Case 3:15-md CRB Document 3008 Filed 03/09/17 Page 1 of 9

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1 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 1 of 9 Robert J. Giuffra, Jr. (pro hac vice giuffrar@sullcrom.com 2 Sharon L. Nelles (pro hac vice nelless@sullcrom.com 3 William B. Monahan (pro hac vice monahanw@sullcrom.com 4 SULLIVAN & CROMWELL LLP 1 Broad Street 5 New York, New York Telephone: ( Facsimile: ( [Additional Counsel on Signature Page] Attorneys for Volkswagen Group of America, Inc., Volkswagen AG and Audi AG UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA l l IN RE: VOLKSWAGEN "CLEAN DIESEL" MDL 72 CRB (JSC MARKETING, SALES PRACTICES, AND 12 PRODUCTS LIABILITY LITIGATION RESPONSE OF VOLKSWAGEN TO THE SUPPLEMENTAL 13 This Document Relates to: DECLARATIONS OF STEVE W. BERMAN 14 ALL CONSUMER AND RESELLER ACTIONS AND ELIZABETH J. CABRASER AND DEALER ACTIONS NAPLETON ORLANDO IMPORTS, LLC d/b/a Hon. Charles R. Breyer NAPLETON'S VOLKSWAGEN OF ORLANDO, an Illinois limited liability company, NAPLETON SANFORD IMPORTS, LLC d/b/a NAPLETON'S VOLKSWAGEN OF SANFORD, an Illinois limited liability company, and NAPLETON AUTOMOTIVE OF URBANA, LLC d/b/a NAPLETON VOLKSWAGEN OF URBANA, a Florida limited liability company, individually, and J. BERTOLET, INC. dba J. BERTOLET VOLKSWAGEN, on behalf of itself and all similarly situated persons and entities, Plaintiffs, V. VOLKSWAGEN GROUP OF AMERICA, INC., a New Jersey Corporation, VW CREDIT, INC., a Delaware corporation, VOLKSWAGEN AG, a German corporation, ROBERT BOSCH, LLC, a Michigan limited liability company, and ROBERT BOSCH GmbH, a German corporation. Defendants. SUI.UV AN &CROMWELL LU'

2 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 2 of 9 1 Defendants Volkswagen Group of America, Inc., Volkswagen AG and Audi AG 2 (together, "Volkswagen" respectfully submit this response to the three declarations recently 3 submitted to the Court concerning the motion for an award of attorneys' fees and expenses for 4 Hagens Berman Sopol Shapiro LLP ("Hagens Berman" and Bass Sox Mercer (together, "Dealer 5 Counsel" in connection with the Volkswagen Branded Franchise Dealer Class Action (the 6 "Franchise Dealer Litigation", in particular: (i the February, 2017 Supplemental Declaration 7 of Steve W. Berman (Dkt. No. 2962; (ii the February, 2017 Corrected Supplemental 8 Declaration of Steve W. Berman (Dkt. No. 2963; and (iii the March 6, 2017 Supplemental 9 Declaration of Elizabeth J. Cabraser (Dkt. No Volkswagen intends to file an opposition IO to Dealer Counsel's pending fee application, but submits this response now because the Court is 11 presently considering the Plaintiffs' Steering Committee's ("PSC" sub Judice application for 12 fees in connection with the 2.0-Liter TDI Consumer Class Action (the "2.0-Liter Litigation", 13 which includes lodestar for work addressed by these declarations. Specifically, in his 14 declarations, Dealer Counsel/PSC member Steve Berman proposes to shift approximately $ million in lodestar, now included in the PSC's sub Judice fee application, to his application for 16 fees in the Franchise Dealer Litigation. This Court should not permit Dealer Counsel to inflate 17 time spent in connection with the Franchise Dealer Litigation by including time spent working 18 on a different matter-the 2.0-Liter Litigation. Any time spent by Hagens Berman on the Liter Litigation is compensable, if anywhere, through the PSC's sub Judice application for fees. 20 Only the additional time that Dealer Counsel spent on the Franchise Dealer Litigation is compensable in that litigation. BACKGROUND The chronology of events is telling. On February 10, 2017, Dealer Counsel, on behalf of Plaintiff J. Berto let, Inc., filed a motion seeking an award of $.56 million in fees and expenses in connection with the Franchise Dealer Litigation. (Dkt. No. 86. Dealer Counsel's initial application omitted all lodestar information. At the direction of this Court, on February, 2017, Mr. Berman submitted his initial Supplemental Declaration without supporting time StlLLIVAN &CJWM\VELLLLP

