Court Rejects Volkswagen Settlement That Gave Lawyers $9 Million, Owners Letters

Forbes discusses Ted Frank's victory when the court sided with him and overturned the Volkswagen settlement because the lawyers created a conflict of interest between class members.

An expert for the lawyers testified the settlement was worth $142 million. But it drew stiff opposition from disgruntled car owners as well as Ted Frank of the Center for Class Action Fairness, who frequently sues to break up settlements he regards as collusive or unfair. And in a 51-page opinion released today, the Third Circuit agreed.

The court said it overturned the settlement because it violated the fundamental principle behind a class action. By dividing the class of Volkswagen and Audi owners into several subclasses, the lawyers created a conflict of interest between those who got something out of the deal and those who didn’t. Plaintiffs in the so-called “reimbursement group” (or more realistically, lawyers claiming to represent them) had an incentive to include only their model years in the group receiving a definite payment, while plaintiffs in the residual group would get only what was left over out of the $8 million. Representative plaintiffs also got $10,000 apiece for leading the litigation.

The decision represents an influential victory for Frank, who is often derided by class-action attorneys as a gadfly or only interested in raking off part of their fees for himself. While Frank does seek to be paid, he says he only applies for a fee when he improves the value of a settlement.

Read the full article at Forbes.