Jacob Glasser v. Volkswagen of America, Inc.

Filing

FILED OPINION (BARRY G. SILVERMAN, RICHARD C. TALLMAN and RICHARD R. CLIFTON) DISMISSED. Judge: BGS Authoring,. FILED AND ENTERED JUDGMENT. [7754656]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JACOB GLASSER, on behalf of
himself and all others similarly
situated and on behalf of the
General Public,
Plaintiff-Appellee,
v.
VOLKSWAGEN OF AMERICA, INC.,
Defendant,
and
DAVID T. MURRAY,
Objector-Appellant,
and
KIMBERLY A. CARR,
Objector.





No. 09-56618
D.C. No.
2:06-cv-02562ABC-JTL
OPINION



Appeal from the United States District Court
for the Central District of California
Audrey B. Collins, Chief District Judge, Presiding
Argued and Submitted
May 3, 2011—Pasadena, California
Filed May 17, 2011
Before: Barry G. Silverman, Richard C. Tallman, and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Silverman

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GLASSER v. VOLKSWAGEN OF AMERICA

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COUNSEL
C. Benjamin Nutley (argued), J. Garrett Kendrick, Kendrick
& Nutley, Pasadena, California, for the appellant.
Jordan L. Lurie (argued), Leigh A. Parker, Joel E. Elkins,
Weiss & Lurie, Los Angeles, California, for the appellee.

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OPINION
SILVERMAN, Circuit Judge:
Objector-appellant David Murray appeals from the district
court’s order awarding attorneys’ fees and costs to Plaintiffappellee Jacob Glasser. Murray, who expressly disavows any
financial interest in the fee the defendant was ordered to pay
to Plaintiff’s counsel, has failed to demonstrate how he has
suffered injury as a result of the fee order. We therefore dismiss his appeal for lack of standing.
FACTUAL AND PROCEDURAL BACKGROUND
I.

The Class Complaint Against Volkswagen

This case was filed in April 2006 in Los Angeles County
Superior Court. Plaintiff, on behalf of himself and a class of
owners and lessors of 2007 model year and older VW and
Audi vehicles, alleged that VW limited the availability of
replacement vehicle keys and failed to sufficiently disclose
information about the potential difficulty and expense of
obtaining such replacements. The complaint alleged that
replacement keys are difficult to obtain in part because, as a
security measure, these “smart keys” must be programmed by
computer to match the individual code for a particular vehicle.
Plaintiff contended that VW refused to give to independent
locksmiths the technological information necessary to reproduce VW smart keys, thereby restricting the market for VW
smart keys to franchised dealers and facilities and fixing
prices for keys at an artificially high level. Plaintiff alleged
several California law unfair competition and misrepresentation claims against VW and sought injunctive relief, a variety
of damages, and attorneys’ fees under California Code of
Civil Procedure section 1021.5 and California Civil Code section 1780(d). The action was removed to the district court
under the Class Action Fairness Act, Pub. L. No. 109-2, 119
Stat. 4 (2005).

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II.

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The Terms of the Settlement Agreement

The parties began settlement discussions almost immediately, representing to the district court that settlement discussions were underway within three months of the complaint’s
filing. In April 2008, a settlement agreement was submitted to
the district court for preliminary approval. Under the terms of
the settlement agreement, Plaintiff released his claims against
VW, and VW denied all wrongdoing and liability. The agreement also confirmed the parties’ understanding that (1) VW
had, in fact, made smart-key replacement technology available to independent sources, as well as franchised VW and
Audi dealers; (2) VW had not fixed prices for the keys; and
(3) franchised dealer prices are competitive with those
charged by independent sources. VW also agreed to make a
series of new disclosures regarding the cost, availability, and
operation of smart keys. The class received no monetary relief
whatsoever.
On the issue of fees and costs, the settlement agreement
expressed the parties’ intent to negotiate in good faith; however, in the event that an agreement could not be reached,
Plaintiff could submit an application for fees to the court, and
VW would neither dispute Plaintiff’s status as a “prevailing
party” nor “take the position that Plaintiff’s Counsel is entitled to no fee.”
III.

Proceedings Regarding the Settlement Agreement

In May 2008, the district court signed the stipulated proposed order submitted by the parties, which preliminarily
approved the settlement, and set a fairness hearing regarding
the settlement. The order indicated that the settlement was not
entirely complete, as the parties had not reached agreement on
the issue of attorneys’ fees and costs; accordingly, Plaintiff’s
counsel was ordered to submit papers in support of an award
of fees and costs. The order also required that “[a]ny objections to the proposed settlement, or to any request or applica-

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tion for attorneys’ fees and reimbursement of litigation costs
and expenses, shall be filed and served twenty-one (21) days
or more prior to the fairness hearing . . . . Any objection must
be made in writing and include a statement of the position to
be asserted, [and] the grounds therefore . . . .” Notice of the
settlement was mailed out to the proposed class, and advised
class members of the terms of the settlement, including that
VW agreed to pay Plaintiff attorneys’ fees, costs and an
incentive award; the parties would attempt to negotiate the
amount of fees and costs; and, if those negotiations failed, the
issue of fees and costs would be submitted to the court. The
Notice also advised proposed class members of their options,
including remaining in the settlement class without objection
or either of the following:
You may request exclusion from the Settlement
Class. If you elect to be excluded from the Settlement Class, you will not be bound by any judgment,
disposition, or settlement of the class action, and you
may not participate in the settlement of this class
action in any fashion. You will retain, and will be
free to pursue, any claims you may have on your
own behalf. . . .
You may object to the Settlement. . . . Any Settlement Class member who objects to all or part of the
Settlement will be bound by the Settlement regardless of whether such Settlement Class member’s
objections are sustained by the Court.
Murray did not opt out of the class; instead, he timely
served a set of objections upon the parties. Murray argued that
the settlement should not be approved and Plaintiff should not
receive any award of fees because (1) Plaintiff’s claims
lacked merit; (2) the settlement provided only illusory benefits to the class; and (3) to the extent Plaintiff’s claims had
any monetary value at all, that value should accrue, at least in

