Coupon

(Reuters) – A new decision from the 9th U.S. Circuit Court of Appeals, vacating a $14.8 million fee award to class counsel in a case alleging that Whirlpool dishwashers were prone to overheat, seems likely to discourage plaintiffs’ lawyers from agreeing to settlements in which a big chunk of the relief can be characterized as a coupon.

Under the settlement agreement at the heart of the 9th Circuit case, class counsel’s fees were to be paid directly by Whirlpool rather than coming from the class recovery. But the two sides could not agree on an amount. The company and plaintiffs’ lawyers had widely divergent views on the value of the settlement, which included cash payments to dishwasher owners who had to repair or replace their appliances as well as rebates discounting the price of future dishwasher purchases. Plaintiffs’ lawyers from Chimicles Schwartz Kriner & Donaldson-Smith; Rifkind Weiner Livingston; Lieff Cabraser Heimann & Bernstein; Law Offices of Jeffrey M. Cohon and Weinstein Kitchenoff & Asher claimed the entire deal was worth as much as $116.7 million to the class. Whirlpool said that the actual class recovery would be more like $4.2 million, based on the 3.7% claims rate and deficient documentation by most of the owners seeking a cash payout.

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Rather than award fees based on a percentage of the settlement, U.S. District Judge Fernando Olguin of Los Angeles based his fee award on class counsel’s lodestar billings of nearly $9 million, applying a 1.68 multiplier for the “impressive” results and novelty of the case.

Whirlpool, represented by Mayer Brown, appealed the fee award. Objectors represented by the Bandas Law Firm, Lang Hanigan & Carvalho, the Law Office of Sam Miorelli and Scott & Cain also appealed, protesting approval of the settlement as well as the fee award.

The 9th Circuit panel – Judges Richard Clifton, Kenneth Lee and U.S. District Judge Frederic Block of Brooklyn – ruled in an opinion written by Judge Lee that 9th Circuit precedent in 2013’s In re HP Inkjet Printer Litigation and 2018’s Easysaver Rewards Litigation precluded Judge Olguin from basing the fee award only on class counsel’s lodestar billings. Those decisions held that the Class Action Fairness Act does not allow trial judges to award lodestar fees for coupon settlements. (Plaintiffs’ lawyers argued that the rebates in the Whirlpool settlement were not coupons, but the 9th Circuit said they were because class members would have to lay out additional money to receive the credit, which applied only to the future purchase of a Whirlpool dishwasher within a limited timeframe.)

When judges are setting fees for a “mixed” settlement that includes both cash and coupon components, the 9th Circuit said, the preferable method is to disaggregate the value of the cash and coupon components and add together separate calculations of appropriate fees for the two components. Fees for the non-coupon piece of the deal can be based on