In Re:

OPPOSITION to MOTION for Attorney Fees 371

C.D. Cal.February 5, 2015

1                            -i- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES QUINN EMANUEL URQUHART & SULLIVAN, LLP Shon Morgan (Bar No. 187736) shonmorgan@quinnemanuel.com Joseph R. Ashby (Bar No. 248579) josephashby@quinnemanuel.com John Lee (Bar No. 272229) johnlee@quinnemanuel.com 865 South Figueroa Street, 10th Floor Los Angeles, California 90017-2543 Telephone: (213) 443 3000 Facsimile: (213) 443 3100 Karin Kramer (Bar No. 87346) karinkramer@quinnemanuel.com 50 California Street, 22nd Floor San Francisco, CA 94111 Telephone: (415) 875-6600 Facsimile: (415) 875-6700 Attorneys for Defendants Hyundai Motor America and Hyundai Motor Company [LIST OF COUNSEL CONTINUED ON NEXT PAGE] UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION IN RE; HYUNDAI AND KIA FUEL ECONOMY LITIGATION CASE NO. 2:13-ML-02424-GW PUBLIC REDACTED VERSION DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES, REIMBURSEMENT OF EXPENSES, AND COMPENSATION OF NAMED PLAINTIFFS [Declarations of Joseph R. Ashby and Gary Greenfield filed concurrently] Date: March 19, 2015 Time: 8:30 a.m. Courtroom: 10 Hon. George H. Wu Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 1 of 31 Page ID #:8377 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -ii- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES DYKEMA GOSSETT PLLC James P. Feeney (Bar No. 219045) jfeeney@dykema.com Benjamin W. Jeffers (pro hac vice) bjeffers@dykema.com Dommond E. Lonnie (Bar No. 142662) dlonnie@dykema.com 333 S. Grand Avenue, Suite 2100 Los Angeles, CA 90071 Telephone: (213) 487-1800 Facsimile: (213) 487-1850 Attorneys for Defendant Kia Motors America, Inc. HOGAN LOVELLS US LLP Dean Hansell (Bar No. 93831) dean.hansell@hoganlovells.com 1999 Avenue of the Stars, Suite 1400 Los Angeles, California 90067 Telephone: (310) 785-4665 Facsimile: (310) 785-4601 Michael L. Kidney (pro hac vice) michael.kidney@hoganlovells.com 555 Thirteenth St., NW Washington, DC 20004 Telephone: (202) 637-5883 Facsimile: (202) 637-5910 Attorneys for Defendants Hyundai Motor America and Hyundai Motor Company Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 2 of 31 Page ID #:8378 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -iii- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES TABLE OF CONTENTS Page PRELIMINARY STATEMENT ................................................................................. 1 RELEVANT FACTUAL BACKGROUND ............................................................... 2 ARGUMENT ............................................................................................................... 7 I. KRAUTH COUNSEL CANNOT SEEK FEES FOR A SETTLEMENT THEY DO NOT SUPPORT .............................................................................. 7 II. THE FEES KRAUTH COUNSEL REQUEST ARE EXCESSIVE ................ 10 A. Krauth Counsel Cannot Be Awarded Fees For Bird ............................ 10 1. They Cannot Claim Fees For Bird On A “Catalyst” Theory ..... 10 2. The Work In Bird Provided No Benefit To The MDL ............... 12 a. The Pre-Filing Investigation Did Not Benefit The MDL ................................................................................. 12 b. The Litigation In Bird Was Not For The Benefit Of The MDL .......................................................................... 13 B. If The Court Awards Fees, The Starting Point For Calculation Should Be The Benefit They Provided, Not Their Claimed Lodestar ................................................................................................. 15 1. Even After Bird Fees Are Deducted, The Claimed Lodestar Is Excessive And Unsupported .................................... 16 C. Krauth Counsel Cannot Seek Statutory Attorneys’ Fees ..................... 20 1. The Krauth And Hasper Plaintiffs Are Not “Prevailing Plaintiffs” Under The Consumers Legal Remedies Act ............. 21 2. The Krauth And Hasper Plaintiffs Are Not A “Successful Party” Under The Private Attorney General Statute .................. 22 D. These Plaintiffs Are Not Entitled To An Incentive Award .................. 23 CONCLUSION .......................................................................................................... 25 Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 3 of 31 Page ID #:8379 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -iv- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES TABLE OF AUTHORITIES Page Cases Binta B. ex rel. S.A. v. Gordon, 710 F.3d 608 (6th Cir. 2013) ................................................................................ 11 In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) .......................................................................... 16, 17 Building a Better Redondo, Inc. v. City of Redondo Beach, 203 Cal. App. 4th 852 (2012) ............................................................................... 22 In re Cmty. Bank of N. Va., 418 F.3d 277 (3d Cir. 2005) ................................................................................... 8 In re Consumer Privacy Cases, 175 Cal. App. 4th 545 (2009) ............................................................................... 16 In re Cont’l Ill. Sec. Litig., 962 F.2d 566 (7th Cir. 1992) ................................................................................ 23 Creative Montessori Learning Ctrs. v. Ashford Gear LLC, 662 F.3d 913 (7th Cir. 2011) .................................................................................. 9 Cullen v. Netflix, Inc., 2013 WL 1832650 (N.D. Cal. 2013) .................................................................... 10 Ebbetts Pass Forest Watch v. Cal. Dep’t of Forestry & Fire Prot., 187 Cal. App. 4th 376 (2010) ............................................................................... 22 Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014) .................................................................................. 9 Fleury v. Richemont N. Am., Inc., 2008 WL 4829868 (N.D. Cal. Nov. 4, 2008) ......................................................... 7 Gascho v. Global Fitness Holdings, LLC, 2014 WL 1350509 (S.D. Ohio Apr. 4, 2014) ......................................................... 8 Graciano v. Robinson Ford Sales, Inc., 144 Cal. App. 4th 140 (2006) ............................................................................... 21 Hensley v. Eckerhart, 461 U.S. 424 (1983) ....................................................................................... 16, 18 In re HP Inkjet Printer Litig., 2011 WL 2462475 (N.D. Cal. June 20, 2011) ....................................................... 8 Kim v. Euromotors W./The Auto Gallery, 149 Cal. App. 4th 170 (2007) ......................................................................... 21, 22 Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 4 of 31 Page ID #:8380 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -v- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES In re Leapfrog Enters., Inc. Sec. Litig., 2008 WL 5000208 (N.D. Cal. Nov. 21, 2008) ....................................................... 7 Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161 (3d Cir. 1973) ................................................................................. 15 McGraw v. Homeservices Lending LLC, 2012 WL 2390742 (S.D. Cal. June 25, 2012) ...................................................... 13 In re Oracle Sec. Litig., 1994 WL 502054 (N.D. Cal. June 18, 1994) ....................................................... 24 Parsons v. Volkswagen of Am., 2014 WL 7148919 (Okla. Dec. 16, 2014) ............................................................ 12 Ramos v. Countrywide Home Loans, Inc., 82 Cal. App. 4th 615 (2000) ................................................................................. 20 Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir. 2014) .................................................................................. 8 Rodriguez v. Disner, 688 F.3d 645 (9th Cir. 2012) ................................................................................ 18 Rodriguez v. W. Publ’g Corp., 563 F.3d 948 (9th Cir. 2009) .......................................................................... 