Galloway v. The Kansas City Landsmen, LLC, 2016 WL 4409343 (8th Cir. Aug. 19, 2016)In this case, affirming the judgment of a district court for an award of attorney’s fee to class counsel, the Eighth Circuit found that 28 U.S.C. § 1712 does not authorize class counsel to choose its method of payment calculation for purposes of computing attorneys’ fees, departing from the Ninth Circuit’s interpretation of the statute.The plaintiffs, consumers, brought a putative class action alleging that the defendants, car rental companies, issued receipts that contained more than five digits of customers’ credit card numbers in violation of the Fair and Accurate Credit Transactions Act (“FACTA”).

In re Sw. Airlines Voucher Litig., 799 F.3d 701 (7th Cir. 2015).In In re Southwest Airlines Voucher Litigation, the Seventh Circuit held that the “coupon settlement” provision of CAFA, 28 U.S.C. § 1712, permits a district court to award attorneys’ fees to class counsel based on the lodestar method, rather than the value of coupons actually redeemed by class members. This decision creates a split with the Ninth Circuit, which previously held that CAFA Section 1712 only permits a district court to award attorneys’ fees to class counsel in a “coupon settlement” based on the value of the coupons redeemed by class members.

47. 151 Cong. Rec. H723-01, at P. H729 (daily ed. Feb. 17, 2005) (statement of Rep. Sensenbrenner). 48. Pub. L. No. 109-2, 119 Stat. 4, Sec. 3(a) (codified as 28 U.S.C. § 1712(a)). 49. While CAFA specifically addresses this concern for “coupon” settlements, CAFA does not address this issue in the context of valuing settlements to fix the attorney’s fee amount in “claims made” or similar settlements that do not involve “coupons.”

Sobel v. The Hertz Corp., No. 3:06–CV–00545–LRH–RAM,2011 WL 2559565 (D. Nev. June 27, 2011).How about sprinting through the airport to the car rental counter only to find out that you get stuck with concession recovery fees in excess of your quoted rate? It may just make you want to drive slowly in a white bronco on the interstate in Los Angeles.Although both Fed. R. Civ. P. 23(e) and CAFA, 28 U.S.C. § 1712(e), require the coupon settlements be fair, reasonable, and adequate for class members, CAFA imposes a heightened level of scrutiny in reviewing such settlements.The plaintiffs, on behalf of persons who have rented cars at the Reno and Las Vegas international airports from three national rental car companies: Hertz, Enterprise, and Vanguard, filed a putative class action, alleging that in return for the right to operate on-site at the Reno and Las Vegas international airports, rental car companies were required to pay a percentage of their gross revenues to the airports as concession fees.As a means of recouping these ordinary operating expenses, the rental car companies pass along the fees to their customers as surcharges labeled “concession recovery fees.”

ion settlement is a "coupon settlement" and therefore subject to the restrictions on the award of attorneys' fees to class counsel imposed by the Class Action Fairness Act (CAFA). 28 U.S.C. Section 1712.In rendering its decision in McKnight v. Hinojosa, the Ninth Circuit affirmed the district court's application of the Online DVD factors from a 2015 case, in concluding that the class action settlement (the Settlement) was not a coupon settlement subject to the restrictions on attorneys' fees awards to class counsel under CAFA by reasoning that two of the three factors weighed against determining that the Settlement was a "coupon settlement."The U.S. Court of Appeals for the Ninth Circuit in McKnight v. Hinojosa, No. 21-16623, 2022 WL 17333820 (9th Cir. Nov. 30, 2022) considered whether the proposed class action settlement was a "coupon settlement" and therefore subject to the restrictions on the award of attorneys' fees to class counsel imposed by the Class Action Fairness Act (CAFA). 28 U.S.C. Section 1712. Congress enacted CAFA in part out of "concern about settlements when class members receive little or no value, including settlements in which counsel are awarded large fees, while leaving class members with coupons or other awards of little or no value." CAFA, Pub. L. No. 109-2, § 2, 119 Stat. 4 (2005). Section 1712 only applies if the settlement is a "coupon settlement" and addresses this concern in two ways. First, under § 1712(e), courts must apply "heightened scrutiny" when approving settlement agreements awarding coupon relief. Id. at 949. Second, courts must apply "a series of specific rules" to attorneys' fees awards in coupon settlements under § 1712(a)–(c). In re HP Inkjet Printer Litig., 716 F.3d 1173, 1178 (9th Cir. 2013).The Ninth Circuit affirmed the district court's judgment awarding attorneys' fees by holding that the parties' settlement was not a coupon settlement and affirmed the district court's application of the percentage-of-fund method, reducing the requested aw

