to be $414 million, Volkswagen contended that the actual number would be in the $50 million range.
¶ 34 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
¶ 35 This Court has long recognized the importance of the relationship between the amount sued for in a case seeking only money damages and the results obtained.
¶ 36 When we consider the award to the class, as did the federal court in Audi, we have little difficulty in concluding that application of a 1.9 enhancement figure to the lodestar amount constituted an abuse of discretion. Nevertheless, we are loath to go so far as did the federal court and to instruct the district court that the record will not support application of a percentage amount to the lodestar figure. Our hesitancy lies in the fact that we are aware that the trial court is cognizant that multipliers may adjust a lodestar upwards or may diminish the award.
¶ 37 The decision to file a nationwide class action can be the cause of massive amounts of work. The class counsel, being the masters of their complaints and all attorneys and their clients being servants to them, must
¶ 38 Trial judges have wide discretion in making reductions based on estimates of time spent on activities that are non-compensable in whole or in part.
¶ 39 There is a strong presumption that the lodestar method, alone, will reflect a reasonable attorney fee.
¶ 40 The cause is reversed and remanded. The attorney fees, as herein modified, are to be assessed against Volkswagen and awarded to Hess in a manner consistent with this opinion and as ordered by the trial court.
COLBERT, C.J., REIF, V.C.J., KAUGER, WATT, WINCHESTER, EDMONDSON, TAYLOR (by separate writing), GURICH, JJ., concur
COMBS, J., disqualified.
TAYLOR, J., concurring (joined by WINCHESTER, J.)
¶ 1 I concur in today's opinion finding that the trial court abused its discretion, vacating the attorney-fee award, and requiring the trial court to start anew in determining the reasonable amount of attorney fees, but write separately to provide guidance in determining reasonable attorney fees on remand. In reviewing the attorney-fee award, it is important to understand what this case is about and what it is not about. It is about a $140.00 replacement, including parts and labor, of a piece of decorative plastic on a Volkswagen Jetta. It is not about attorneys acting as private attorneys general protecting the social good; it is about attorneys acting with a business plan.
¶ 2 Rule 1.5(a) of the Oklahoma Rules of Professional Conduct (ORPC), 5 O.S.2011, ch. 1, app. 3-A, requires attorneys to charge a reasonable fee. Rule 1.5(a) is the basis for the requirement that all fees, even those awarded in a class action, be reasonable. The considerations for determining reasonable attorney fees were set out in Rule 1.5(a) well before State ex rel. Burk v. City of Oklahoma City, 1979 OK 115, 598 P.2d 659, see 5 O.S.1961, ch. 1, app. 3, § 12, and are substantially identical to those in Title 12, Section 2023(G) of the Oklahoma Statutes with the exception that Section 2023(G) also includes as considerations whether the case is undesirable, awards in similar causes, and
¶ 3 There are two primary methods of calculating attorney fees in class actions: the lodestar method and the contingency fee method.
¶ 4 In addition to failing to give proper weight to the most important consideration (the relationship between the attorney fees and the recovery), the trial court also misconstrued the nature of the claims and erred in its application of a number of the considerations in determining the reasonable attorney fees. For example, the district court's finding that the litigation was "arduous and complicated" and that the attorneys showed a particular level of "expertise and courage" is unfounded and an abuse of discretion. When one thinks of courage, Clarence Darrow and the fictional Atticus Finch come to mind. It is hard to imagine promoting the cause of decorative plastic spoilers on a Volkswagen Jetta as courageous. "Courage" and decorative plastic parts which cause no danger to any person are concepts that do not go together. This case involves two jurisdictions, Oklahoma and Ohio, as the Florida case was dismissed, not numerous jurisdictions making coordination unduly complex. The fact that the case was not certified in Florida does not make this a complex case or an unpopular cause which would make it difficult to obtain counsel or require courage to litigate.
¶ 5 This is a very simple case which does not involve death, traffic safety, or bodily harm. This case involves a cosmetic defect so insignificant that the vast majority of the 2.1 million class members did not bother to file a claim, and only 310 were able to secure any recovery.
¶ 6 This case was brought on a contingency fee basis, meaning that the attorneys would have recovered at most $25,000.00 in fees from their clients. The trial court took into account that "much of the litigation occurred follow[ing] the reversal of certification" in the Florida case. Contingency fees are generally based on the final recovery in a case. Here, the trial court should give no consideration to resources expended in a failed certification attempt in Florida.
¶ 7 In considering the nature and length of the professional relationship between the attorneys and the clients, the trial court mistakenly considered the length of this litigation, including the litigation in Florida which did not involve most of the attorneys in this
¶ 8 The trial court considered several factors improperly in rationalizing that the attorney-fee award is reasonable, such as recovery of future claims. The class recovery at the relevant time, i.e., when the attorney fees were awarded, was at most $47,040.00. In trying to justify the attorney fees, the trial court improperly considered future claims. Still, the trial court's most egregious error by far was failing to give proper consideration to the relationship of the attorney fees to the recovery.
¶ 9 The attorneys' requested fees of over $14,000,000.00 is 317 times the recovery. The trial court's attorney-fee award of $7,221,438.30 is 154 times the recovery. The initial trial court award of $3,610,719.15 in attorney fees is 77 times the recovery. Lastly, if the trial court on remand omits only the fees charged in the Florida litigation and caps attorney fees at $650.00 an hour, the attorney-fee award will still be 64 times the claimants' recovery. Such a disproportional benefit to the lawyers relative to the claimants' recovery is repugnant to the purposes of our judicial system and to the purposes of class actions and erodes confidence in the courts. See Pearson v. NBTY, Inc., 772 F.3d 778, 781, 2014 WL 6466128 *3 (7th Cir.2014) (calling "outlandish" attorney fees amounting to sixty-nine percent of the aggregate value of the settlement).
¶ 10 Justice O'Connor warned against another "troubling [consequence]" of approving fee agreements without inquiring into any rational relationship between the fee and the recovery. Int'l Precious Metals Corp. v. Waters, 530 U.S. 1223, 1223, 120 S.Ct. 2237, 147 L.Ed.2d 265 (2000) (O'Connor, J., statement respecting the denial of the petition for a writ of certiorari). Such fee agreements would "encourage the filing of needless lawsuits where, because the value of each class member's individual claim is small compared to the transaction costs in obtaining recovery, the actual distribution to the class will inevitably be minimal." Id. Justice O'Connor's concerns are relevant when class attorneys are awarded fees based on a settlement agreement. The claimed transaction costs for this simple litigation are curiously high-eight attorneys and two paralegals from four firms in four different states racked up over 7,100 hours to secure a $140.00 recovery for about 310 class members. The trial court's attorney-fee award reflected a preposterous number of attorney and paralegal hours given the minimal and paltry recovery. On remand, the trial court must act with a wise and courageous sword to sever the unreasonable attorney fees and bring them in line with the recovery by about 310 class member of at most $47,040.00 in benefits.