20, 24 In re S. Ohio Corr. Facility, 24 F. App’x 520 (6th Cir. 2001) ........................................................................... 23 Schaffer v. Litton Loan Servicing, LP, 2012 WL 10274679 (C.D. Cal. Nov. 13, 2012) ................................................... 24 Sengupta v. City of Monrovia, 2010 WL 3368438 (C.D. Cal. Aug. 25, 2010) ..................................................... 23 Staton v. Boeing Co., 327 F.3d 938 (9th Cir. 2003) ................................................................................ 23 Stewart v. Gates, 987 F.2d 1450 (9th Cir. 1993) .............................................................................. 16 Thayer v. Wells Fargo Bank, N.A., 92 Cal. App. 4th 819 (2001) ................................................................................. 17 In re Toys R Us-Del., Inc., 295 F.R.D. 438 (C.D. Cal. 2014) .......................................................................... 24 True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052 (C.D. Cal. 2010) .................................................................. 8 Van Vranken v. Atl. Richfield Co., 901 F. Supp. 294 (N.D. Cal. 1995) ....................................................................... 24 Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 5 of 31 Page ID #:8381 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -vi- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES In re Vitamin Cases, 110 Cal. App. 4th 1041 (2003) ....................................................................... 17, 20 Vizcaino v. Microsoft Corp., 290 F.3d 1043 (9th Cir. 2002) .......................................................................... 7, 15 Williams v. Ruan Transp. Corp., 2013 WL 6623254 (E.D. Cal. Dec. 16, 2013) ...................................................... 16 Zucker v. Occidental Petroleum Corp., 192 F.3d 1323 (9th Cir. 1999) ............................................................................ 8, 9 Statutes Cal. Civ. Code § 1780 ................................................................................................ 21 Cal. Code Civ. P. § 1021.5 ........................................................................................ 22 Miscellaneous Manual for Complex Litigation (Fourth) § 21.643 ..................................................... 7 Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 6 of 31 Page ID #:8382 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Preliminary Statement At $2,789,522.50 (plus expenses), the lodestar claimed by the four law firms representing the Krauth and Hasper plaintiffs (“Krauth counsel”) eclipses that of any other firm and is hugely inversely proportional to their contribution to the case. Their request must be denied entirely at this point: first because they have never signed on to the settlement and the law does not permit fee awards to objecting counsel at this juncture; and second because they have failed to submit the detail necessary to review their claimed lodestar—an especially important consideration given the time they claim to have spent, their inexplicable deployment of four law firms, and their request for fees incurred in the completely separate Bird state court action. Even should the Court entertain their claim and award fees, their request should be substantially reduced. This MDL did not present the typical challenges for these plaintiffs’ counsel. Typically, counsel initiate litigation, face a long campaign with an uncertain future, putting their time and resources at risk. This case was different. These counsel did not file Krauth until the EPA had announced its findings and defendants already had decided voluntarily to compensate affected consumers. They did not file Hasper until even later, after the MDL was formed and a settlement-in-principle already had been announced. This posture portended a quicker and less risky trajectory and apparently signaled to plaintiffs’ counsel they could participate in a settlement and accumulate lodestar by doing little more than finding a plaintiff and participating in group activities (such as hearings and conference calls) to which they made no identifiable or significant contribution. Krauth counsel’s request also should be denied or reduced because it proceeds from the erroneous assumption that their claimed lodestar provides the starting point for the calculation of an appropriate fee award. To be entitled to fees, counsel first must show that they conferred a benefit on the litigation that merits a fee award. Although Krauth counsel have made perfunctory and conclusory claims Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 7 of 31 Page ID #:8383 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -2- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES to their contribution, the facts show their participation made virtually no difference to the end result. The substance of the settlement-in-principle changed little from the time it was announced to preliminary approval. Its basic structure and compensation components mirrored the voluntary reimbursement program Defendants Hyundai Motor America (“HMA”) and Kia Motor America (“Kia”) already had designed, and the only change of significance after the initial settlement was announced—adding a web-based claims system—came from liaison counsel. Mostly the Krauth counsel contributed a consistently discordant voice, often appearing contrarian simply for their own sake (and even contradicting themselves from week to week), without their discord translating into benefit to the class. In determining any amount Krauth counsel might receive, a useful reference is the fee agreements reached with other counsel for Non-Settling Plaintiffs (“NSPs”), most of whom have agreed to fee amounts. Of the 28 NSP firms that have agreed to fees, the range accepted was from 22% to 56% of their claimed lodestars. (Declaration of Joseph R. Ashby (“Ashby Decl.”), Exh. 1). Krauth counsel’s fees, if any, should fall at the low end of the scale for the reasons set forth above, including their deployment of multiple and inevitably duplicative counsel and their claim for fees in Bird—which they used to compete with the MDL—and that should be excised entirely from their claim.1 Relevant Factual Background These counsel were not the catalyst for the EPA investigation. Krauth counsel’s claim that they were the force behind the EPA investigation and, ultimately, this settlement, is not borne out by the facts. The EPA sought fuel- economy related information from HMA months before Krauth counsel claims to have first contacted HMA. The EPA itself stated it initiated its inquiry because 1 Defendants’ opposition to Krauth plaintiffs’ motion for attorneys’ fees is supported by the Declaration of Gary Greenfield (“Greenfield Decl.”). Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 8 of 31 Page ID #:8384 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES another automaker had complained. (Automotive News, “Who Fingered Kia, Hyundai? A U.S. Rival, Oge Says” (Dec. 17, 2012) (Ashby Decl., Exh. 2)). Krauth counsel’s sole evidence that Bird was the “catalyst” for recovery in the MDL is that Bird was filed on July 3, 2012, (Krauth/Hasper Plaintiffs’ Mot. for Payment of Attorneys’ Fees, Reimbursement of Expenses & Compensation to Named Plaintiffs (“Mot.”). at 14:9-12 (Dkt. No. 371-1)). (See Declaration of Laura Antonini (“Antonini Decl.”), Exh. E at 38:7-12 (Dkt. No. 371-2)). (See, e.g., Ashby Decl., Exhs. 3, 4). As to the settlement itself, Krauth counsel did not participate in forging it and have sought mostly to undermine it. They chose not to participate in the original settlement discussions that led to the settlement-in-principle. Thereafter, they repeatedly denied its existence in representations made to the state court in Bird. (See Plaintiff Bird’s Opp. to HMA’s Mot. to Stay at 4 (Ashby Decl., Exh. 7); Plaintiff’s Sur Reply in Opp. to Mot. to Stay at 5-6 (Ashby Decl., Exh. 8); Plaintiff Bird’s Opp to HMA’s Mot. for Reconsideration at 1-3 (Ashby Decl., Exh. 11)). In their stance before this Court, they have acted more like objectors than co-counsel working to bring the settlement to fruition. The changes they suggested that ultimately were adopted went to minor non-substantive issues in the notices in terms of phrasing and whether certain items