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CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

Getting Free Stuff in Settlement is Not a Coupon Settlement

Posted in Case Summaries

Seebrook v The Childrens Place Retail Stores Inc, 2013 WL 6326487 (N.D. Cal. Dec. 4, 2013).

In this action, a California federal court found that when class members are receiving vouchers, which entitles them to get free stuff from defendants under a Settlement Agreement, it does not attract the provisions of § 1712, and therefore, are not coupon settlements.

The plaintiffs in this action were purchasers from the defendant’s stores. They sued the defendant alleging that the defendant requested and recorded personal identification information in conjunction with a credit card transaction in violation of the Song-Beverly Credit Card Act of 1971. After the district court approved the settlement, the plaintiffs filed a motion for attorneys’ fees, expenses, and incentive award payments.

The issue before the district court was whether the settlement agreement was a coupon settlement under CAFA. The district court noted that the terms of the settlement provided that class members receive the choice of $10 gift certificate with no minimum purchase required or a 35% off voucher at the defendant’s retail store.

The district court observed that In re HP Inkjet Printer Litigation, 716 F.3d 1173 (9th Cir. 2013), the Ninth Circuit addressed the calculation of attorneys’ fees in the context of coupon settlement under CAFA, and held that if a settlement gives coupon and equitable relief and the district court sets attorneys’ fees based on the value of the entire settlement, and not solely on the basis of injunctive relief, then the district court must use the value of the coupons redeemed when determining the value of the coupons part of the settlement.

The district court observed that CAFA does not define what constitutes a coupon or even for that matter a voucher. However, the distinction between a coupon and a voucher was that a coupon is a discount on merchandise or services offered by the defendant and a voucher provides for free merchandise or services. In this case, the district court found that the 35% discount was indisputably a coupon, however, at issue was whether the $10 merchandise certificate provided in the alternative by the settlement was a coupon.

The district court observed that other courts have found that CAFA does not apply to settlements that offer vouchers for free products. Such cases distinguish vouchers from discounts on products where class members are forced to purchase the products and pay the difference between the full and coupon-discounted price. For example, in Foos v. Ann, Inc., 2013 WL 5352969 (S.D. Cal. 2013), a very similar case to the one at hand, the court found that a $15 certificate and a discount at the defendant’s store did not constitute a coupon settlement because the class members had the opportunity to receive free merchandise, as opposed to merely discounted merchandise.

Accordingly, the district court ruled that, the $10 certificate was not a coupon settlement, and did not trigger the provisions of 28 U.S.C. § 1712.

In the same vein, the district court granted the attorneys’ request for $335,000 in class counsel’s fees, costs and expenses of litigation, finding those reasonable. –JR