Class counsel in VW clean diesel case: Without us, no government deal

Reuters speaks with Ted Frank on CEI's Center for Class Action Fairness's objection to the Volkswagen emissions settlement. 

The class settlement, which would require VW to fix or buy back hundreds of thousands of 2.0 liter engine cars outfitted with software to defeat emissions-testing equipment, was submitted to U.S. District Judge Charles Breyer of San Francisco as part of a global deal in which Volkswagen also resolved civil claims by the U.S. Justice Department and Federal Trade Commission. In one of the most substantive objections challenging the proposed deal, a VW owner represented by class action gadfly Ted Frank of the Competitive Enterprise Institute argued (among other things) that class members would have received the same benefits via VW’s agreement with the government.

According to Frank, car owners are actually worse off under the proposed settlement than they would have been if there had been no private litigation.

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Frank and his objector client had also argued that compensation for class lawyers cost class members hundreds of millions of dollars. In this case, as in many very large multidistrict litigations, plaintiffs’ lawyers agreed to separate negotiation of their fees from negotiation of the class recovery. Frank said the separation is an economic myth – VW knew going into negotiations with the class and the U.S. government what it was willing to pay to resolve claims, including legal fees, so the company surely subtracted anticipated lawyers’ fees from what it would pay class members.

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I asked Frank what he thought of the plaintiffs’ response to objectors. He said the settlement documents themselves (as opposed to the executive summary cited in the class brief) show that the Justice Department agreement with VW required the company to buy back the cars. Class counsel, he said, “is referring to a piece of paper that has no legal weight.” Frank also repeated his argument that money for plaintiffs’ lawyers necessarily comes out of pockets of class members, no matter whether the fee award is negotiated at the same time as the class settlement or separately.

“It’s a complete economic fiction” to argue otherwise, he said.

Cabraser’s brief mentioned only glancingly Frank’s most provocative arguments about class counsel in the VW case, which are really broad-based arguments about how plaintiffs’ lawyers are selected to lead giant class actions. Frank contends plaintiffs’ lawyers should be required to specify the fees they will charge class members as part of the selection process. He also believes plaintiffs’ lawyers engage in collusion when they endorse one another to judges who pick lead counsel.

Read the full article at Reuters.