GRAY v. BMW OF NORTH AMERICA, LLC
AMENDED OPINION (The Court certified the class on February 17, 2017 not November 16, 2016.) Signed by Judge William J. Martini on 8/24/17. (gh, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
ROBERT GRAY and MARKUM
GEORGE, individually, and on behalf
of a class of similarly situated individuals,
Civ. No. 13-cv-3417 (WJM)
BMW OF NORTH AMERICA, LLC
and BMW AKTIENGESELLSCHAFT,
Plaintiffs Robert Gray and Markum George brought this putative class action
against BMW of North America and BMW Aktiengesellschaft (“BMW” or “Defendants”)
on May 31, 2013. Plaintiffs allege that BMW 6-Series vehicles produced between 2004
and 2010 contain one or more defects that prevent the convertible top from functioning
properly. On February 17, 2017, the Court certified the class for the purpose of settlement
and preliminarily approved the parties’ proposed settlement agreement. This matter now
comes before the Court on Plaintiffs’ motion for final settlement approval and Plaintiffs’
motion for attorneys’ fees, expenses and incentives. A fairness hearing was held on August
15, 2017. See Fed R. Civ. P. 23(e)(2). The Plaintiffs’ motion for final approval is
GRANTED and the Plaintiffs’ motion for attorneys’ fees is GRANTED in part.
On May 31, 2013, Plaintiffs Robert Gray and Makrum George (“Plaintiffs”) brought
this suit on behalf of themselves and other similarly situated persons or entities who
currently own or lease, or previously owned or leased, a model-year 2004 to 2010 BMW 6
Series (E64) Convertible (the “Class Vehicles”). Plaintiffs allege that the Class Vehicles
contain one or more defects that cause the convertible tops to stop functioning properly.
On May 28, 2014, this Court dismissed four of the seven claims asserted in the First
Amended Complaint (“FAC”). See ECF No. 21. The parties proceeded with discovery in
connection with the Plaintiffs’ claims for common law fraud, violation of California’s
Consumer Legal Remedies Act, and a violation of California’s Unfair Competition Law.
Discovery following from the parties Rule 26(f) hearing included document
production by BMW, third-party discovery requests on several BMW dealerships, and the
deposition of a BMW employee regarding the alleged defects and BMW’s efforts to rectify
them. This was followed by a full-day mediation before the Honorable Edward A. Infante
(Ret.) and telephone and in-person conferences with Magistrate Judge Mark Falk.
The parties executed a settlement agreement (the “Settlement”) on October 26,
2016. ECF No. 66-2. The Settlement provides three forms of relief:
Within one year of the Settlement’s effective date, all current owners and lessees
of Class Vehicles may arrange for a software update at a BMW facility that
addresses the convertible top defect.
A one-year unlimited-mileage extended warranty from the date of installation of the
Reimbursement for out-of-pocket expenses incurred by former and current owners
and lessees for up to two attempts at repairing the convertible top defect, so long as
appropriate documentation is provided.
On February 17, 2017, the Court issued an order preliminarily approving the
Settlement; certifying the class1 for the purposes of settlement; and directing the parties to
disseminate class notice by April 18, 2017, pursuant to Rule 23 of the Federal Rules of
Civil Procedure.2 The Court appointed Kurtzman Carson Consultants (“KCC”) as the
KCC worked with Experian Automotive to generate a list of Class Members using
Vehicle Identification Numbers (VIN). After processing the names and addresses through
the National Change of Address Database, KCC identified 111,614 Class Members and
disseminated printed notices to 118,984 addresses. Declaration of Jay Geraci ¶¶ 4-6. As of
July 5, 2017, KCC had received 2,492 timely claim forms along with 57 untimely claim
forms. Declaration of Daniel Z. Rivlin in Response to Plaintiffs’ Motion for Fees ¶ 4. Six
Class Members opted out and two filed objections, both of which are addressed below. The
Court held a fairness hearing on August 15, 2017. See ECF No. 84. Neither objector
appeared, although the Court reviewed the grounds for both objections. The Court reserved
judgment on the motion for final approval of the settlement as well as the motion for
The Order defined the Settlement Class as: “All persons or entities in the United States, the
District of Columbia, and Puerto Rico who currently own or lease, or previously owned or
leased, a mode-year 2004 to 2010 BMW 6 Series (E64) Convertible.” ECF No. 74.
