Companies may be inclined to offer “coupons” or similar benefits to settle consumer class actions. While offering coupons is permissible, in In re Easysaver Rewards Litigation, No. 16-56307, 2018 U.S. App. LEXIS 28000 (9th Cir. Oct. 3, 2018), the Ninth Circuit has reaffirmed that the full face value of coupons cannot be included when calculating the total value of the settlement, which may reduce the attorneys’ fees awarded to Plaintiffs’ class counsel.
Defendant Provide Commerce (“Provide”) is an online purveyor of flowers, chocolates, and fruit baskets. Plaintiffs alleged that Provide enrolled its customers into a membership program without their consent and mishandled their billing information. The class included 1.3 million consumers.
To settle the dispute, Provide agreed to reimburse membership fees upon submission of a claim, and to automatically distribute a $20 “credit” to all class members. The credit was transferrable, but was subject to restrictions including that it expired within one year and could not be used in the lead-up to Christmas, Valentine’s Day or Mother’s Day. The U.S. District Court for the Southern District of California valued the settlement at $38 million, with the $20 credits accounting for $25.5 million of that value. Plaintiffs’ counsel was awarded $8.7 million based on the $38 million total settlement amount.
Class members submitted claims totaling $225,000 in cash refunds, leaving approximately $3 million of the settlement’s cash fund to be distributed to certain cy pres beneficiaries. On appeal, objector Brian Perryman argued that the Class Action Fairness Act (“CAFA”) required the credits be treated as coupons for purposes of calculating the value of the settlement (and also challenged the cy pres awards).
The Ninth Circuit agreed the credits were coupons...
