Lawyers for car owners warn VW: Hiring Feinberg won’t get you out cheap

December 18, 2015

(Reuters) – Kenneth Feinberg, the most famous victims’ compensation expert in the United States, has many fans in the plaintiffs’ bar. He has earned their regard in designing and implementing settlement programs over the past 30 years, including funds for victims of the 9/11 attacks, the Boston Marathon bombing, and the General Motors ignition switch defect. This month, when U.S. District Judge Charles Breyer of San Francisco invited recommendations for a court-appointed settlement mediator in the gigantic consolidated clean diesel litigation against Volkswagen, Feinberg was suggested by at least a half-dozen plaintiffs’ firms that sang his praises.

On Thursday, Feinberg and Volkswagen announced that the lawyer will indeed oversee a settlement fund for claimants affected by VW emissions cheating – but not through the class action litigation before Judge Breyer. Instead, VW has hired Feinberg and his team to create a settlement program to resolve car owners’ claims outside of court.

The voluntary program, whose terms have not yet been set, will be entirely separate from whatever happens in the VW litigation, according to Feinberg’s VW deputy, Camille Biros. If car owners decide to accept what VW eventually offers, she said in a phone call Friday, they will have to give up their right to sue the company in the litigation before Judge Breyer. If they decide VW’s offer isn’t good enough, they can stay in the consolidated litigation.

Biros insisted the VW program isn’t intended to undercut the more than 500 class actions that have been brought against the company. As she and Feinberg said in a conference call with reporters on Thursday, VW does want to pull car owners out of the litigation before Judge Breyer and into its settlement program, which Biros said will be a “transparent and more expedient” way to get money to claimants. But she said the decision between litigation and the VW settlement program will be up to car owners and their lawyers.

Lawyers representing VW owners said in interviews Friday that if the company wants their clients to drop out of the litigation, it will have to offer car owners almost as much as plaintiffs’ lawyers believe they can obtain in the consolidated litigation. Both Robert Hilliard and James Kreindler have worked with Feinberg in previous cases, Hilliard in the GM ignition switch death and injury fund and Kreindler in the 9/11 victims fund. Both said they hope the company’s appointment of Feinberg is an indication that VW understands its exposure to clean diesel car owners. They said they expect Feinberg to consult with them and other plaintiffs’ lawyers before he finalizes the terms of VW’s settlement offer.

But if the company thinks it can use the program to settle on the cheap, Hilliard said, Feinberg’s effort will fail. “I represent 4,200 clients,” he said, “and they will not go to Feinberg unless they get what they want.” Hilliard and Kreindler said they will press VW to pay clients their full purchase price plus punitive damages.

Plaintiffs’ lawyers Michael Hausfeld and Bruce Simon – who, like Hilliard and Kreindler, backed Feinberg as a potential mediator in the cases before Judge Breyer – said the judge will probably want to keep a close eye on VW’s extrajudicial settlement process. When BP appointed Feinberg to set up a claims facility for victims of the 2010 Deepwater Horizon oil spill, for instance, he filed reports to the court overseeing consolidated litigation.

Hausfeld and other lawyers noted that Feinberg’s BP program was criticized for confusing oil spill victims about its independence and neutrality. Hausfeld said he believes Feinberg and VW “would have learned from that” and “would put the Volkswagen system in the context of a fair, open, transparent presentation  that would have the imprimatur of the federal court.” Deputy administrator Biros said Feinberg and his colleagues “are used to the criticism” and “learn from each program we do.” She also said it is too soon to know what, if anything, VW will report to Judge Breyer, but she emphasized the independence of the company’s settlement program from the consolidated litigation.

Plaintiffs’ lawyers’ fees will be affected by the success of the VW settlement program. If claimants reach individual settlements through the VW program, attorneys’ fees depend on clients’ retainer agreements with their lawyers. If, however, car owners opt to reject the VW offer and end up reaching a settlement through the consolidated litigation before Judge Breyer, the judge will set aggregate fees for the lawyers who worked on behalf of class members.

Judge Breyer will preside over the first hearing in the consolidated VW litigation on Dec. 22. Scores if not hundreds of plaintiffs’ lawyers are expected to appear, and it’s a good bet that some will raise concerns about VW’s out-of-court settlement program. Chris Seeger, for instance, told my colleague Jessica Dye that VW’s sudden announcement of a private settlement program, even as firms are responding to Judge Breyer’s invitation to nominate mediators in the litigation, “doesn’t pass the smell test.”

“I do not see Judge Breyer allowing VW to set up their own program without court guidance and oversight, particularly when these were filed as class actions,” Seeger told Dye. “I need to be open-minded but VW is off to a bad start.”

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