The logo of Samsung Electronics is seen at its headquarters in Seoul, South Korea, April 4, 2016. REUTERS/Kim Hong-Ji/File Photo
A federal appeals court has upheld a settlement resolving claims that certain Samsung Group washing machines were prone to exploding, over the objection of a class member who said that agreements between Samsung and class counsel that deprived class members of more than $2 million in potential recovery.
The 10th U.S. Circuit Court of Appeals said Friday that the district court had properly applied heightened scrutiny to "clear sailing" and "kicker" agreements under which Samsung set aside up to $6.55 million for fees and costs, but was allowed to retain what was left over if the actual fees and costs were less than that.
Ted Frank of the Hamilton Lincoln Law Institute, who represented objecting plaintiff John Morgan, said he was pleased that the court found such agreements require heightened scrutiny, and that "if future district courts apply that faithfully, it will discourage a lot of wrongdoing."
"But the court's conclusion that it could therefore affirm this abusive settlement is inconsistent with the district court applying the wrong standard of law," he said. "We're evaluating our options."
Samsung, its lawyer John Elwood of Arnold & Porter Kaye Scholer and plaintiffs' counsel Samuel Issacharoff of NYU Law School did not immediately respond to requests for comment.
Consumer lawsuits began piling up after Samsung recalled about 2.8 million top-load washing machines in the U.S. in 2016, saying the tops could unexpectedly detach, causing injury. Though Samsung offered rebates, plaintiffs said they were inadequate.
The cases were consolidated in an MDL in 2017, eventually resulting in a settlement under which Samsung agreed to pay enhanced rebates and other forms of relief.
U.S. District Judge Timothy DeGiusti of the Western District of Oklahoma, in approving the settlement, concluded that it was worth up to $11.42 million and that it provided average consumers more than they could win at trial.
Morgan objected to the settlement's "clear sailing" agreement, in which Samsung agreed not to challenge any fee request under $6.55 million, and "kicker" agreement, which allowed Samsung to keep anything left over.
The actual award of fees and costs was about $3.8 million, and Morgan argued that since Samsung had been willing to pay $6.55 million, the extra should go to the class.
Morgan had also tried, unsuccessfully, to negotiate a side agreement with Samsung to accomplish that, but class counsel opposed it. He asked for class counsel to be disqualified, arguing that their opposition showed they were not working in plaintiffs' interests.
Circuit Judge Carolyn McHugh wrote Friday that clear sailing and kicker agreements must be subject to heightened scrutiny, an issue of first impression. However, she said the district court had met that standard.
"Simply put, where class members were receiving compensation equivalent to or in excess of actual damages, it cannot be said that class counsel and defendants negotiated terms that favored attorneys' fees and costs at the expense of adequate and reasonable compensation for the class," she said.
McHugh was joined by Circuit Judges Gregory Phillips and Michael Murphy.
The case is In re Samsung Top-Load, 10th U.S. Circuit Court of Appeals, No. 20-6097.
For Morgan: Ted Frank of the Hamilton Lincoln Law Institute
For Samsung: John Elwood of Arnold & Porter Kaye Scholer
For class plaintiffs: Samuel Issacharoff of NYU Law School
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May 08, 2021 at 05:54AM
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