In Glasser v. Volkswagon of American, Inc. (9th Cir. May 17, 2011), the Ninth Circuit considered objector-appellant David Murray's contention that the district court erred when it awarded attorneys’ fees and costs to plaintiff-appellee Jacob Glasser. Glasser challenged the inadequacy of disclosures by Volkswagon about the limited availability of "smart keys" for certain Audi and Volkswagon vehicles. Soon after the case was filed, the parties initiated settlement discussions. As part of those discussions, Glasser evidently learned that replacement key technology was available through independent dealers and agreed that Volkswagon had not fixed the price of replacement keys. Volkswagon agreed to make additional disclosures about "smart keys," but no monetary benefit was obtained for the class.
The trial court approved a settlement in which the class was notified of the agreement to make new disclosures and Volkswagon's agreement to either pay an agreed-upon amount of attorney's fees or let the trial court decide fees if the parties did not reach agreement on that issue. Murry filed an objection to the settlement. The district court awarded plaintiff attorney's fees in the amount of $417,663.75, costs and expenses in the amount of $16,614.40, and an incentive award to Glasser in the amount of $2,500.
The Court began with a discussion of Article III standing. The Court observed that fees paid from common funds confer standing on objectors because the fees reduce the fund:
When attorneys’ fees are paid out of a common fund, from which both the class recovery and the fee award are paid, a class member who participates in the settlement generally has standing to challenge the fee award because any reduction in the fee award results in an increase to the class recovery.
Slip op., at 6356. But the Court then concluded that Murray failed to satisfy his obligation to establish Article III standing:
Murray does not contend that Plaintiff’s counsel colluded with VW to orchestrate an excessively high fee award in exchange for an unfair settlement for the class. Had he alleged as much, he may have been able to meet the requirements of Article III standing under a “constructive common fund theory.” See Lobatz, 222 F.3d at 1147. However, Murray has expressly disclaimed recovery under a “constructive common fund” theory. Instead, he argues Plaintiff’s claims were entirely meritless from the beginning of the lawsuit. Further, he claims only that an excess fee award will cause VW to pass along the cost to its shareholders and customers, and that he may somehow benefit as a consumer from any savings that may result from the denial or reduction of the award.
Slip op., at 6537. The appeal was then dismissed for lack of standing. Oops. I suppose an assertion of a "constructive common fund" theory will become the new standard refrain for objectors, particularly in consumer class actions.