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In re Samsung Top-Load Washing Machine Marketing, Sales Practices and Products Liability Litigation.

No. 20-6097. W.D.Okla. Judge McHugh. Class Action—“Kicker” and “Clear Sailing” Agreements—Attorney Fees and Costs—Approval of Class Action Settlement Agreement—Objection to Settlement Agreement and Class Counsel.

May 10, 2021

Consumers owning Samsung top-load washing machines experienced issues with the top-load door detaching mid-cycle and allowing water to spew out of the machines. Ensuing litigation resulted in consolidation of class action cases into multi-district litigation. Several months later, with the assistance of a mediator, class counsel and defendants negotiated a Settlement Agreement (Agreement) that provided class members five forms of relief. The district court valued the Agreement at between $6.55 and $11.42 million and found that certain of its aspects provided the average claimant greater compensation than damages provable at trial.

Class member Morgan objected to the Agreement’s inclusion of “kicker” and “clear sailing” agreements. Under the kicker agreement, Samsung retained the difference between the maximum permissible attorney fees and costs award of $6.55 million and the amount actually awarded by the district court. Under the clear sailing agreement, Samsung agreed not to contest any request by class counsel for attorney fees and costs of up to $6.55 million. Morgan argued that these clauses allowed class counsel to self-deal at the expense of class compensation. In an effort to resolve the objections, Morgan and Samsung negotiated for a side agreement, but no agreement was reached. The court approved the Agreement over Morgan’s objection and granted final class certification and final approval of the settlement.

Class counsel sought an attorney fees and cost award of about $6.25 million. After scrutinizing the billing records and acknowledging the kicker and clear sailing agreements, the district court awarded class counsel about $3.8 million. Samsung was permitted to retain the difference between this amount and the $6.55 million maximum, which amount would likely have been distributed to the class had Morgan and Samsung finalized the side agreement.

On appeal, Morgan contended that the district court’s orders granting final class certification, granting final approval to the Agreement, and awarding class counsel attorney fees and costs should be reversed. The Tenth Circuit first determined that a district court must apply heightened scrutiny before approving a settlement that includes both kicker and clear-sailing agreements. Here, the district court found that the average class claimant received compensation in excess of damages provable at trial; the mediator’s declaration established that the negotiations were hard fought, and that the attorney fees and costs issue was addressed after the other settlement components were resolved; and the court reduced the attorney fees and cost award, and cross-checked the amount awarded with the estimated value to the class. Therefore, the district court applied sufficient scrutiny and did not abuse its discretion.

Morgan also argued that the district court erred by not disqualifying class counsel and decertifying the class. While the district court committed clear error when it found that class counsel took no position as to the side agreement, class counsel had reasonable bases that were consistent with the class members’ interests to oppose further negotiations on the side agreement. Further, the district court recognized that class counsel had reason for concern regarding the side agreement delaying the proceedings. There was no compelling evidence that class counsel breached its fiduciary duty to the class. Accordingly, the error was harmless.

The orders granting final class certification, granting final approval to the Settlement Agreement, and awarding attorney fees and costs were affirmed.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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