3 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 3 of 9 1 entries, claiming an "estimated" lodestar of $3.5 million in support of his $.56 million fee 2 request; in other words, a multiplier of 8x. (Dkt. No. 2962,,r 4. What Mr. Berman's initial 3 declaration failed to state was that this "estimated" $3.5 million lodestar included time spent 4 by the Hagens Berman firm on the 2.0-Liter Litigation that also was included in the PSC 's 5 lodestar in support of its November 8, 2016 request for $175 million in fees and expenses in the Liter Litigation. Mr. Berman submitted a "corrected" declaration shortly thereafter, 7 acknowledging that he "may have" included time in Dealer Counsel's lodestar that was also 8 included in the PSC's lodestar. (Dkt. No. 2963,,r 8. On March 6, 2017, Lead Counsel for the 9 PSC, Elizabeth Cabraser ("Plaintiffs' Lead Counsel", confirmed that approximately $ million was in fact included in the PSC's lodestar in the 2.0-Liter Litigation fee application. 11 (Dkt. No. 3005,,r 3. Indeed, the PSC's Lead Counsel confirmed that more than 40% of Dealer 12 Counsel's lodestar came from time for which the PSC is currently seeking to be compensated in 13 its pending fee application. (Id. The removal of this double-counted time from Dealer 14 Counsel's lodestar in their fee application would reduce that lodestar to approximately $ million. (See Dkt. No. 2963,,r 11. As a result, the Court would have to award a multiplier of 16 l 4x to justify Dealer Counsel's requested fee of $.56 million. 17 ARGUMENT 18 Dealer Counsel offer two grounds to justify their effort to inflate their lodestar by 19 approximately $1.491 million: (1 that their lodestar does not matter; and (2 that time Hagens 20 Berman spent working on the 2.0-Liter Litigation is "hybrid time" and thus also may be allocated to fee requests in other matters. (Dkt. No. 2963,,r,r 6-8, 13. These arguments miss the point. The time has already been included as support for the PSC's pending fee petition, to which Volkswagen agreed not to object based in part on the PSC's purported lodestar, and cannot simply be moved to justify a fee request in another litigation. This Court should not permit Dealer Counsel to shift any time from the PSC's lodestar submitted last November in support of its fee application in the 2.0-Liter Litigation to Dealer Counsel's lodestar in the Franchise Dealer Litigation. All time worked by the PSC on the 2.0-Liter Litigation should remain in the lodestar disclosed in the PSC' s pending fee application; including the approximately $1.491 million. SUl.UVAN &CROMWEI.LLLP -2-

