By Mike Scarcella

WASHINGTON, June 11 (Reuters) - A federal appeals court on Thursday threw out a $3.7 million legal fee award to lawyers who won a settlement for car owners suing automotive giant BMW, in a ruling that could limit payments to class action attorneys for their work in some cases.

The Philadelphia-based 3rd U.S. Circuit Court of Appeals said that when a defendant agrees to pay fees to the plaintiffs as part of a class action settlement, judges in approving the amount must generally hew to the "lodestar" rate — the number of hours involved in a case multiplied by a reasonable billing rate.

Judges should only rarely use "lodestar multipliers" that can drive up fees based on factors including the novelty and complexity of a case, the panel concluded.

"Class action counsel serve a valuable role in our legal system and deserve to be paid. But not twice," Judge Cheryl Ann Krause wrote for the panel, which included Judges Peter Phipps and Jane Roth.

BMW and a lawyer for the company did not immediately respond to requests for comment.

Bruce Nagel, a lead attorney for the plaintiffs, said they will appeal the decision. Nagel said the ruling “not only conflicts with another Circuit, it will ensure that firms will not litigate most class action cases as they can only recover lodestar for what is always many years of hard, risky work.”

The ruling concerns contractual fees that some defendants agree to pay the lawyers for a class as part of a settlement, and not to settlements where lawyers are awarded a percentage of a fund that also provides payouts to class members.

The order marked the second time the appeals court wiped out the $3.7 million fee award for plaintiffs’ lawyers who settled with BMW in a lawsuit over allegedly defective timing chains.

The plaintiffs sought compensation for more than 2,800 hours of work. They said in the settlement they would not seek more than $3.7 million and that the amount was within the range of similar awards.

The settlement has amounted so far to more than $16 million in financial benefits to consumers for repair reimbursements or other related payments, the plaintiffs said.

BMW in its appeal said the $3.7 million award was based on “excessive, redundant and unnecessary” billing by the plaintiffs.

The appeals court questioned hundreds of hours billed by law firm partners, who typically charge higher rates than associates. The panel said lodestar fee calculations are presumptively reasonable and already account for many factors, including time and labor, that a judge might consider in ordering an enhanced amount.

The case is Artem V. Gelis, et al v. BMW of North America LLC, 3rd U.S. Circuit Court of Appeals, No. 24-2721.

For defendant: Chris Dalton of Buchanan Ingersoll & Rooney

For plaintiff: Bruce Nagel of Nagel Rice

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