Coupon-only settlements are hard to sell

"Class action attorney" is now routinely used as a pejorative.  Although a certain amount of the taint attached to class action attorneys certainly stems from marketing efforts by "big business" (another term now used as a pejorative), which has the most to lose from a robust class action device, the plaintiffs' bar is also to blame.  The chief culprit?  The despised coupon settlement:

Class-action cases haven't always served consumers' interests, admits Bailey. In notorious "coupon" settlements, millions of victims get near-worthless service credits or discounts, while lawyers who file the cases get millions in fees.

(Sullivan, The  End of Class-Action Lawsuits?, (April 1, 2008) redtape.msnbc.com.)

In my humble opinion, the "class action attorneys" of the world aren't doing themselves any favors with coupon-only settlements that are grist for the media mill.  Case in point, as reported by The UCL Practitioner last week a trial court granted final approval to a settlement in the Ford Explorer Cases, JCCP nos. 4266 & 4270.  The terms of that settlement, which involves coupons to Ford Explorer owners and substantial fees to attorneys, were not covered favorably in the media.  According to consumeraffairs.com, consumers "in California, Connecticut, Illinois and Texas will be able to apply for $500 coupons to buy or lease new Explorers or $300 coupons to buy or lease other Ford, Mercury or Lincoln" products.  (Enoch, Ford Class Action Settlement Leaves Consumers In The Dust (April 16, 2008), www.consumeraffairs.com.)  In that article, Enoch wrote:

But while trial lawyers who represented consumers in this case are likely to make about $25 million, most consumers will be lucky to get anything at all.

Many will never learn of the settlement results while those who do may well be unable to meet the strict requirements needed to qualify for the coupons, Ditlow said.

(Ibid.)  And a Texas newspaper, reporting on the objection filed by a local resident, said:

The compensation? Those who own an Explorer with a model year from 1991 to 2001 can submit a claim and receive a $500 voucher to buy another Explorer or receive a $300 voucher to purchase another Ford or Lincoln Mercury vehicle.

“Tell me why you’re going to spend $30,000 on a car to get the benefit of a $500 coupon,” Weinstein said Thursday.

While consumers are getting a coupon, attorneys in the case arranged their fees to be paid — in cash — to the tune of about $20 million.

Weinstein thinks that’s too much when the actual buyers of the vehicles are getting a coupon with no cash value.

(Larson, When is $500 worth nothing?  Local attorney thinks he knows (April 18, 2008), www.athensreview.com.)

Certainly, we don't (and won't) learn the full story behind why a particular settlement is accepted and recommended by counsel.  In any particular case, counsel for the class may conclude that there is little likelihood of success on the merits, despite the fact that certification appears likely or was achieved.  Despite not knowing the particular twists of the Ford case, it is a high profile matter that invites reporting like the examples above.

Personally, while I understand that there are occasions where coupon-only settlements are the only viable method for settlement and resolution, I prefer, at minimum, what I call "consumer choice settlements."  Under such settlements, a class member receives a choice of money in amount X or a coupon of value Y.  The parties can negotiate the values of X and Y to encourage one choice over the other, but the class member that wishes a clean divorce from the defendant can opt for the money, even if the coupon is of higher value.  "Class action attorneys" should consider the larger consequences of their settlement structures before legislative bodies take it upon themselves to do so for the attorneys.

Comments

[Greg May]

The Ford case seems an anomaly from the usual couppon-only setlement in that the dollar value of the coupon lends itself to a cash substitute of sufficient value (say, $250 cash in lieu of a $500 coupon). Many coupon settlements are for coupons of such nominal value that a cash substitute would be even less of an incentive for a class member to fill out a claim form.

[betty]

I was awarded some money and coupons for kmart c/a settlement. I learned about the settlement from the social security office much later when they wanted to know why I had not declared the benefits (I said tell me the number so I can get my benefits!?

I searched the web and found a phone#.My check arrived about a month later, certified mail. No coupons/certificates for merchandise.I called about why in another two weeks, it is 5 months now after repeated phone calls, faxes, and pleas.Can anyone help me retreive these coupons? I asked for the certified mail receipt but it is unavailable???? By the way, I was still receiving mail at the original address I filed under.

[The Complex Litigator (H. Scott Leviant)]

Betty:

Unfortunately, I don't know anything about either the class action case or the settlement that you mentioned. I will leave comments open on this post so that any reader willing to provide information to you can do so through another comment.

Good luck,

H. Scott Leviant
The Complex Litigator