4 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 4 of 9 1 (Dkt. No If there should be any questions about this, the Court should require Dealer 2 Counsel and the PSC to disclose all supporting time records to Volkswagen and the Court A. The PSC and Dealer Counsel Lodestars Are Crucial To Determining Reasonable Attorneys' Fees. Lodestar matters here because it is the appropriate method to determine SUUJV i\."l & CROM\VELI, LlJ' 6 reasonable attorneys' fees in both the Franchise Dealer Litigation and the 2.0-Liter Litigation, 7 and because the PSC already has submitted its lodestar to justify its fee request in the 2.0-Liter 8 Litigation. 9 The lodestar method is the proper method to determine reasonable attorneys' fees 10 in both the Franchise Dealer Litigation and the 2.0-Liter Litigation, because Volkswagen's 11 settlements in those cases do not create any common fund. 1 The "value" of Volkswagen's 12 settlements turn on the number of participating class members, and any attorneys' fees awarded 13 will be paid by Volkswagen, not from any pool. 2 Thus, the accuracy and completeness of the See, e.g., Estrada v. iyogi, Inc., 2016 WL 3109, at *5, *9 (N.D. Cal. Jan., 2016 (no common fund exists where there was a "claims-made settlement" and "attorney's fees do not 16 detract from a common settlement fund"; Zakshorn v. Am. Honda Motor Co., Inc., 2015 WL 36990, at *14-15 (E.D. Cal. June 9, 2015 (citing Hanlon v. Chrysler Corp., 150 F.3d 1011, (9th Cir (holding that "the lodestar method is appropriate where the value of a common fund is uncertain," including where "it [was] subject to the final total number of 18 claims"; Nwabueze v. AT&T, 2014 WL 32, at *2 (N.D. Cal. Jan. 29, 2014 (awarding fees 19 under lodestar method where "no reliable method of determining the precise value of the recovery the Class Members will receive" "[u]ntil the entire process is complete"; Create-A 20 Card, Inc. v. Intuit, Inc., 2009 WL , at * 1 (N.D. Cal. Sept., 2009 (finding that settlement did not create a "common fund" where attorneys' fees "come directly from defendant as opposed to from a fund created by the settlement" and "will have no impact on the recovery available to class members," and that use of lodestar method was supported under Ninth Circuit and California law. 2 See Settlement in 2.0-Liter Litigation, (Dkt. No. 1685,,i 2.42 ("The Funding Pool is based on an assumed 100% Buyback of all purchased Eligible Vehicles and 100% Lease Termination of all leased Eligible Vehicles... Any unspent portion of the Funding Pool will belong to Volkswagen upon the completion of the Class Action Settlement Program.";,i 11.1 ("[T]he attorneys' fees and costs will be paid by Volkswagen in addition to the compensation provided to Class Members under this Class Action Agreement."; Settlement in Franchise Dealer Litigation, (Dkt. No. 1970,,i ("Volkswagen shall pay a Maximum Settlement Amount of $1,208,000, if there is participation of 100% of all Eligible Dealers; i.e., no Eligible Dealer chooses to opt-out of this Franchise Dealer Class Agreement. The Net Settlement -3-

5 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 5 of 9 1 lodestar information submitted by the PSC and Dealer Counsel is crucial to assessing the 2 reasonableness of their requested fees in each case. For this reason, the Court issued Pretrial 3 Order No. 11 ("PTO 11 " requiring any counsel who wishes to recover fees and expenses for 4 work done for the common benefit of plaintiffs in this MDL to "accurately and 5 contemporaneously maintain[]" all time, and "keep contemporaneous billing records of the time 6 spent in connection with Common Benefit Work on this MDL, indicating with specificity the 7 hours (in tenth-of-an-hour increments and billing rate, along with a description of the particular 8 activity." (Dkt. No. 14 at 4-5. Plaintiffs' Lead Counsel is "responsible for collecting 9 monthly common benefit time and expense submissions from Participating Counsel" and 10 "auditing such submissions for compliance with the directives set forth in" PTO 11. (Id. at Volkswagen agreed not to oppose the PSC's November 8, 2016 fee request for 12 $175 million in the 2.0-Liter Litigation on the express understanding that the PSC's application, 13 if granted, would constitute the "full and final payment for any and all attorneys' fees and costs 14 owed to Participating Counsel in connection with work performed in the 2.0-Iiter litigation 15 against Volkswagen." 3 Volkswagen made this agreement before receiving the specific lodestar 16 information that the PSC included when it filed its fee application, 4 which claimed an aggregate 17 lodestar of approximately $63.5 million and counted the approximately $1.491 million that Mr. 18 Berman now includes in his Franchise Dealer Litigation lodestar. (Dkt No. 75, at 13. By any 19 measure, $175 million is a generous fee for a $63.5 million lodestar, particularly given the very 20 early stage at which class claims in the 2.0-Liter Litigation were settled, and the reduced StlLIJVAN &CROMWELLLLP Amount is the actual amount to be paid to those Eligible Dealers that do not opt-out of this Franchise Dealer Class Agreement.";,i 13.2 ("[T]he attorneys' fees and costs will be paid by Volkswagen in addition to the compensation provided to Dealer Settlement Class Members under this Franchise Dealer Class Agreement.". 3 Agreement Regarding Payment of Attorneys' Fees and Costs to Participating Counsel for Work Performed and Costs Incurred in Connection with 2.0-Liter TDI Claims, at 2. Under PTO 11, "Participating Counsel" include Plaintiffs' Lead Counsel and members of the PSC. (Dkt. No. 14 at 1. 4 The PSC disclosed the general magnitude of its lodestar, although at an amount higher than reported in its fee application. -4-

