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

To Avoid Rejection, Make Sure Your Coupon Has All the Trimmings!

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Navigating the Minefield: Lessons of Figueroa v. Sharper Image and Defense Counsel’s Guide to Settling Coupon Based Class Actions After CAFA, 15 No. 8 Andrews Class Action Litigation Report 1. 

In their article, David L. Aronoff and Saul S. Rostamian offer suggestions to defense counsel regarding how to successfully structure coupon-based class action settlements post-CAFA.

The article touches on a few procedural requirements of CAFA and provides a very brief synopsis of Figueroa v. Sharper Image, 517 F.Supp.2d 1292 (S.D. Fla. 2007). (Editors’ Note: See the CAFA Law Blog analysis of Figueroa posted on November 21, 2007). It then launches into the Four Big Lessons the authors learned as counsel to Sharper Image when their client’s proposed coupon settlement failed the fairness hearing and was shot down by the District Court for the Southern District of Florida (it was the first rejected coupon settlement since CAFA’s enactment). 

The hard-knock lessons learned are as follows:

Lesson 1 – although it takes away nearly all of the fun, during settlement negotiations, there can’t be any appearances of fraud, collusion and/or greatly disparate bargaining positions. The court doesn’t like it.

Lesson 2 – issue coupons "with all the trimmings"! Make the coupons irresistible by making them – freely transferable, freely collectible, good for at least 2 years, tailored to “fit” the harm suffered by individual class members (none of this one-size-fits-all stuff), easily redeemable, and have it delivered directly to the consumer. It is also key at this juncture to mention, if it’s true, that a cash payout would wipeout your client.

Lesson 3 – if the class members are slated to receive a $19.00 coupon and class counsel is slated to collect a $2,000,000.00 fee, the court ain’t gonna like it, will sneer at all counsel, and likely reject the settlement proposal. So keep the fees in check and a constant eye on the perfect “window” for settlement.

Finally, Lesson 4 – pay attention to all objectors, but pay particularly close attention to objecting state attorneys general – the less governmental objections there are to your proposed coupon settlement, the better shot you’ve got of it being approved.

This article provides practical insight into the various factors a court may consider in determining whether a coupon-based settlement will be approved post-CAFA.