Because the Court in its February 17, 2017, Order found that the prerequisites for Fed. R. Civ.
P. 23(a) and (b)(3) had been satisfied, there is no need to conduct an additional analysis for class
certification at this time. Again, certification has been granted solely for the purpose of
Settlement agreements are entitled to “initial presumption of fairness” when: “(1)
the negotiations occurred at arm’s length; (2) there was sufficient discovery; (3) the
proponents of the settlement are experienced in similar litigation; and (4) only a small
fraction of the class objected.” In re Nat'l Football League Players Concussion Injury
Litig., 821 F.3d 410, 436 (3d Cir.), as amended (May 2, 2016) All four criteria are satisfied
here. Having held a fairness hearing pursuant to Rule 23(e)(2), the Court now reviews the
nine factors articulated in Girsh v. Jepson to determine whether the settlement is “fair,
adequate and reasonable.” 521 F.2d 153 (3d Cir. 1975). These include:
“(1) the complexity, expense and likely duration of the litigation; (2) the
reaction of the class to the settlement; (3) the stage of the proceedings and
the amount of discovery completed; (4) the risks of establishing liability; (5)
the risks of establishing damages; (6) the risks of maintaining the class action
through the trial; (7) the ability of the defendants to withstand a greater
judgment; (8) the range of reasonableness of the settlement fund in light of
the best possible recovery; (9) the range of reasonableness of the settlement
fund to a possible recovery in light of all the attendant risks of litigation.”
Girsh, 521 F.2d at 157. The Court examines each factor below and finds the Settlement to
The Girsh Factors
Complexity and duration of the litigation
First, Girsh asks the Court to consider the complexity, expense and likely duration
of the litigation. This factor “captures the probable costs, in both time and money, of
continued litigation.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 535-36 (3d Cir.
2004) (citing In re Cendant Corp. Litig., 264 F.3d 201, 233 (3d Cir.2001)). This case has
been in federal court for over four years. A contentious battle over class certification would
likely have ensued absent settlement. Were certification successful, Defendants would
likely have moved for summary judgment. The Court agrees that this factor weighs in favor
of approving the settlement.
Reaction of the Class to the Settlement
The second Girsh factor “attempts to gauge whether the members of the Class
support the settlement.” McLennan, 2012 WL 686020, at *6. The Convertible Top Defect
allegedly implicates 30,000 vehicles owned or leased by an estimated 111,614 class
members. As of June 21, 2017, the Settlement Administrator received timely claims from
2,315 class members, while six members had opted out and two have objected. “Although
the small number of negative responses is not dispositive, it certainly weighs in favor of
final approval.” McLennan, 2012 WL 686020 at *6.
The Stage of Proceedings and the Amount of Discovery Completed
The stage of proceedings and amount of discovery indicates whether the parties
“had adequate appreciation of the merits of the case before negotiating.” In re GMC PickUp Truck Fuel Tank Prods. Liab. Litig. (“G.M. Trucks”), 55 F.3d 768, 813 (3d Cir. 1995).
Once again, this action has been the subject of litigation in federal court for more than four
years. Discovery has taken place—including large document productions, interrogatories,
and one deposition—and the parties engaged in arm’s length negotiations. See Bell-Atlantic
Corp. v. Bolger, 2 F.3d 1304, 1314 (3d Cir. 1993). Plaintiffs have submitted affidavits
stating that roughly 1,400 hours have been logged by Class Counsel litigating this matter.
The third Girsh factor favors approval of the Settlement.
Risk of Failing to Establish Liability and Damages
“The risks surrounding a trial on the merits are always considerable.” McLennan,
2012 WL 686020 at *6. BMW vigorously disputes the merits of Plaintiffs’ claims. A trial
would likely provoke conflicting expert testimony over technical issues and require
resolution of difficult issues of law and fact, including whether BMW had “knowledge” of
the alleged defect. The Court finds that the attending risk of failing to secure liability and
damages weighs in favor of approving the settlement.
The Risk of Maintaining the Class Action through Trial
Rule 23 allows a court to decertify or modify a class at any time during litigation.