6 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 6 of 9 1 litigation risks facing the putative consumer class in light of disclosures made in connection with 2 related government regulatory proceedings B. Dealer Counsel Seek To Shift Time Spent in the 2.0-Liter Litigation, and Included in the PSC's Lodestar, To Increase Impermissibly Their Lodestar in Support of Fees and Expenses in the Franchise Dealer Litigation. 5 Dealer Counsel want this Court to allow them to shift approximately $ million in lodestar performed in connection with the 2.0-Liter Litigation, for which the PSC has 7 already applied for an award, to support recovery of fees for work in the Franchise Dealer 8 Litigation. Plaintiffs' Lead Counsel has confirmed that more than 40% of the estimated $3.5 9 million lodestar disclosed in Mr. Berman's declarations (or approximately $1.491 million now 10 sits in two separate fee requests. (See Dkt. No. 2963,, 11; Dkt. No. 3005,, 5. Mr. Berman 11 describes this as "Hybrid VW Emissions Time" that Mr. Berman contends his firm "spent on the 12 Volkswagen MDL generally." (Dkt. No. 2962,, 4; Dkt. No. 2963,, 4. PTO 11 does not 13 provide for any "hybrid time" category Given that Mr. Berman's first declaration stated that this so-called "hybrid time" 15 "was not included in the PSC's report of approximately $63.5 million in lodestar" (Dkt. No ,, 8 (emphasis added, and Mr. Berman's subsequent "corrected" declaration stated that 17 "hybrid time" "may have previously been reported in" the PSC's lodestar (Dkt. No. 2963,, 8 18 (emphasis added, Volkswagen had no choice but to request Mr. Berman's supporting time 19 records. After Mr. Berman declined this request, Volkswagen subpoenaed those records from 20 Hagens Berman and Plaintiffs' Lead Counsel. Volkswagen has not received any records to date. It should be no issue to produce these materials: Mr. Berman stated in his Declarations that Sl/LUV AN & CROM\VELL LLP 5 As this Court stated at an initial status conference, this is "a case in which liability has been conceded." (Status Conf. Hr'g Tr. 19:3-4, Feb., PTO 11 sets out specific categories of potentially reimbursable work, and states that "[u]nder no circumstances should a submitting firm make up new categories for use in its submission." (PTO 11 at

