Pa. Supreme Court rules against $4M attorneys fees

HARRISBURG, Pa. -- The Pennsylvania Supreme Court ruled Friday that attorneys fees in a class action lawsuit against Kia Motors America were inappropriate.

Kia Motors America, an automobile manufacturer, lost a class action lawsuit for breach of express warranty. The Pennsylvania Superior Court affirmed the certification decision of the class by the trial court, as the Supreme Court also did in its decision, and the amount of damages and litigation costs awarded to the class.

Included among the litigation costs was a significant legal fee of more than $4 million. The Supreme Court affirmed part of the ruling and reversed part of it. The justices' reversal was only to the extent of the "lower courts' approval of an enhancement" of the legal fee by application of "a risk multiplier to the amount of the lodestar." The Supreme Court remanded the case back to the trial court for adjustment of the attorneys' fees.

Shamell Samuel-Bassett was the plaintiff in the action taken against KMA. She sued KMA on behalf of herself and others in a class action lawsuit filed in January 2001 in Philadelphia Common Pleas Court.

Bassett alleged that, in October 1999, she purchased a 2000 Sephia from KMA with an extended warranty of 60 months or 60,000 miles. The purchase contract included the manufacturer's standard warranty clause, which stated that the new vehicle would be free from defects in material and workmanship.

According to the complaint, the plaintiff experienced malfunctioning of her Sephia's brakes within 17,000 miles of use. She was unable to stop the vehicle or control it properly. She attributed this to a design defect in the Sephia's brake system. The complaint cited inadequate heat dissipation, premature wear of the brake pads, and warping of the rotors.

KMA's authorized dealerships attempted five repairs on Bassett's vehicle between January and October 2000, replacing brake pads and rotors on four of five occasions. Bassett claimed that, although KMA was aware of the defect in the brake system it failed to correct the defect and failed to honor the warranty by charging her for the required repairs. All the repair attempts were ineffective.

According to Bassett, she wanted to rescind her purchase contract but KMA refused. She alleged that the defect was common to all Sephia model years from 1995 to 2001. She filed the class action claiming that all members of the class experienced premature wear and malfunction of the brakes and that they all needed repairs within the first 20,000 miles of purchase.

According to the complaint, all the members of the class incurred damages of a similar nature to Bassett's. The complaint stated four causes of action: breach of express warranty, breach of implied warranty of merchantability, violation of the MMWA, and violation of the Unfair Trade Practices and Consumer Protection Law. Bassett claimed that each member of the class was entitled to compensatory damages for out-of-pocket repair costs, loss of use costs, loss of resale value, funds for permanent repair of the vehicle, treble damages, and costs of litigation, including legal fees. Finally, Bassett requested an injunction compelling KMA to notify all class members of the potential danger for personal injury from the defect.

After a May 27, 2005, jury trial in Philadelphia Common Pleas Court, a verdict was rendered in favor of the class on the claim for breach of express warranty. Damages in the amount of $600 per class member were awarded.

Bassett filed a motion for attorneys' fees on June 6, 2005. After several postponements, the trial court held a hearing on the motion on Sept. 13, 2005. The court granted the motion and awarded class counsel $4,125,000 in fees in January 2006, and $267,513 in costs and expenses of litigation.

The Supreme Court ruled that "Pennsylvania law is well established that a petition for attorneys' fees is an ancillary matter, which the trial court retains authority to decide after entry of judgment on the verdict... Pennsylvania generally adheres to the 'American Rule,' under which 'a litigant cannot recover counsel fees from an adverse party unless there is express statutory authorization, a clear agreement of the parties, or some other established exception.'"

The Supreme Court reversed the lower court's ruling which provides for enhancement of the attorneys' fee award "beyond the amount of the lodestar." They remanded the case back to the trial court for
adjustment of the attorneys' fees "in accordance with their ruling."

Chief Justice Ronald Castille authored the opinion.