See Federal Rule of Civil Procedure 23(c)(1)(C). It is far from certain that Plaintiffs’ class
would survive the “rigorous analysis” of certification. See Marcus v. BMW of N. Am., LLC,
687 F.3d 583, 591 (3d Cir. 2012). For instance, the Court could find that the class is too
broad to comport with the predominance requirement of Rule 23(b). See, e.g., Neale v.
Volvo Cars of N. Am., LLC, 794 F.3d 353, 373 (3d Cir. 2015) (“uniform evidence cannot
be used to establish predominance as to both new and used owners of the Class Vehicles
because the applicable warranties between the groups may vary.”). This factor weighs
decidedly in favor of approving the Settlement.
The Ability of Defendants to Withstand a Greater Judgment
Certainly BMW could withstand a much greater judgment, but this fact has marginal
relevance unless the ability of a defendant to survive a judgment is central to the negotiation
process. See McLellan, 2012 WL 686020, at *7 (citing In re Warfarin Sodium Antitrust
Litig., 391 F.3d 516, 538 (3d Cir. 2004)). BMW’s resources do not affect the Court’s
determination to approve the Settlement.
The Range of Reasonableness of the Settlement in Light of the Best Possible
Recovery and the Attendant Risks of Litigation
The Settlement is reasonable in light of the best possible recovery and the attendant
risks of litigation. The Settlement allows the owner and lessee of a Class Vehicle to receive
a software update that will cure the convertible top defect. The update will come with a
one-year extended warranty in the event that the defect recurs. The Settlement also
provides Class Members with reimbursement for repair costs for up to two repair attempts,
even those attempts made by third parties, and for reimbursement of out-of-pocket
expenses incurred to replace the convertible top entirely. Agr. § III.B. Plaintiffs’ expert
Kirk D. Kleckner estimates the total value of the Settlement to be $8.5 million, exclusive
of administrative costs. Importantly, the Settlement does not preclude future claims against
BMW for personal injury or subrogation arising from the conduct subject to this litigation.
Objections to the Proposed Settlement
The Oettings’ Objection
The Oettings own a 2005 6-Series BMW (E64), which they bought used in 2011.
Declaration of Jay Geraci, Ex. A.3 They have been unable to consistently use their car with
the top down because of the convertible top failure. They spent $352.27 on one repair and
an additional $500 on a second failed attempt at repair. The Oettings object to the
Settlement on the grounds of their “total lack of trust and confidence” in BMW to
administer the repairs. Instead, the Oettings request compensation reflecting “the total
value of the car over the six-year period of their ownership as if it were fully functional.”
While understandably frustrated, the Oettings’ objection provides no basis for disturbing
the settlement in this case, which elicited only one additional objection. See In re Cendant
Corp. Litig., 264 F.3d 201, 235 (3d Cir. 2001). As Defendants indicate, the two out-ofpocket expenses incurred by the Oettings are eligible for reimbursement if supported by
necessary documentation. See Pl. Response to Objections 5. Perhaps an ideal settlement
would provide additional monetary compensation and additional relief for the Oettings’
frustration, but settlements are by definition the product of compromise, and the possibility
“that a settlement could have been better . . . does not mean the settlement presented was
not fair, reasonable or adequate.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir.
1998). The Oettings’ objection is overruled.
The Sibley Objection
Gary Sibley leased a 2009 BMW 6 Series (E64) convertible and returned the car at
the termination of his lease period. Geraci Decl. ¶ 6. Sibley, whom Defendants refer to as
The Oettings indicated that they have never objected to a class action settlement. They did not
attend the August 15, 2017, fairness hearing.
“notorious serial objector,” objects that notice was generally inadequate; that approval
would violate the Supreme Court’s intra-class requirements; that the requested attorney
fees are unreasonable and based on an overstated valuation of the Settlement; and that the
deadline for objections preceded the application for attorneys’ fees and thus prevented class
members from making informed objections to the fee request.
First, the Court disagrees that notice was inadequate. See Rule 23(c)(2)(B). The
Claims Administrator searched application registration databases to identify the last known
addresses of all Class Members. Notice consisted of website providing prospective Class
Members with information about the suit; a paper notice mailed to class members along
with claims forms; and a toll-free telephone number established to field inquiries regarding
the litigation. See Geraci Decl., Ex. B. ¶¶ 4-12.