7 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 7 of 9 1 Dealer Counsel "has kept detailed time records showing the time they have spent on matters 2 exclusively concerning the Franchise Dealer Action." (Dkt. No. 2962,,r 5; Dkt. No. 2963,,r Plaintiffs' Lead Counsel states in her March 6 Supplemental Declaration that Mr. 4 Berman "would prefer" to apply "Hybrid Time... to support Bertolet's fee application instead." 5 (Dkt. No. 3005,,r 5. Specifically, according to Plaintiffs' Lead Counsel, agreeing to Mr. 6 Berman's "prefer[ence]" would reduce the PSC's lodestar to approximately $62 million from 7 $63.5 million. (Id.,r 7. Notably, Plaintiffs' Lead Counsel did not suggest that the PSC's 8 original inclusion of Hagens Berman's time in its lodestar was improper under PTO 11, or that 9 the PSC would be reducing its $175 million fee application. 10 Mr. Berman would "prefer" to shift approximately $1.491 million included in the 11 PSC's lodestar (where Volkswagen has already agreed to pay up to $175 million in order to 12 artificially increase the lodestar presented in support of Dealer Counsel's fee request in the 13 Franchise Dealer Litigation. But Dealer Counsel cannot inflate their recovery of fees for work 14 on the Franchise Dealer Litigation by improperly calling time spent on the 2.0-Liter Litigation 15 "hybrid time" and then asking for an even greater multiplier (8x for that time than the PSC did Volkswagen is unaware of any Jaw that would allow counsel to call work done for one case 17 "hybrid," submit time for that work in a fee application for that case, and then later, when 18 convenient, move that time to another fee application in a different case brought on behalf of 19 different clients. Volkswagen's agreement not to oppose the PSC' s request for $175 million in 20 fees and expenses is to compensate PSC members for all of their work on the 2.0-Liter Litigation. 9 This was Volkswagen's understanding in not opposing the PSC's fee request. SULLl\'AN &CROM\\1~LLLLP 7 Volkswagen intends to move to compel production of these time records and thus may require additional time to submit its opposition to Dealer Counsel's fee application, currently due on March 16, 2017 (Dkt. No. 2972, until Volkswagen's motion to compel is resolved. 8 See McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir ("In determining the appropriate number of hours to be included in a lodestar calculation, the district court should exclude hours 'that are excessive, redundant, or otherwise unnecessary."' (citation omitted. 9 Volkswagen currently is engaged in discussions with the PSC concerning the PSC's forthcoming request for attorneys' fees for work performed in connection with the Amended Consumer and Reseller Dealership 3.0-liter Class Action Settlement. (Dkt. No. 94. The PSC -6-

8 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 8 of CONCLUSION For the foregoing reasons, the Court should not permit Dealer Counsel to shift any 3 time from the PSC's lodestar submitted last November in support of its pending fee application 4 in the 2.0-Liter Litigation to Dealer Counsel's lodestar in the Franchise Dealer Litigation. That 5 time is compensable, if anywhere, through the PSC's sub Judice fee application, not in any 6 subsequent fee application by a PSC member in connection with a follow-on settlement. 7 Moreover, if there is any question about whether time should be included in the lodestar of 8 Dealer Counsel or the PSC, then this Court should defer ruling on any fee application and order 9 production of time records supporting those lodestars in both cases in order to ensure that all 10 time is accounted for and allocated to the appropriate litigation Dated: March 9, 2017 Isl Robert J. Giuffra, Jr. Robert J. Giuffra, Jr. Sharon L. Nelles William B. Monahan SULLIVAN & CROMWELL LLP 1 Broad Street New York, New York Telephone: ( Facsimile: ( Laura Kabler Oswell SULLIVAN & CROMWELL LLP 1870 Embarcadero Road Palo Alto, California Telephone: ( Facsimile: ( Attorneys for Volkswagen Group of America, Inc., Volkswagen AG and Audi AG S\ILLIVAN &CROMV."EU.LIJ' has indicated that it may seek up to $5 million in additional fees with respect to the 3.0-liter litigation. (See Dkt. No Volkswagen reserves the right to object to any unreasonable fee request, including any attempt to shift time for work performed in connection with the 2.0-Liter Litigation to any lodestar in support of such a request for attorneys' fees in connection with the 3.0-liter litigation. JO See, e.g., Gutierrez v. Wells Fargo Bank, NA., 2015 WL 384, at *5-6 (N.D. Cal. May, 2015 (review "of counsel's actual timesheets" necessary to avoid awarding fees based on inflated lodestar that included time for "projects reflecting overstaffing, duplication, inefficiency, [and] lack of billing judgment". -7-

9 Case 3:15-md-072-CRB Document 3008 Filed 03/09/17 Page 9 of ATTESTATION (CIVIL LOCAL RULE 5-1(1(3 In accordance with Civil Rule 5-1 (i(3, I attest that concurrence in the filing of 3 this document has been obtained from the signatory Dated: March 9, 2017 SULLIVAN & CROMWELL LLP /s/ Laura Kabler Oswell Laura Kabler Oswell Sl!UJVAN & CROMWELL LLP -8-