A federal appeals panel has sliced almost in half nearly $5 million in attorney fees awarded by a federal judge to a group of lawyers who led a decade-long legal action against Sears and Whirlpool over allegedly defective washing machines the retailer sold.
On Aug. 14, the three-judge panel for the U.S. Seventh Circuit Court of Appeals in Chicago ruled those lawyers should receive $2.7 million – “no more, no less” – for their work on the case.
The opinion was authored by Seventh Circuit Judge David Posner, with judges Ripple and Hamilton concurring.
The plaintiffs’ lawyers, Posner wrote, “failed to prove that a reasonable fee would exceed $2.7 million,” which was “already thrice the damages awarded the class” under a settlement with Sears and Whirlpool.
The appeals panel’s decision reversed the ruling of U.S. District Judge Mary Rowland who, in September 2016, said the plaintiffs’ lawyers were owed $4.8 million in fees for their work on the case.
The lawyers, including attorneys Steven A. Schwartz, of the firm of Chimicles & Tikellis, of Haverford, Pa., and James Rosemergy, of the firm of Carey, Danis & Lowe, of St. Louis, had filed suit in 2006 on behalf of a class of potentially hundreds of thousands of people who bought from Sears and then paid to repair certain Kenmore and Whirlpool-branded washing machines.
The lawsuit had demanded Sears pay for selling the washing machines the plaintiffs claimed Sears knew would “repeatedly break down, do not clean clothes effectively and otherwise fail to perform during normal home use.”
The plaintiffs also claimed the machines’ defective design, which did not allow the machines to “circulate and drain completely,” allegedly allowing mold and mildew to grow inside the machines.
In 2016, the parties reached a settlement deal, under which Sears and Whirlpool agreed to pay anyone with valid claims – meaning those who could document costs to fix the specific problem alleged in the lawsuit within three years of buying the machine.
As recently as February 2016, court documents had indicated more than 10,000 people had submitted claims, and the average claim paid was about $275.
In all, court documents have estimated claimants would likely receive a total payout of around $900,000.
Under the settlement, the plaintiffs’ attorneys were allowed to request fees of as much as $6 million.
Ultimately, they presented billable hours they estimated to be worth about $3.25 million – a figure known in legal parlance as the “lodestar.” However, they then sought to apply a “multiplier” of 1.85 to that figure, compensation they said they were due for handling a “complex” case for so many years against two large corporate defendants.
Judge Rowland questioned the request, but ultimately adjusted the lodestar to $2.7 million, and applied a multiplier of 1.75, bumping the total fee to $4.77 million.
“Given that the most important factor is the ‘results obtained,’ class counsel is entitled to a significant lodestar enhancement,” Judge Rowland wrote.
Sears, however, contended the fee award was excessive, and appealed.
Posner and the other appeals judges said they believed the plaintiffs’ lawyers were entitled to recover more than the class.
But he said he and his colleagues were “puzzled” by Rowland’s decision to apply the multiplier.
“The district court, comparing the hourly rates sought by class counsel with the complexity of their work, concluded that for the most part the case wasn’t very complex - it was just about whether or not Sears had sold defective washing machines,” Posner wrote.
Sears and Whirlpool were represented in the action by attorneys from the firms of Wheeler Trigg O’Donnell, of Denver, and Barnes & Thornburg, of Chicago. Whirlpool was represented individually by the firm of Bartlit Beck Herman Palenchar & Scott, with offices in Chicago and Denver.