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$1.35 Million in Fees|for HP Class Action

SAN FRANCISCO (CN) - A federal judge awarded $1.35 million in fees to attorneys for a class who settled with Hewlett Packard over misrepresentations about its ink cartridges.

The Sept. 30 settlement resolves three consolidated class actions that were proposed in 2007, each one claiming that HP had misled consumers about it printers and ink cartridges.

One case claimed that the company duped consumers into believing that they needed to replace the ink cartridges before the cartridges were empty.

A second one alleged that HP neglected to tell customers that its printers combined colors from ink cartridges to print black and white text.

The final lawsuit claimed that HP concealed that some of the ink cartridges had expiration dates.

As part of the settlement, HP agreed to issue coupons worth $2 to $6, to discontinue using certain pop-up messages showing an image of an ink gauge, and to disclose additional information through the packaging, user manuals, interfaces and the HP website.

Although notices of the settlement reached an estimated 13 million class members, only 122,000 filed claims for coupons.

At the time of the initial settlement approval, U.S. District Court Judge Jeremy Fogel awarded $1.5 million in attorney fees and nearly $600,000 in costs, based partly on Fogel's conclusion that the "ultimate value" of the settlement to the class was approximately $1.5 million.

This was a significant step down from the $7 million in bills that class counsel submitted, and a slight reduction in the $2.3 million in fees that counsel requested and that HP had agreed to pay.

However, on appeal by an objector to the settlement, the 9th Circuit ruled that the attorney fees attributable to the award of coupons must be calculated using the redemption value of the coupons, not an estimated value.

The circuit said it would be improper for the fee award to outstrip the calculated class benefit.

In light of the 9th Circuit's opinion, class counsel claimed not to seek any fees for the coupon portion of the settlement, but requested the original award of $1.5 million in fees and $600,000 in costs based only on the injunctive relief portion of the settlement.

These fees must be calculated using the lodestar method.

Although counsel argued that the appropriate initial lodestar figure is the $7.4 million that it incurred in litigating the action, Fogel found that "under the foregoing framework the entire amount of fees incurred cannot be the correct starting point, because some portion of those fees must be attributable to obtaining the coupon portion of the settlement."

"While the court agrees with plaintiffs that the injunctive relief obtained in this case addressed the core complaints of the class members and that the value of the coupon relief awarded was modest, the value of the coupon relief clearly was not $0. Accordingly, the starting point for the lodestar calculation must be something less than the entire $7.4 million in fees incurred," Fogel wrote.

At least $1.5 million of the fees were undoubtedly incurred in litigating the equitable relief portion of the settlement, so Fogel would be inclined to award the entire $1.5 million requested if it were the first time the fees were being addressed, he said. However, the court already reduced the previous requested fee award of $2.3 million to $1.5 million.

"Given that the prior award of $1.5 million was meant to compensate class counsel for obtaining the entire settlement, including both the coupon and non-coupon aspects, and that the court's current task is to compensate class counsel for obtaining only the non-coupon aspects of the settlement, the court concludes that it must reduce the original $1.5 million award to reflect those fees attributable to the coupon aspect of the settlement," Fogel wrote.

Noting that the settlement coupons are nontransferable and cannot be used with other coupons or discounts, and that they are valid only for class members who continue to use HP printers, Fogel found that a revised award of $1.35 million in attorney fees, plus the approximately $600,000 in costs and expenses, is appropriate.

The amount reflects a 10 percent reduction in the amount previously awarded and a reduced lodestar award for class counsel's work on the non-coupon portion of the litigation that does not exceed the value of the settlement to the class.

Fogel declined to disqualify lead class counsel, Cotchett, Pitre & McCarthy, despite a motion from objectors claiming that the law firm failed to disclose a conflict of interest.

When the objectors filed their motion, the proposed settlement agreement provided that HP would retain the law firm as its counsel in certain future proceedings. However, the settlement agreement was revised to omit the provision, making the objectors' motion moot.

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