Lawyers Lose $2M Award for HP Inkjet Settlement

     (CN) – The 9th Circuit on Wednesday rejected an award of more $2 million in attorneys’ fees and costs in a class-action settlement over Hewlett Packard inkjet printers.
     The federal appeals court in San Francisco found that a lower court had used the wrong method to calculate fees and costs in a settlement that gave the plaintiffs coupons worth between $2 and $6.
     HP had faced three proposed class actions by 2007 alleging that it had misled consumers. One case claimed the company had duped customers into buying replacement ink cartridges before their current one had run dry. Another claimed that the company had neglected to tell customers that its printers combined colors from ink cartridges to print black and white text, a practice known as “underprinting.” The third lawsuit claimed that HP had hidden the fact that some its cartridges had expiration dates.
     U.S. District Judge Jeremy Fogel in Sacramento approved the parties’ approximately $6 million settlement in 2010. The agreement called for HP to make disclosures about its printers, to hand out up to $5 million in “e-credits” for HP products, and to pay another $1 million in notice and administration costs. The value of the e-credits would range from $2 to $6.
     The class conceivably contains millions of people, but judge 122,000 filed claims after a notice campaign.
     The District Court also approved about $2 million in attorneys’ fees and costs, a significant step-down from the more than $7 million in bills class counsel submitted, and a slight reduction in the nearly $3 million that the lawyers eventually requested.
     While two members of the class, Kimberly Schratwieser and Theodore Frank, objected to the settlement on a number of grounds, the 9th Circuit reached only the attorneys’ fees question in a divided reversal on Wednesday.
     The question came down to differing interpretations of Section 3 of the Class Action Fairness Act (CAFA), which sets down specific rules for calculating fees and costs in class-action cases where the lawyers get cash and the plaintiffs get a coupon.
     “When a settlement provides for coupon relief, either in whole or in part, any attorney’s fee ‘that is attributable to the award of coupons’ must be calculated using the redemption value of the coupons,” Judge Milan Smith wrote for the San Francisco-based majority.
     Instead, the lower court “estimated the ‘ultimate value’ of the settlement to the class at roughly $1.5 million,” Smith wrote, noting that it recognized “that it would be improper to award fees that outstrip the calculated class benefit.”
     “Since the district court awarded fees that were ‘attributable to’ the coupon relief, but failed to first calculate the redemption value of those coupons, we reverse the orders of the district court and remand for further proceedings consistent with this opinion,” the ruling states.
     Judge Marsha Berzon disagreed with the majority’s reading in a lengthy dissent.
     “On my reading of the statute, CAFA allows the use of a lodestar to calculate attorney’s fees on the basis of hours reasonably expended on the class action as a whole, rather than as a percentage of the value of the class recovery,” Berzon wrote. “That permission applies whether the relief obtained for the class involves, in whole or in part, coupons, or whether it does not. The limit CAFA imposes with regard to cases in which there is a coupon recovery is a limit on the district court’s method of calculating percentage-of-recovery fees, should it choose that approach.”

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