Second, Sibley argues that the Settlement “unfairly and arbitrarily benefits some
class members at the expense of other,” and thus violates the principle of “intraclass
equity.” Ortiz v. Fibreboard Corp., 527 U.S. 815, 858 (1999). For instance, Sibley argues,
Class Members who have disposed of their vehicle are prejudiced because of the
Settlement’s “restrictive requirements to obtain out of pocket expense.” Geraci Decl., Ex.
B ¶ 13. The Court disagrees that the reimbursement requirements are unduly restrictive. As
Plaintiffs stated at the fairness hearing, those who have not retained their own repair records
may simply contact the dealership that performed the repairs to obtain documentation.
Third, Sibley argues that the value of the Settlement relief is vastly overstated
because only a small percentage of Class Members will actually take advantage of the
Settlement. As Plaintiffs argue, however, the relevant measure is the value of benefits made
available to the class as a whole, not the portion of benefits ultimately claimed by class
members. See Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980) (“Their right to share
the harvest of the suit upon proof of their identity, whether or not they exercise it, is a
benefit in the fund created by the efforts of the class representatives and their counsel.”).
Finally, Sibley argues that because the deadline for objections was earlier than
motion for attorneys’ fees, objectors were not given an opportunity to make an informed
objection to the fees. According to Sibley, this violates Rule 23(h). The only Third Circuit
case discussing this issue does so in dicta. See In re Nat’l Football League Players
Concussion Injury Litig., 821 F.3d 410, 446 (3d Cir. 2015). The Court finds that Class
Members had ample time between the June 23, 2017, fee request filing and the August 15,
2017, fairness hearing to prepare objections. Moreover, the notice to Class Members—as
well as the Court’s preliminary approval order—stated that the upper limit on attorneys’
fees was $1,869,000 under the parties’ “high-low” agreement. Thus, although detailed
information about how the requested amount was calculated was not provided until June
23, 2017, potential objectors were on notice that the request would likely amount to roughly
$1.8 million. See id. at 446. For that reason, the Court is satisfied that notice procedures in
this case did not violate Rule 23 or due process.
The parties agreed to award fees in an amount within the range of $944,000 and
$1,869,000 (inclusive of $65,078.79 in expenses), subject to the Court’s discretion. Doc.
No. 66-2, Ex. 1A, Settlement Agreement. The agreement states that BMW’s payment of
attorneys’ fees and costs “will be paid separate and apart from any relief provided to the
Settlement Class.” Id., § VIII(A). Class Counsel are requesting $1,803,921.21, representing
20.8% of $8,666,000, the value of the settlement relief according to Plaintiffs’ expert Kirk
D. Kleckner. See Declaration of Kirk. D. Kleckner, ECF No. 77-5. Defendants oppose the
fee request on grounds that it should have been calculated using the “lodestar” method and
that the requested is based on an inflated valuation of the Settlement. Defendants argue that
the Court should award $944,000, the minimum agreed upon under the high-low
Methodology for Calculating Fees
Percentage-of-recovery is normally applied in cases involving a “common fund” as
opposed to a “claims-made” settlement, which usually calls for application of the lodestar
method. McLennan v. LG Electronics USA, Inc., No. 2:10-cv-03604 (WJM), 2010 WL
686020 (D.N.J. Mar. 2, 2012). “A lodestar award is calculated by multiplying the number
of hours [the attorney] reasonably worked on a client’s case by a reasonable hourly billing
rate for such services given the geographical area, the nature of the services provided, and
the experience of the lawyer.” Oh v. AT&T Corp., 225 F.R.D. 142, 153 (D.N.J. 2014). This
method “has appeal where . . . the nature of the settlement evades the precise evaluation
needed for the percentage of recovery.” In re General Motors Corp. Pick-up Truck Fuel
Tank Products Liab. Litig., 55 F.3d 768, 821 (3d Cir. 1995). “Regardless of the method a
court applies or the specific factors considered, the fundamental requirement is that any fee
be fair and reasonable.” See McLellan, 2010 WL 686020, at *9.
