Glasser v. Volkswagen: Objectors Must Have Actual Financial Interest and Show Harm Resulting from Fee Award

Too often, an objection to a class action settlement is, rather than a bona fide objection, a gambit by a law firm that has stood on the sidelines and hopes to extract a nuisance settlement from the larger, more established firm that negotiated the settlement. At best, settlements are delayed. At worst, fees are cut and returned to settling defendants, with no benefit at all to the class members.

The Ninth Circuit recently injected some much-needed reason into the objection process with its ruling in Glasser v. Volkswagen of America, No. 09-56618, 2011 U.S. App. LEXIS 9943 (9th Cir. May 17, 2011). Above all, Glasser clarifies the prevailing assumption that being a class member necessarily implies an unfettered entitlement to object. “In the class action context, simply being a member of the class does not automatically confer standing to challenge a fee award to class counsel—the objecting class member must be “aggrieved” by the fee award.” Glasser at *7-*8.

The at-issue settlement provided entirely for injunctive relief, whereby Volkswagen agreed to make disclosures about its “smart keys” that the underlying lawsuit, first filed in Los Angeles Superior Court and then removed to federal court under CAFA, had alleged were lacking. Specifically, the named plaintiff alleged that buyers of cars using the smart keys, which require computer programming and typically cost more than conventional keys, were not sufficiently informed as to either the expense or the difficulty attendant to getting replacements. See Glasser at *2. The objector, class member David Murray, argued that the attorney fees were excessive and that the settlement’s benefits were merely “illusory” and, in any event, the case lacked merit. Murray asked that the awarded fees of $417,663.75 be significantly reduced below the lodestar amount. Glasser at *5-*7.

The three-judge Ninth Circuit panel ruled that none of Murray’s specific objections gave rise to circumstances that would confer standing. For instance, his contention that the purportedly “excess” fee award would cause Volkswagen to pass costs along to customers failed to satisfy the “irreducible minimum” of an actual or imminent injury for Article III standing under the leading case on standing in federal courts, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). And because the settlement was not styled as a “constructive common fund,” there was no basis for arguing that the fees directly depleted the class members’ recovery. Glasser at *10-*11.

By flatly prohibiting an objection that was little more than a generalized, indirect grievance about the settlement, Glasser is a modest victory for the fair and efficient administration of class action settlements.