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Gas expands as it heat ups, which basically explains the complex class-action In Re. Motor Fuel Temperature Sales Practice Litigation.
According to Judge Nancy Moritz of the U.S. Tenth Circuit Court of Appeals, the years of litigation were born of simple physics: when consumers buy gas at higher temperatures, they may get less bang for their buck.
The parties ultimately settled, providing mechanisms to remedy the wrong at the gas pump. But some of the settlements blew up because of another explosive issue: class-action attorney's fees.
Amy Alkon, an objector and appellant in the case, said the attorney's fees were "grossly disproportionate" compared to the benefit to the class members. The trial judge approved $18.9 million in attorney's fees in the case.
Nine settling defendants agreed not to object to attorney's fees up to $11,165,800; another agreed separately to pay whatever fees the court awarded. Alkon said it was not fair to the class.
"But in making this argument, Alkon puts the attorney's fees on one side of the ledger and the potential economic benefits to the class on the other -- benefits that Alkon says will amount to, at most, one cent per consumer per year," Moritz wrote.
The cost-benefit analysis is not how it works, however.
The appeals court said the trial judge found that the settlement agreements gave class members a potential informational benefit: "accuracy and consistency of fuel measurement for their dollar." The panel said the judge did not abuse her discretion in making that determination.
Alkon urged the appellate court to follow a Seventh Circuit decision in Pearson v. NBTY, Inc. In that case, the appeals panel said the trial court abused its discretion in approving about $2 million for class counsel and $865,284 for 30,245 class members.
The Seventh Circuit said it was a "selfish deal between class counsel and the defendant" and "that attorneys' fees awarded to class counsel should not exceed a third or at most a half of the total amount of money going to class members and their counsel."
The Tenth Circuit disagreed, saying that class actions are a deterrent to unlawful behavior -- especially when individual injuries are too small to justify expensive litigation.
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