were in bold or underline. (See, e.g., Krauth/Hasper Plaintiffs’ Opp. to Mot. for Prelim. Approval at 19-24 (Dkt. No. 236); Krauth/Hasper Plaintiffs’ Resp. to Filing of Revised Notice and Claim Docs. at 2-7 (Dkt. No. 266); Krauth/Hasper Plaintiffs’ Resp. to Settling Parties’ Supp. Brief in Supp. of Prelim. Approval at 9-23 (Dkt. No. 277)). The Court rejected the Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 9 of 31 Page ID #:8385 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Krauth plaintiffs’ challenges to the basic framework of the settlement. (E.g., Tentative Ruling re Plaintiffs’ Motion for Prelim. Approval at 16 (Dkt. No. 267) (rejecting Krauth plaintiffs’ objection to the requirements for class members to make claims)). Neither Krauth, Hasper, nor Bird is a product of original work. Although Krauth counsel may have spent time finding plaintiffs for their cases and generating publicity for their filings, the complaints they filed are not original work product. The first action they filed, Bird, venued in Sacramento Superior Court, was filed six months after Espinosa and merely recast Espinosa’s same claims and allegations as a state court action, crafted to avoid removal. (See generally Bird Compl. (Ashby Decl., Exh. 5)). Their hope, quite clearly, was to try to beat Espinosa to class certification and, ultimately, settlement.2 Like Espinosa, Bird asserted, inter alia, UCL, CLRA, and false advertising claims based on HMA’s alleged failure to include federally mandated disclosures in advertisements. (Id.). The putative class in Bird was encompassed by the putative class alleged in Espinosa. (Id. ¶ 35). The original Bird complaint did not allege any fuel economy testing errors. (See id.). Following the November 2, 2012 announcement that defendants were readjusting the EPA fuel economy estimates for certain vehicles, the first case to allege testing errors was filed, Hunter v. HMA. An onslaught of similar cases followed. Krauth was one of those cases. Filed four days after Hunter, it copied almost word-for-word most of the Bird allegations, while adding Hunter’s allegations about testing. Shortly thereafter, Krauth counsel filed an amended complaint in Bird, this time revising Bird to copy Krauth. Over two months later, 2 Indeed, the Court may recall the Krauth plaintiffs’ counsel’s hasty, midnight ex parte motions to intervene and be appointed lead counsel in Espinosa, filed the night before the initial hearing on the motion for class certification—in disregard of this Court’s local rules. (Application for Appointment as Lead Counsel (Espinosa v. HMA, Case No. 12-cv-0800, Dkt. Nos. 71, 72 (C.D. Cal.))). Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 10 of 31 Page ID #:8386 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Krauth counsel filed Hasper, another copycat action. (Hasper Compl. (Hasper v. HMA, Case No. 13-cv-220, Dkt. No. 1 (C.D. Cal.))). In the interim, 38 other post- November 2, 2012 MDL cases were filed. (Id. ¶ 7). Krauth counsel misrepresented to Sacramento Superior Court that there was no settlement-in-principle. After Krauth counsel amended Bird to include the allegations in the MDL, HMA moved to stay Bird in light of the settlement-in- principle that had been reached in the MDL. (HMA’s Mot. to Stay Proceedings (Ashby Decl., Exh. 6)). HMA argued that Bird was the same case, covering the same class, and represented by the same four law firms as Krauth and Hasper, and therefore the putative class would obtain relief from the MDL settlement. (Id. at 2- 3, 5-7). Efficiency therefore dictated that Bird be stayed so that HMA could devote its efforts to the settlement in the MDL. In response, Krauth counsel’s effort were directed, once again, not towards the best interests of their class, but rather towards trying to gain leverage in the MDL by pursuing competing litigation in state court. Despite HMA having provided his counsel with the terms of the settlement-in-principle, the Bird plaintiff opposed the motion to stay, falsely claiming that no such settlement was pending. (Plaintiff Bird’s Opp. to HMA’s Mot. to Stay at 4 (Ashby Decl., Exh. 7); Plaintiff’s Sur Reply in Opp. to Mot. to Stay at 6-7 (Ashby Decl., Exh. 8)). The court denied HMA’s motion, finding—based on Bird counsel’s representations—that no settlement was imminent in the MDL. (Mar. 28, 2013 Minute Order at 3 (Ashby Decl., Exh. 9)). Only upon HMA’s motion for reconsideration, when it submitted additional evidence establishing the existence of the proposed MDL settlement, was Bird stayed on July 10, 2013. (HMA’s Mot. for Reconsideration at 1-3 (Ashby Decl., Exh. 10); May 2, 2013 Minute Order at 2 (Ashby Decl., Exh. 12)). Krauth’s minimal contributions to the MDL. Krauth counsel cannot identify any significant substantive contribution they made to the settlement that justifies the fees they seek. They chose not to participate in the negotiations that led Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 11 of 31 Page ID #:8387 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES to the MDL settlement. Each exhibit attached to Krauth counsel’s motion papers— for which they seek to claim credit for bringing to light in confirmatory discovery— already had been previously produced in Espinosa. (Id. ¶ 24). On December 23, 2013, Settling Plaintiffs moved for preliminary approval of the class settlement. (Dkt. No. 185-1). In May 2014, when plaintiffs’ counsel had to file briefs in opposition to the motion for preliminary approval, forty-four of the 51 law firms representing plaintiffs in the MDL supported or did not object to the motion.3 Krauth counsel opposed it, arguing that: (i) the settlement should not be approved; (ii) defendants should not be permitted to administer the settlement; (iii) a claims process was unnecessary; and (iv) certain changes should be made to the organization and wording of the claim and notice documents. (Liaison Counsel’s Report Listing Non-Settling Plaintiffs Supporting or Not Objecting to the Settlement at 1-2 (Dkt. No. 239); see, e.g., Ltr.from Krauth/Hasper Plaintiffs’ Counsel to Liaison Counsel at 3 (Dkt. No. 211-3) (“The claims process . . . is . . . completely unnecessary.”); Krauth/Hasper Plaintiffs’ Opp. to Brady/Hunter/Espinosa Plaintiffs’ Mot. for Prelim. Approval at 16-18 (Dkt. No. 236) (opposing motion for preliminary approval and arguing, inter alia, the claims process is unnecessary); Krauth/Hasper Plaintiffs’ Resp. to Joint Notice of Filing of Revised Notice at 5 (Dkt. No. 266) (stating in their response to the revised notice and claim documents that a “claim form should not be a requirement for Class Members choosing the lump-sum payment”); Krauth/Hasper Plaintiffs’ Resp. to Settling Parties’ Supp. Brief in Support of Prelim. Approval at 4-5 (Dkt. No. 277) (“[T]here is no reason to require every Class Member to file a claim in order to obtain the principle benefit of the settlement.” (emphasis in original)); Ltr. from Krauth/Hasper Plaintiffs’ 3 The tally is that now 46 of 51 law firms representing plaintiffs in the MDL currently support or do not object to the settlement, because the Law Office of Lewis G. Adler and the Law Office of Paul DePetris now support the settlement. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 12 of 31 Page ID #:8388 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Counsel to Liaison Counsel at 1 (Dkt. No. 311-1) (providing statement in response to the settling parties’ revised notice and claim documents: “We continue to believe that no claim form is necessary . . . .”)). Their objections to the settlement were mostly overruled. The settlement did receive preliminary approval, defendants are administering the settlement, and a claims process is in place. (Order Granting Prelim. Approval (Dkt. No. 319)). The only changes arising from the parties’ multiple rounds of briefing were some non- substantive revisions to the organization and wording of the claim and notice forms and website. Most of the changes adopted resulted from suggestions by the Court, not the counsel now seeking fees. (See id.; Tentative Ruling re Plaintiffs’ Mot. for Prelim. Approval (Dkt. No. 290)). Argument I. KRAUTH COUNSEL CANNOT SEEK FEES FOR A SETTLEMENT THEY DO NOT SUPPORT Two principles of class action fee practice meant to ensure that the interests of the class remain paramount to those of counsel preclude awarding fees to Krauth counsel. The first is that counsel who object to a settlement may not obtain fees unless and until their objections bear fruit, and those objections must increase the fund or otherwise substantially benefit the class; mere cosmetic changes will not suffice. Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1051-52 (9th Cir. 2002) (“In the absence of a showing that objectors substantially enhanced the benefits to the class under the settlement, as a matter of law, they [are] not entitled to fees.”). Courts scrutinize the claimed contributions of objectors to ensure they have conferred more than a technical or coincidental benefit. In re Leapfrog Enters., Inc. Sec. Litig., 2008 WL 5000208, at *2-3 (N.D. Cal. Nov. 21, 2008); see Manual for Complex Litigation (Fourth) § 21.643; Fleury v. Richemont N. Am., Inc., 2008 WL 4829868, at *6-12 (N.D. Cal. Nov. 4, 2008) (concluding objector did not confer a substantial benefit upon the class where, inter alia, his actions did not result in Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 13 of 31 Page ID #:8389 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES material changes to the settlement or affect its terms); In re HP Inkjet Printer Litig., 2011 WL 2462475, at *2 (N.D. Cal. June 20, 2011) (denying motion for attorneys’ fees where objectors failed to show their actions benefited the class in any significant way). The second principle applicable to fee applications by parties who do not support the settlement is that fees must not appear to be a pay-off for counsel to agree to a settlement. See In re Cmty. Bank of N. Va., 418 F.3d 277, 308 (3d Cir. 2005) (describing concern that class counsel may be enticed by a “red-carpet treatment on fees”); see also Gascho v. Global Fitness Holdings, LLC, 2014 WL 1350509, at *25 (S.D. Ohio Apr. 4, 2014) (“The risk of collusion is also lessened in this action because the parties negotiated the payment of attorneys’ fees and costs after having reached agreement on the relief to the Class and Subclasses.”), report and recommendation adopted, 2014 WL 3543819 (S.D. Ohio July 16, 2014); Redman v. RadioShack Corp., 768 F.3d 622, 629 (7th Cir. 2014) (“[C]lass counsel, as ‘economic man,’ presumably is interested primarily in the size of the attorneys’ fees provided for in the settlement, for those are the only money that class counsel, as distinct from the members of the class, get to keep.”); Zucker v. Occidental Petroleum Corp., 192 F.3d 1323, 1327 (9th Cir. 1999) (noting concern that plaintiffs’ attorneys may be paid enough money to “induce them to settle the class action”). The fee award should not risk the appearance that counsel’s consent to the settlement is being purchased. See True v. Am. Honda Motor Co., 749 F. Supp. 2d 1052, 1078 (C.D. Cal. 2010) (holding that concurrent negotiation of the class settlement and attorneys’ fees weighed against approving the settlement). Both principles are implicated by Krauth counsel’s motion for fees at this time. As pointed out above, Krauth counsel has not conferred a substantial benefit on the class. Their proposed changes to the settlement were by and large rejected, and the few changes that were accepted were cosmetic changes to the notice and claim documents. Further, Krauth counsel have never stated their support for the Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 14 of 31 Page ID #:8390 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -9- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES settlement nor indicated they have any intention of joining in it, including in their current fee motion. Their litigation history shows a pattern of discontent consistent with a party who intends to continue objecting and eventually pursue an appeal. Counsel have the right to object; what they cannot do is simultaneously object to the settlement and seek fees based on it. Unless and until they agree to support the settlement and abandon their objector stance, they may not be awarded fees. See Zucker, 192 F.3d at 1327 (“The risk of collusion may be especially high if defendants can buy off the attorneys with money . . . .”). The danger of an appearance of impropriety here is similar to situations where a defendant agrees to pay attorneys’ fees while settlement negotiations with class counsel remain ongoing, thus suggesting that class counsel may be “selling out” the class for counsel’s own interest in fees. See Eubank v. Pella Corp., 753 F.3d 718, 720 (7th Cir. 2014) (“[W]e and other courts have often remarked the incentive of class counsel, in complicity with the defendant’s counsel, to sell out the class by agreeing with the defendant to recommend that the judge approve a settlement involving a meager recovery for the class but generous compensation for the lawyers—the deal that promotes the self-interest of both class counsel and the defendant and is therefore optimal from the standpoint of their private interests.” (quoting Creative Montessori Learning Ctrs. v. Ashford Gear LLC, 662 F.3d 913, 918 (7th Cir. 2011))). No principled distinction can be made between that situation and this one, and the result should be the same: no fees awarded that appear to hinge on counsel’s agreeing to settlement. To eliminate the risk inherent in this circumstance, the Court should decline to consider Krauth counsel’s request for fees at this time. This approach also makes sense from a procedural standpoint. Based on the principles cited above that prohibit fees to objectors while they maintain their objections, if the Court grants final approval and Krauth counsel then objects and pursues an appeal, they could not receive fees under the agreement anyway. They would need to wait until their Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 15 of 31 Page ID #:8391 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -10- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES appeal is decided and, if successful, seek fees at that time. If they are unsuccessful on appeal, they are not entitled to fees. If, on the other hand, they decide to support the settlement, they can submit a motion for fees at that time. II. THE FEES KRAUTH COUNSEL REQUEST ARE EXCESSIVE Lead counsel in this case, who negotiated the settlement and have led the effort on behalf of plaintiffs throughout, claimed a lodestar of approximately $2,200,000, and agreed to accept fees of $2,700,000, after applying a 1.22 multiplier. Krauth counsel claim a lodestar $1,000,000 more than lead counsel, with contributions that, at best, pale by comparison. Most of the other NSPs have put their limited contributions in appropriate perspective and accepted negative multipliers. At least three components contribute to the excessive lodestar figure Krauth counsel claims: (i) they improperly seek fees for Bird, their competing state court action; (ii) they overstaffed the matter with four law firms, each of whom deployed multiple counsel; and (iii) they ask for certain statutory fees to which they are not entitled. In addition, Krauth counsel fail to provide the documentation necessary to evaluate their claimed lodestar. A. Krauth Counsel Cannot Be Awarded Fees For Bird 1. They Cannot Claim Fees For Bird On A “Catalyst” Theory Krauth counsel claim Bird was the “catalyst” for both the voluntary reimbursement program and the MDL settlement and therefore justifies their fee. (Mot. at 14). Neither the facts (explained above) nor the law support them. Krauth counsel cite no authority for the proposition that this Court can award fees for their work in other litigation, and the law is to the contrary. Courts consistently reject fee applications based on work performed in separate litigation. For example, in Cullen v. Netflix, Inc., the plaintiff argued he should be entitled to attorneys’ fees under a “catalyst” theory based on a favorable result achieved in a later-filed, separate action brought by a different party against the same defendant. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 16 of 31 Page ID #:8392 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -11- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES 2013 WL 1832650, at *2 (N.D. Cal. May 1, 2013). The court rejected this argument because: (i) the plaintiff’s lawsuit was not the motivation for the later-filed action; (ii) the settlement was negotiated without the plaintiff’s participation; and (iii) the plaintiff did not show that his lawsuit played any role in the settlement negotiations or acted as motivation for the defendant to settle. Id. at *3. These same factors are present here. Bird did not motivate anything and certainly did not inspire the MDL litigation. It copied Espinosa, then added new allegations similar to actions filed after the November 2 announcement. The MDL cases were triggered by defendants’ November 2, 2012 announcement that they were restating fuel economy estimates for certain vehicles.4 (See, e.g., Hunter Compl. ¶¶ 3, 6-7 (Hunter v. HMA, Case No. 12-cv-1909, Dkt. No. 1 (C.D. Cal.)); Maharaj Compl. ¶¶ 1, 15-16 (Maharaj v. HMA, Case No. 13-cv-0070, Dkt. No. 1 (C.D. Cal.))). The settlement was negotiated without participation by Bird’s counsel, who not only played no role in it but falsely denied its existence to the state court judge. Other courts also have found it improper to award fees for work performed in separate litigation. In Binta B. ex rel. S.A. v. Gordon, the Sixth Circuit took issue with the prospect of “permitting plaintiffs’ counsel to receive fees for work performed in a completely separate case” because “[d]oing so could lead to all sorts of oddities.” 710 F.3d 608, 631 (6th Cir. 2013). One such oddity would be “allow[ing] counsel to be compensated for time spent conducting discovery in a completely separate matter,” as Krauth counsel seek to do here. Id.; see also 4 Espinosa v. HMA, like Bird, was based on allegations concerning fuel economy disclosures. Espinosa, however, pre-dated Bird and thus could not have been motivated by Bird. (See Espinosa Compl. (Espinosa v. HMA, Case No. 12-cv- 0800, Dkt. No. 1 (C.D. Cal.))). Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 17 of 31 Page ID #:8393 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -12- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Parsons v. Volkswagen of Am., 2014 WL 7148919, at *4-5 (Okla. Dec. 16, 2014) (rejecting award of fees for work performed in an earlier, separate action). By counsel’s deliberate design, Bird is not part of the MDL. Accordingly, Krauth counsel cannot seek fees here for their work there. 2. The Work In Bird Provided No Benefit To The MDL It is not a stretch to say that Bird was litigated with the specific intent of undermining the MDL, not to support the settlement for which Krauth counsel now requests fees. Bird was a constant distraction, with counsel seeking to diverge from the orderly path being taken in the MDL and urging that they be permitted broad discovery on their own timetable. These efforts were so at odds with the orderly conduct of the MDL that this Court suggested it would consider enjoining the state court proceedings should counsel be permitted to proceed with discovery in that action. (See Apr. 25, 2013 Hearing Tr. at 47-56 (Ashby Decl., Exh. 20)). Krauth counsel claim entitlement to fees for two categories of work in Bird, neither of which benefited the MDL class: (i) “pre-filing investigation and preparation of complaint;” and (ii) “discovery and motion practice.” (Mot. at 2). a. The Pre-Filing Investigation Did Not Benefit The MDL Their claim to $130,000 in fees for a “pre-filing investigation and preparation of complaint” between January 2012 and July 3, 2012 not only has nothing to do with this case, it seems facially suspect. They apparently started their “investigation” when Espinosa was filed and ended it by filing a very similar complaint six months later. It is difficult to imagine what went on during that six month period, and imagine we must because Krauth counsel have provided no data to support their claimed work. Further raising questions is the fact that they also claim fees for the “pre-filing investigation” in Krauth/Hasper, suggesting they seek to recover for the same activities in both the federal and state actions, and undermining their assertion that their work in Bird was transferrable to the MDL. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 18 of 31 Page ID #:8394 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -13- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES See McGraw v. Homeservices Lending LLC, 2012 WL 2390742, at *2 (S.D. Cal. June 25, 2012) (deducting duplicative work from fee calculation). b. The Litigation In Bird Was Not For The Benefit Of The MDL Counsel do not purport to explain how motion practice in Bird benefited the MDL, and no benefit is apparent. Bird counsel admittedly engaged in extensive motion practice—serial, unnecessary, and largely unsuccessful. But far from benefitting the MDL, much of that effort was geared towards undermining the MDL by competing with this Court’s orders staying all discovery except the confirmatory discovery process. Bird discovery was meant to—and did—interfere with HMA’s efforts to meet the deadlines in the MDL as it was forced to juggle the demands of both cases. Significantly, the majority of the $410,000 in fees for discovery and motion practice sought by Krauth counsel for their work in Bird was incurred after the settlement-in-principle was reached and HMA had moved for a stay of Bird—a motion counsel fought by falsely representing to the Bird court that there was no pending settlement. (See, e.g., Plaintiff Bird’s Opp. to HMA’s Mot. to Stay (Ashby Decl., Exh. 7)). Their wasteful litigation efforts—none of which contributed to the MDL settlement—included: • Mr. Bird’s motion to compel further responses to document requests. (Ashby Decl., Exh. 13). • HMA’s motion seeking to protect the privacy of its customers from intrusive discovery measures proposed by Mr. Bird. (Id. Exh. 14). • HMA’s motion to quash a notice of a person most knowledgeable deposition, which Mr. Bird served before the court had even ruled on HMA’s demurrer to his amended complaint (and after this Court had stayed MDL discovery). (Id. Exh. 15). • An additional motion by Mr. Bird concerning document discovery. (Id. Exh. 16). Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 19 of 31 Page ID #:8395 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -14- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES • Multiple rounds of voluminous written discovery. (Id. ¶ 16). Krauth counsel do not and cannot demonstrate how that unnecessary discovery and motion practice—pursued in circumvention of this Court’s order staying all MDL discovery apart from confirmatory discovery (Mar. 28, 2013 Hearing Tr. at 39:12-22 (Ashby Decl., Exh. 19))—advanced the interests of the MDL class. And although counsel portrays Bird as a “successful pursuit of documents and information,” (Mot. at 5), the bulk of the motion practice in Bird consisted of either frivolous arguments rejected by that Court or discovery items that could and should have been resolved informally between the parties. With no regard for the substantial production and preparation efforts the MDL required of HMA—and despite these same four law firms having two pending cases in the MDL—Krauth counsel were peremptory at every turn, refusing to allow reasonable discussions to conclude, or reasonable measures to be taken. To take just two examples: • Mr. Bird refused to stipulate to a reasonable protective order to address the treatment of confidential materials produced in discovery, requiring HMA to move for a protective order. Among the frivolous and unsuccessful arguments made by Mr. Bird in opposition to HMA’s motion were that: (i) HMA had somehow “waived” its right to a protective order; (ii) HMA had “waived” the trade secret privilege; (iii) Mr. Bird should be allowed to share HMA’s confidential materials with attorneys in any other case involving fuel economy litigation against HMA; (iv) HMA should be required to stipulate in advance to the authenticity of every confidential document it produced; and (v) there should be no provision requiring the receiving party to notify the producing party when it believed it had received inadvertently produced privileged materials. (See Plaintiff’s Opp. to HMA’s Mot. for Protective Order (Ashby Decl., Exh. 17)). On March 12, 2013, the court rejected these arguments and granted a protective order. (Mar. 12, 2013 Minute Order (Ashby Decl., Exh. 18)). • HMA moved to stay Bird based on the