The Court agrees that Plaintiffs have mischaracterized the relief obtained by Class
Counsel as a “common fund.” See Black’s Law Dictionary 17(c) (10th ed. 2014) (defining
“common fund” as “[a] monetary amount recovered by a litigant or lawyer for the benefit
of a group that includes others, the litigant or lawyer then being entitled to reasonable
attorney’s fees from the entire amount.”). No specific monetary figure has been set aside
to provide relief to the class; rather, the Settlement Agreement permits class members to
make individual claims in order to obtain relief. See McLellan, 2010 WL 686020, at *10.
Attorney fees and expenses are not being drawn from a pool of money recovered by the
plaintiffs. Although expert testimony for the Plaintiffs pins the estimated value of the
settlement at $8.6 million, this approximation does not somehow transform the relief into
a fund. See In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283,
334 (3d Cir. 1998) (finding that the lodestar method may be appropriate if “the settlement
... cannot reasonably be valuated”) ; Lake v. First Nationwide Bank, 900 F.Supp. 726, 735
(E.D. Pa. 1995) (applying the lodestar multiplier rather than percentage-of-recovery
method where the expected benefit of class relief was “difficult to monetize”).
Applying the Lodestar Method
Multiplying the numbers of hours counsel worked by a reasonable hour rate
establishes the lodestar. McLellan, 2010 WL 686020, at *10. A court may reduce a lodestar
multiplier that is excessive in light of the relief obtained by a settlement. Lazarska v. Cty.
of Union, No. CIV.A.04-02602 (WGB), 2006 WL 2264455, at *7 (D.N.J. Aug. 8, 2006)
(quoting Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)). The Court “has a great deal of
discretion to adjust the fee award in light of  objections.” Rode v. Dellarciprete, 892 F.2d
1177, 1183 (3d Cir. 1990).
Three firms shared the responsibility of class counsel in this case, together
committing 1,396.2 hours to this action. The Court has reviewed the hourly rates of counsel
and finds them to be reasonable and consistent with standard rates in this region’s legal
services market. Multiplying the number of hours worked by counsels’ hourly rates
generated a lodestar of $752,307.50. See Mendelsohn Decl. ¶ 43. Dividing this number into
the total fees sought by counsel ($1,803,921.21) results in a lodestar multiplier of 2.4, a
number that falls within the range of multipliers often approved in this circuit. In re
Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 341 (3d Cir.
1998) (noting that multipliers between one and four are often approved in this Circuit).
In this case, however, a 240% increase over counsels’ normal hourly rates is
unreasonable in relation to the relief obtained under the Settlement Agreement. For one,
the Settlement does not account for Class Members who may have sold or returned their
defective vehicles rather than seek a software update which did not then exist. See
Mendelson Supp. Decl., Ex. A at 63:21-64:23. Further, the estimated value of the software
update relates to the cost of repair without accounting for the damages actually incurred by
Class Members prior to the development of the software update, which Plaintiffs sought in
their amended complaint. See ECF No. 10, FAC p. 35. While the Court does not question
the number of hours class counsel devoted to the litigation, the Plaintiffs’ fee request is
also excessive in light of the relatively limited discovery conducted by Class Counsel;
counsel conducted only one deposition and participated in one settlement conference
before Judge Falk and a single day of mediation with Judge Infante.
The Court finds that a more reasonable reward is $1,128,461.25, exclusive of the
$65,078.79 in costs. This figure rewards class counsel with 150% of their actual claimed
fees ($752,305), thus preserving the premium necessary to induce attorneys to assume the
risk of contingency-fee representation, without overstating the value of the relief obtained
in this case or the amount of discovery required to obtain it. See Steiner v. Hercules Inc.,
835 F.Supp. 771, 791 (D. Del. 1993). See also Lazarka, 2006 WL 2264455 at *9 (awarding
multiplier of 1.2 as opposed to requested multiplier of 1.5); Colbert v. Trans Union Corp.,
No. CIV. A. 93-6106, 1997 WL 550784, at *1 (E.D. Pa. Aug. 22, 1997) (reducing award
from requested amount $129,209.60 to $73,147.35).
For the foregoing reasons, the Court GRANTS Plaintiffs’ motion for final settlement
approval and GRANTS in part Plaintiffs’ motion for attorney fees and costs. The Court awards
counsel with $1,128,461.25 in fees and $65,078.79 in costs, for a total award of
/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
August 24, 2017
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