Robert H. Klonoff & Mark Herrmann, The Class Action Fairness Act: An Ill-Conceived Approach To Class Settlements, 80 Tul. L. Rev. 1695 (2006).
Nationally renown class action expert Robert Klonoff and his co-author, Mark Herrmann, take CAFA’s drafters to task, criticizing CAFA’s settlement provisions for their less than comprehensive coverage of settlement contingencies in this article from Tulane Law School’s summer symposium discussing class actions. Before exposing CAFA’s settlement provision faults, the authors acknowledged the provisions’ “laudable purpose” of stopping class action settlement abuse and disproportionate coupon settlements such as the class action brought against Blockbuster for allegedly charging excessive late fees. The video chain settled the suit by disbursing $1 discount coupons to class members for future rentals while class counsel earned $9.25 million dollars in fees. Sounds fair. The Netflix people think so.
After giving Congress a “well, at least you tried,” Klonoff and his comrade expose many unanswered questions sure to provide fodder for future litigation, such as: what exactly constitutes a coupon?; how should courts realistically value coupons?; when has a coupon been redeemed?; etc. The authors also point out that coupon settlements constitute only 10% of class action settlements, leaving a wide range of settlement options open to class counsel. One such option is a “reversionary” settlement where any uncollected funds revert to the defendant – a settlement template carrying the same potential for abuse as coupon settlements. CAFA fails to address reversionary settlements. But instead of just finding fault, Klonoff and Herrmann provide Congress a suggested amendment to cure the perceived ailments – but you’ll have to read the article for that.
Bottom Line: Good article from authoritative source on an issue that will soon explode…you should probably read it.