settlement-in-principle in the MDL, in order to avoid duplicative and potential conflicting proceedings. (HMA’s Mot. to Stay (Ashby Decl., Exh. 6)). Mr. Bird Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 20 of 31 Page ID #:8396 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -15- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES opposed, wrongly claiming no settlement was imminent, even though counsel had in his hands the settlement terms. (Bird’s Opp. to HMA’s Mot. to Stay (Ashby Decl., Exh. 7)). That Court finally stayed Bird, but only after HMA was forced to file a second motion with additional evidence contravening counsel’s denial of the settlement. (HMA’s Mot. for Reconsideration (Ashby Decl., Exh. 10); May 2, 2013 Minute Order (Ashby Decl., Exh. 12)). The record is replete with illustrations of the wasteful nature of counsel’s litigation activity in Bird. Rather than seeking efficiently to resolve discovery disputes, Mr. Bird’s counsel repeatedly created unnecessary motion practice in a transparent effort to multiply fees, a tendency the Ninth Circuit has acknowledged: “[I]t is widely recognized that the lodestar method creates incentives for counsel to expend more hours than may be necessary in litigating a case so as to recover a reasonable fee.” Vizcaino, 290 F.3d at 1050 n.5 (citation omitted). B. If The Court Awards Fees, The Starting Point For Calculation Should Be The Benefit They Provided, Not Their Claimed Lodestar Krauth counsel’s fee request begins from the assumption that they are entitled to fees because they brought cases to the MDL. Fee awards are not based on bringing cases; they are based on obtaining value. Counsel cite no case for the proposition that the mere participation in class litigation entitles them to be paid even if their presence in the case makes no difference. If counsel were correct, 10,000 firms could bring 10,000 duplicative cases and all could recover fees for every step they choose to take, whether it provides benefit or not. That is not the law, nor should it be. The lodestar concept originally was based in the theory of quantum meruit— the value of the benefit conferred. Lindy Bros. Builders, Inc. v. Am. Radiator & Standard Sanitary Corp., 487 F.2d 161, 167 (3d Cir. 1973) (first case discussing lodestar and pointing out that it must be based on benefit conferred). This foundation has not changed over the decades; the lodestar method remains rooted in Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 21 of 31 Page ID #:8397 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -16- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES the Court’s “objective determination of the value of the attorney’s services,” as the cases counsel cite also show. See, e.g., In re Consumer Privacy Cases, 175 Cal. App. 4th 545, 556-57 (2009) (citation omitted); (cf. Mot. at 16 (citing In re Consumer Privacy Cases)). To reward counsel for anything other than the value they contribute to the class not only would be contrary to the law, it would encourage the filing of an infinite number of cases which sole purpose is to allow a hook for a fee award. As the court said in Consumer Privacy Cases, ensuring that the fee award is anchored to value is “vital to the prestige of the bar and the courts.” 175 Cal. App. 4th at 557. 1. Even After Bird Fees Are Deducted, The Claimed Lodestar Is Excessive And Unsupported The lodestar should include only those hours that were “reasonably expended on the litigation.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 941 (9th Cir. 2011) (citations omitted). It should not include hours that were “excessive, redundant, or otherwise unnecessary.” Stewart v. Gates, 987 F.2d 1450, 1452 (9th Cir. 1993) (citing Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)); Williams v. Ruan Transp. Corp., 2013 WL 6623254, at *3 (E.D. Cal. Dec. 16, 2013) (“Counsel is expected to exercise good billing judgment by making a good faith effort to exclude hours that are excessive, redundant or otherwise unnecessary.” (citations and quotations omitted)). Here, there is no way to determine what was “reasonably expended” because Krauth counsel have not provided information that would permit the Court and defendants to do so. (See Greenfield Decl., ¶¶ 21-25, 32, 40-42). Nor does their expert, Mr. Pearl, indicate that he reviewed their bills or otherwise audited their hours. No credible claim can be made that the hours claimed are reasonable on their face. Plaintiffs engaged four law firms and 17 lawyers for these substantively identical cases (Krauth and Hasper) without any explanation why such a bloated deployment was warranted, particularly given the many other lawyers in the MDL. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 22 of 31 Page ID #:8398 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -17- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES This is exacerbated by counsels’ failure to submit any billing records, such that it cannot be assessed whether any of the work performed by the four firms on overlapping issues was duplicative. (Greenfield Decl., ¶¶ 21-25, 32, 40-42). That a firm invites colleagues to join a litigation does not mean they all get to recover for every minute each of those 17 lawyers’ claims to have worked on the case. By their logic, had they pulled in ten law firms, all would be entitled to recover everything claimed to have been billed. There are limits to what may be claimed as lodestar and these plaintiffs exceed it. This conclusion becomes even more obvious when the fee agreements reached with other counsel are compared; other counsel understood they were part of a whole and accepted less than their lodestar accordingly. (See Ashby Decl., Exh. 1). Overstaffing is a red flag for unnecessary and duplicative work. See Thayer v. Wells Fargo Bank, N.A., 92 Cal. App. 4th 819, 841, 844-45 (2001) (reversing an award of attorneys’ fees where there was “unnecessary duplication of work by plaintiffs’ numerous counsel”); In re Vitamin Cases, 110 Cal. App. 4th 1041, 1054- 55 (2003) (same). A settlement that resolves many private class actions, especially where some plaintiffs are represented by multiple firms, “raises the specter of duplicative and superfluous litigation and hence unnecessary fees and costs.” Vitamin Cases, 110 Cal. App. 4th at 1054. Courts awarding fees in such settlements should take care not to reward duplication of effort among the various plaintiffs, as well as among multiple firms representing the same plaintiffs. See id. Even were the lodestar accurate as to time spent on non-duplicative and necessary work (which seems implausible), the figure should be adjusted according to reasonableness factors “including the quality of representation, the benefit obtained for the class, the complexity and novelty of the issues presented, and the risk of nonpayment.” In re Bluetooth, 654 F.3d at 941-42 (citations omitted). “Foremost among these considerations [] is the benefit obtained for the class.” Id. The Supreme Court “has instructed district courts to [] ‘award only that amount of Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 23 of 31 Page ID #:8399 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -18- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES fees that is reasonable in relation to the results obtained.’” Id. (quoting Hensley, 461 U.S. at 436 ). To confer a benefit on the class, an attorney’s work must add something substantive to the process or decision in question—for instance, by raising a substantive issue not previously considered by the court, or by offering new legal argument or expertise. See, e.g., Rodriguez v. Disner, 688 F.3d 645, 659 (9th Cir. 2012) (denying attorneys fees altogether when counsel added no legal argument or expertise to the class’s litigation effort) (Greenfield Decl., ¶ 13 (“In a class action, before counsel is entitled to any portion of their lodestar, they must first show that they provided a benefit to the class.”)). Krauth counsel seek fees for work of dubious benefit. For example, they seek fees for more than 1,200 hours for work related to revising the settlement agreement. (Antonini Decl., ¶ 104 (Consumer Watchdog: 1,104.7 hours); Declaration of William Anderson (“Anderson Decl.”), ¶ 42 (Dkt. No. 371-3) (CGL: 137.5 hours); Declaration of Anne Marie