A U.S. federal appeals court cut by nearly half the legal fees that Sears Holdings Corp. and Whirlpool Corp. must pay as part of a class-action lawsuit over defective washing machines, reversing an earlier judgment by a District Court.
The U.S. Court of Appeals for the 7th Circuit in Chicago issued a ruling on Aug. 14 that cut the amount to be awarded for plaintiffs' attorneys' fees in the case to $2.7 million from a lower court's award of $4.8 million in attorney fees.
Beginning in 2006, several groups of consumers across the U.S. filed lawsuits over front-loading washing machines manufactured by Whirlpool under the Kenmore brand and sold by Sears. The lawsuits were eventually consolidated into two classes — one alleging faulty control units and the other alleging mold in the machines.
While the two companies settled with both classes in 2015, they appealed to the 7th Circuit, challenging the fees awarded to the plaintiffs' attorneys representing the consumers, claiming the fees were too high.
Plaintiffs' attorneys, who claimed to have incurred $3.16 million in fees to work on the case, asked the District Court to multiply the base by 1.9 times due to the effort involved in the case. They then raised the claim on their base fee to $3.25 million after discovering more billable time but cut the multiplier request to 1.85 times, according to court documents.
In September 2016, the U.S. District Court for the Northern District of Illinois, Eastern Division, concluded that plaintiffs' attorneys were entitled to fees of $4.8 million, court documents showed.
District Court Judge Mary Rowland concluded in September that the base fee should be $2.73 million but granted a multiplier of 1.75 times on the basis of the "novelty and complexity, the degree of success and the public interest involved," according to the same court document.
However, Sears and Whirlpool challenged the lower court's ruling and filed an appeal with the 7th Circuit, arguing that the award for plaintiffs' attorneys' fees should not exceed $900,000, according to court documents.
On Aug. 14, 7th Circuit Judge Richard Posner said the District Court's decision to grant a multiplier was "questionable," as the novelty and complexity of a case is usually reflected in base fees. Moreover, he added he was "puzzled" because the District Court had determined that the case was "for the most part" not that complex and hinged on whether Sears and Whirlpool had sold defective washing machines.
The District Court "failed to prove that a reasonable fee would exceed $2.7 million — the pre-multiplier figure sought by class counsel and already thrice the damages awarded the class," according to the 7th Circuit's decision. "We therefore reverse the judgment of the district court and remand with directions to award $2.7 million — no more, no less — in fees to the class counsel."
The law firms that represented the consumers include Carey Danis & Lowe and Chimicles & Tikellis LLP, according to a document submitted to the appeals court by attorneys representing Sears and Whirlpool when they filed the appeal in March 2017.
The damages that the class will receive as a result of the settlement are yet to be determined. However, the District Court has accepted the two companies' estimation that the class members would receive no more than $900,000.