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part, to the class, rather than entirely to counsel in the form
of fees.
On October 6, 2008, the district court issued its Order and
Final Judgment, in which it “approve[d] the terms of [settlement agreement] . . . as fair, reasonable, and adequate, with
the exception of attorneys’ fees, costs, interest, and expenses
and incentive payment issues reserved for later decision.” The
order stated that twenty-nine class members had filed objections and “[t]hese objections to the [settlement agreement]
have been considered and overruled.”
Murray filed a notice of appeal from the Order and Final
Judgment, proposing three issues to be raised on appeal,
including whether the district court abused its discretion in
approving the settlement and whether Plaintiff’s counsel was
entitled to any fees. We later granted Murray’s motion to voluntarily dismiss that appeal with prejudice.
IV.

Proceedings Regarding Attorneys’ Fees

Returning to the motion for fees, Murray timely filed objections, arguing that Plaintiff’s counsel should not receive an
award of fees under California Code of Civil Procedure section 1021.5 because the settlement (1) places no new obligations on VW that could be considered a “significant benefit”
to the class or public, and (2) potentially affects only a small
subset of the class. Murray also argued in the alternative that
any award of fees should be significantly reduced below the
lodestar amount. Notably, Murray did not claim in his objection to the fee application that any reduction in fees could or
should benefit the class in any way.
On September 11, 2009, the district court awarded Plaintiff
attorneys’ fees in the amount of $417,663.75, costs and
expenses in the amount of $16,614.40, and an incentive award
to Plaintiff in the amount of $2,500. This appeal from Murray
followed.

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DISCUSSION
[1] “[Article III] limits are jurisdictional: they cannot be
waived by any party, and there is no question that a court can,
and indeed must, resolve any doubts about this constitutional
issue.” City of Los Angeles v. County of Kern, 581 F.3d 841,
845 (9th Cir. 2009). To establish Article III standing on
appeal, “an appellant must establish that she has suffered an
injury, caused by the appellee, that is redressable.” Lobatz v.
U.S. W. Cellular of Cal., Inc., 222 F.3d 1142, 1146 (9th Cir.
2000). In the class action context, simply being a member of
the class does not automatically confer standing to challenge
a fee award to class counsel—the objecting class member
must be “aggrieved” by the fee award. In re First Capital
Holdings Corp. Financial Prods. Sec. Litig., 33 F.3d 29, 30
(9th Cir. 1994). If modifying the fee award would not “actually benefit the objecting class member,” the class member
lacks standing because his challenge to the fee award cannot
result in redressing any injury. Knisley v. Network Assocs.,
Inc., 312 F.3d 1123, 1126 (9th Cir. 2002).
[2] 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. Knisley, 312 F.3d at 1126. However, there is no
common-fund settlement in this case. Instead, Volkswagen is
liable for Plaintiff’s attorneys’ fees pursuant to a fee order that
is independent of the settlement agreement and the class
recovery. See, e.g., Lobatz, 222 F.3d at 1144, 1146. In Lobatz,
we held that class members may have standing to challenge
a fee award if the award negatively affects the class recovery,
that is, where “class counsel might obtain an excessive attorney fee award as part of a deal to accept an inadequate settlement for the class.” Id. at 1146-47; accord In re Gen. Motors
Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d
768 (3d Cir. 1995); Rosenbaum v. MacAllister, 64 F.3d 1439,

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1442 (10th Cir. 1995). In such circumstances, we consider the
independent fee award and class recovery as a “constructive
common fund.” Lobatz, 222 F.3d at 1147; see also Zucker v.
Occidental Petroleum Corp., 192 F.3d 1323, 1327 (9th Cir.
1999) (dicta). In this scenario, class counsel have breached
their fiduciary duty to the class by agreeing to an unfair settlement offer, so the excessive fee award “could be considered
the property of the class.” Id.
[3] However, the rule announced in Lobatz does not
change the underlying Article III requirement that a class
member must be “aggrieved” by the fee award to have standing to challenge it. See First Capital, 33 F.3d at 30 n.1.
Whether a fee award is independent of the settlement agreement is an issue distinct from whether an objecting class
member was injured by the fee award. Id. (“The fact that the
attorney fees were separately negotiated and funded has nothing to do with the outcome of this case. It is [the objecting
class member’s] particular lack of injury that is unique and it
is this fact which precludes her from having standing to
appeal [the fee award].” (emphasis added)).
[4] 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. These
allegations fail to satisfy “the irreducible constitutional minimum of standing” because they are insufficient to demonstrate either an injury that “is . . . concrete and particularized

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and . . . actual or imminent, not conjectural or hypothetical”
or that it is “likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision.” Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal
citations, quotation marks and alterations omitted). We therefore dismiss Murray’s appeal for lack of standing.
DISMISSED.