Murphy (“Murphy Decl.”), ¶ 22 (Dkt. No. 371-4) (CPM: 590 hours for confirmatory discovery and revisions to settlement agreement combined)). This is an astonishing number of hours, yet they fail to provide any indication what they were allegedly doing for all that time and what those 1,200 hours yielded. Those few changes wrought were minor and cosmetic. For example, following the July 24, 2014 hearing, Consumer Watchdog proposed a number of “primarily stylistic” changes, which were not incorporated into the revised notice submitted to the court “because they did not appear to add clarity and would require review for the first time by both the Court and the other plaintiff groups.” (Settling Parties’ Submission of Proposed Final Notice at 1:22-27 (Dkt. No. 304); Krauth/Hasper Plaintiffs’ Unincorporated Revisions (Dkt. Nos. 304-4, 304-5, 304-6)). Some of Consumer Watchdog’s proposed revisions even “reflected an inaccurate understanding of the proposed settlement or the lifetime reimbursement program.” (Settling Parties’ Submission of Proposed Final Notice at 1:27-2:1 at 1:27-2:1 (Dkt. No. 304)). These revisions could not have added Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 24 of 31 Page ID #:8400 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -19- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES anything to the notice-revision process because, as noted, they were off-base, and were offered so late in the process that other plaintiffs’ counsel were not able to consider them in the discussions. (See id. at 1:22-27). They also seek fees for more than 1,100 hours for work related to confirmatory discovery, described only at a high level, such as conferring with liaison counsel about the terms of the settlement agreement, document review, editing discovery requests, and interviews of witnesses. (Antonini Decl., ¶ 86 (Consumer Watchdog: 618.1 hours); Anderson Decl., ¶ 37 (CGL: 534.75 hours); Murphy Decl., ¶ 22 (CPM: 590 hours for confirmatory discovery and revisions to settlement agreement combined)). Much of this work surely was duplicative not only of the efforts of settling plaintiffs and liaison counsel, but also of their fellow Krauth counsel. (See Greenfield Decl., ¶¶ 34-38, 41 (identifying duplicative work performed by counsel even based on the sparse descriptions submitted)). Consumer Watchdog and CGL both participated in all four U.S. interviews of Hyundai witnesses (Antonini Decl., ¶ 78; Anderson Decl., ¶ 34), and CPM participated in three (Murphy Decl., ¶ 13). Consumer Watchdog’s participation in the interviews conducted by CGL and CPM consisted of “monitoring,” participating in a chat room, and drafting notes. (Antonini Decl., ¶ 80). Similarly, all three firms “analyzed” the proposed settlement and suggested improvements to the notice and claim form. (Antonini Decl. ¶¶ 87-106; Anderson Decl. ¶¶ 38-42; Murphy Decl. ¶¶ 15-19). Yet their input into the notice-revision process was often superfluous at best, as their suggested changes were rejected in favor of those made by other plaintiffs. (See Settling Parties’ Submission of Proposed Final Notice at 1:22-27 (Dkt. No. 304)). No fees should be awarded for this type of duplicative work. (See Greenfield Decl., ¶¶ 34-38, 41). Krauth counsel also fail to provide support for their requested billing rates. For instance, they seek recovery of fees for work performed by Harvey Rosenfield of Consumer Watchdog at an hourly rate of $925 (Antonini Decl., Exh. B)—the Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 25 of 31 Page ID #:8401 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -20- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES highest request by any counsel in the MDL—but fail to submit any evidence of Mr. Rosenfield’s relevant legal expertise or actual work performed in this litigation that would justify such an inflated rate. (See Greenfield Decl., ¶ 41). The Krauth submission is similarly devoid of substantiation of their other counsel’s rates. (Id., ¶¶ 43, 45-52). The lodestar also should be adjusted based on “the degree of risk undertaken by plaintiffs’ counsel in this type of litigation.” Ramos v. Countrywide Home Loans, Inc., 82 Cal. App. 4th 615, 627 (2000). The degree of risk depends on, inter alia, the number of defendants and claims and the novelty of the legal theories at issue. See Vitamin Cases, 110 Cal. App. 4th at 1056-57 (number of defendants); Rodriguez v. W. Publ’g Corp., 563 F.3d 948, 967 (9th Cir. 2009) (existence of controlling precedents, number of “hurdles in proving [] damages and liability”). Here, Krauth counsel faced less risk than other plaintiffs because they filed their first case after Espinosa already had received a ruling that permitted that case to proceed beyond the pleading stage. Bird merely sought to proceed on a variant of the theory that survived the pleading stage in Espinosa. They filed their later cases after the EPA announcement and HMA’s and Kia’s voluntary decision to take responsibility for the fuel estimate discrepancies. Even among themselves, they spread their risk around to four firms, presumably sharing costs and time so that each firm had to put less on the line. Their conduct was a model of avoiding risk, rather than assuming it, all while multiplying fee opportunities. C. Krauth Counsel Cannot Seek Statutory Attorneys’ Fees Krauth counsel’s request for fees pursuant to California’s Consumers Legal Remedies Act (“CLRA”) and private attorney general statute, (Mot. at 11-12), is legally unsupportable. To recover under either of these statutes, they must be a “prevailing plaintiff” or “successful party.” Neither status properly characterizes the Krauth and Hasper plaintiffs, because they are not parties to the settlement agreement nor have they expressed support for it. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 26 of 31 Page ID #:8402 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -21- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES 1. The Krauth And Hasper Plaintiffs Are Not “Prevailing Plaintiffs” Under The Consumers Legal Remedies Act California Civil Code § 1780(e) provides for an award of costs and attorneys’ fees in an action brought under the CLRA, but only to a “prevailing plaintiff.” Cal. Civ. Code § 1780(e) (“The court shall award court costs and attorney fees to a prevailing plaintiff in litigation filed pursuant to this section.” (emphasis added)). “[A] plaintiff who is not prevailing is not entitled to attorneys fees.” Kim v. Euromotors W./The Auto Gallery, 149 Cal. App. 4th 170, 179 (2007). The Krauth and Hasper plaintiffs expand the CLRA’s fee provision to a situation far beyond that contemplated by the statute’s plain terms or courts’ interpretation of it. To begin with, their request to be considered a “prevailing party” is not even warranted at this time. Courts assess the propriety of awarding attorneys’ fees—including the meaning of “prevailing plaintiff”—after the parties have reached a resolution on the underlying litigation. In the cases relied upon by these plaintiffs, the CLRA claims had been resolved through jury verdict, court order, or the parties’ settlement agreement. See, e.g., Kim, 149 Cal. App. 4th at 181 (proper to determine whether or not plaintiff is a “prevailing plaintiff” where “the litigation was resolved by a settlement agreement”); Graciano v. Robinson Ford Sales, Inc., 144 Cal. App. 4th 140, 151-54 (2006) (conducting prevailing party analysis after the jury entered a verdict on the plaintiff’s CLRA claims and the parties reached a settlement). Here, while the defendants and other plaintiffs’ groups have agreed to resolve this litigation, the Krauth and Hasper plaintiffs’ position remains unclear. They are not parties to the settlement and have not indicated whether they intend to support or object to the settlement going forward. Noticeably absent from their current motion, as well as prior filings, are statements of support for the settlement. In addition, the Krauth and Hasper plaintiffs overstate their role as a “prevailing party,” claiming that they secured “substantial improvement to the Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 27 of 31 Page ID #:8403 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -22- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Settlement, including revisions to the notice and claim forms and process . . . .” (Mot. at 12). But, as pointed out earlier, the changes these plaintiffs advocated for largely were not adopted and those that were adopted were of minimal benefit to the class. The substantive outcomes achieved in this litigation instead resulted from the work of defendants and counsel for other parties, most significantly counsel in Brady and Hunter, as well as liaison counsel. A decision suggesting it was Krauth counsel who achieved a resolution in this action would be misleading, and an affront to the counsel who did bring the settlement to fruition through constructive efforts. Because they cannot “show[] that [they were] the prevailing plaintiff,” an award of attorneys’ fees pursuant to the CLRA is not proper. Kim, 149 Cal. App. 4th at 181. 