lass action settlements enriched plaintiffs’ attorneys while providing little or no value to class members. Of particular concern were certain “coupon settlements,” in which class members, instead of receiving a monetary payment, received a “coupon” with which to purchase additional products or services from the defendant. These coupons often went unredeemed. See Pub. L. No. 109-2, § 2(a)(3)(A), 119 Stat. 4 (2005) (noting concern over settlements in which “counsel are awarded large fees, while leaving class members with coupons or other awards of little or no value”).Under CAFA, Congress did not prohibit “coupon settlements” outright, but instead limited class counsel’s attorneys’ fees in such settlements: “If a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney’s fee award to class counsel that is attributable to the award of the coupons shall be based on the value to class members of the coupons that are redeemed.” 28 U.S.C. § 1712(a). CAFA does not define “coupon,” however, leaving federal courts to devise their own tests.A recent example is the Ninth Circuit’s decision in McKnight v. Hinojosa, 54 F.4th 1069 (9th Cir. Nov. 30, 2022). The Ninth Circuit affirmed the district court’s conclusion that a class settlement with a ride-sharing company was not a “coupon” settlement subject to CAFA’s restrictions on attorneys’ fees awards to class counsel.The Ninth Circuit, applying de novo review, analyzed the three factors it had previously set forth in In re Online DVD-Rental Antitrust Litigation, 779 F.3d 934, 950-51 (9th Cir. 2015), to determine whether the settlement qualifies as a coupon settlement: “(1) whether class members have to hand over more of their own money before they can take advantage of a credit, (2) whether the credit is valid only for select products or services, and (3) how much flexibility the credit provides, including whether it expires or is freely transferrable.”The court concluded that the first

UnderCAFA, acourt must hold a hearing and make written findings that a coupon settlement is fair, reasonable, and adequate to class members before approving a coupon settlement. 28 U.S.C. §1712(e). CAFA also imposes limits on attorneys’ fees in coupon settlements.

In In Re HP Inkjet Printers, the Ninth Circuit yesterday reversed the district court’s orders granting final approval to a class-action settlement between Hewlett-Packard Company and a nationwide class of consumers who purchased certain HP inkjet printers, and awarding attorneys’ fees. Here is the summary issued by the court: The panel held that the attorneys’ fee award to class counsel violated the Class Action Fairness Act (“CAFA”), and specifically 28 U.S.C. § 1712(a)-(c), which governs the calculation of attorneys’ fees in class action cases containing a coupon component. The panel held that when a settlement provides for coupon relief, either in whole or in part, any attorneys’ fee that is “attributable to the award of coupons” must be calculated using the redemption value of the coupons.

Class counsel’s hopes for windfall fee awards may also discourage some new class action filings in the Ninth Circuit. A few immediate observations can be made:The opinion reaffirms that CAFA’s “mixed” settlement provision (28 U.S.C. § 1712(c)) applies to settlements involving coupon relief and monetary relief, even though the statute references settlements involving coupon relief and equitable relief. Under the Panel’s broad interpretation of the “mixed” settlement provision, it is hard to imagine a class action settlement involving coupons that is not For example, it is generally the case that defendants will pay class administration fees incurred in executing the terms of a class action settlement. Defendants’ payment of these fees is a form of monetary relief for the class obtained by class counsel. It appears then that the panel’s decision means district courts can never apply lodestar-only methodology to calculate a fee award for class action settlements involving coupons.

It noted difficulties the plaintiffs would have had in prosecuting their claims based on genuine questions about whether they could prove employment status, questions about the available damages and the impact of arbitration agreements the defendants had implemented. It similarly rejected challenges to the attorney fees, and specifically found that a “clear sailing provision” under which the defendant agreed not to oppose an attorney fee award was not per se illegal.We don’t usually discuss dissents, but the one here raised the interesting question of whether participation in the larger credit pool of $4.5 million made the agreement a “coupon settlement” as contemplated by the Class Action Fairness Act (CAFA), 28 U.S.C. 1712. While the dissent agreed that the attorneys were entitled to a fee, it would have remanded to recalculate the fee based on the actual value of the pool to the class members.While the case involves a colorful subject matter, it does reveal several things.