2. The Krauth And Hasper Plaintiffs Are Not A “Successful Party” Under The Private Attorney General Statute Attorneys’ fees are also not warranted pursuant to California’s private attorney general statute. Under that statute, a court may, in its discretion, award attorneys’ fees to a “successful party” in an action “which has resulted in the enforcement of an important right affecting the public interest” if certain conditions have been met. Cal. Code Civ. P. § 1021.5. Such fees may be available “when a case has been won on a preliminary matter, the case settled or the opposing party voluntarily withdrew its claim.” Building a Better Redondo, Inc. v. City of Redondo Beach, 203 Cal. App. 4th 852, 870 n.13 (2012) (citations omitted). As the movant, the burden is on the Krauth and Hasper plaintiffs to establish each prerequisite to an award of attorneys’ fees under the private attorney general statute. Ebbetts Pass Forest Watch v. Cal. Dep’t of Forestry & Fire Prot., 187 Cal. App. 4th 376, 381-82 (2010). This burden includes establishing their status as a “successful party.” Id. Because they cannot meet this threshold requirement, attorneys’ fees should not be awarded. Id. (“A party seeking an award of section 1021.5 attorney fees must first be ‘a successful party.’”). The arguments made above apply here as well and will not be repeated. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 28 of 31 Page ID #:8404 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -23- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES Krauth counsel’s quest for attorneys’ fees under the catalyst theory similarly fails. (Mot. at 14). To establish entitlement to attorneys’ fees pursuant to the catalyst theory, these plaintiffs must prove, inter alia, that “the lawsuit was a catalyst motivating the defendants to provide the primary relief sought.” Sengupta v. City of Monrovia, 2010 WL 3368438, at *2 (C.D. Cal. Aug. 25, 2010) (citations omitted). For the reasons discussed in Section II.A.1, supra, the record cannot support any such finding here. D. These Plaintiffs Are Not Entitled To An Incentive Award Krauth counsel seek incentive awards for 14 clients, none of whom is a class representative for the MDL, and including Mr. Bird, who is not even a putative class representative on any case in the MDL. Their claim is supported by one paragraph containing conclusory statement that these 14 persons spent time on this litigation, such as approving the filing of the complaint, reviewing pleadings, and maintaining contact with their counsel. (Antonini Decl., ¶109). The sum total of their work is set forth in one brief paragraph of counsel’s declaration, no individual’s effort is described, and there is no attempt to even claim they provided a benefit to the class. The request should be denied. Incentive awards are meant to compensate named plaintiffs for “the services they provide and the risks they incur in leading class action litigation.” See In re S. Ohio Corr. Facility, 24 F. App’x 520, 526 (6th Cir. 2001); In re Cont’l Ill. Sec. Litig., 962 F.2d 566, 571-72 (7th Cir. 1992) (denying an incentive award because named plaintiff’s risk was nominal). Incentive awards must be evaluated individually and should reflect the “degree to which the class has benefitted” from the named plaintiff’s actions. Staton v. Boeing Co., 327 F.3d 938, 977 (9th Cir. 2003) (citations omitted). Specifically, courts look at “(1) the risk to the class representative in commencing suit, both financial and otherwise; (2) the notoriety and personal difficulties encountered by the class representative; (3) the amount of time and effort spent by the class representative; (4) the duration of the litigation; Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 29 of 31 Page ID #:8405 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -24- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES and (5) the personal benefit (or lack thereof) enjoyed by the class representative as a result of the litigation.” Schaffer v. Litton Loan Servicing, LP, 2012 WL 10274679, at *18 (C.D. Cal. Nov. 13, 2012) (quoting Van Vranken v. Atl. Richfield Co., 901 F. Supp. 294, 299 (N.D. Cal. 1995)). In practice, the appropriate size of an incentive award hinges largely on the third factor, and whether the named plaintiff “remained fully involved and expended considerable time and energy during the course of the litigation.” In re Toys R Us- Del., Inc., 295 F.R.D. 438, 471 (C.D. Cal. 2014) (citation omitted). For example, in In re Oracle Sec. Litig., the court ruled that, due to their “limited participation” in discovery, the named plaintiffs were entitled to only one-fifth of the compensation they requested. 1994 WL 502054, at *1 (N.D. Cal. June 18, 1994) (awarding $500 each to named plaintiffs who spent “between two and five hours undergoing depositions and [] responded to a few narrow document discovery requests”); see, e.g., Toys R Us-Del., 295 F.R.D. at 471 (C.D. Cal. 2014) (focusing on third factor); Schaffer, 2012 WL 10274679, at *19-20 (same). Here, the Court cannot assess any of the relevant factors because no supporting information was provided. Instead of making a showing that could support an incentive award, plaintiffs merely claim that incentive awards are “fairly typical in class action cases,” citing Rodriguez, 563 F.3d at 958, but also citing a statistic that they are awarded in only 28% of class actions. (Mot. at 22:24-23:1). In Rodriguez, the request for incentive awards was denied because they had agreements with class counsel that put the class representatives into a conflict situation with the class. More to the point, the Court explained its “typical” comment by pointing out that incentive awards are “intended to compensate class representatives for work done on behalf of the class, to make up for financial or reputational risk undertaken in bringing the action, and, sometimes, to recognize their willingness to act as a private attorney general. Awards are generally sought after a settlement or verdict has been achieved.” Rodriguez, 563 F.3d at 958-59. Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 30 of 31 Page ID #:8406 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -25- Case No. 2:13-ML-02424-GW DEFENDANTS’ OPPOSITION TO THE KRAUTH/HASPER PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES These plaintiffs have not settled, nor have they demonstrated that any of the reasons for granting incentive awards apply to them. The fact that their case was pending for a certain number of months says nothing at all about what they did during those months and whether they did anything to earn a fee. The Krauth and Hasper cases (and the Bird case, which should not even be under consideration) belong in the 72% of cases where incentive awards are not granted. Conclusion For all the above reasons, the Court should deny the Krauth counsel’s request for fees and incentive awards. DATED: February 5, 2015 QUINN EMANUEL URQUHART & SULLIVAN, LLP By /s/ Shon Morgan Shon Morgan Attorneys for Defendant Hyundai Motor America DATED: February 5, 2015 DYKEMMA GOSSETT PLLC By /s/ James P. Feeney James P. Feeney Attorneys for Defendant Kia Motors America, Inc. C.D. Cal. L. R. 5-4.3.4(a)(2) Attestation Pursuant to Local Rule 5-4.3.4(a)(2), I attest that all other signatories listed, and on whose behalf the filing is submitted, concur in the filing’s content and have authorized the filing. /s/ Shon Morgan Case 2:13-ml-02424-GW-FFM Document 397 Filed 02/05/15 Page 31 of 31 Page ID #:8407