Monday, April 01, 2019

smells bad? 9th Circuit approves tuna voucher settlement as not a coupon settlement

Hendricks v. Ference, 754 Fed.Appx. 510 (9th Cir. 2018)

Objectors appealed the approval of a class action settlement over the alleged under-filling of Starkist tuna cans; over a partial dissent, the court of appeals affirmed. In particular, the court affirmed the district court’s determination that the award of tuna vouchers was not a form of coupon relief under the Class Action Fairness Act (CAFA). “The vouchers did not expire, they were freely transferrable, they could be used at a wide variety of stores (any retailer selling Starkist products), and the vouchers had sufficient value that class members could use them to purchase tuna without additional out-of-pocket expense.”  The underlying claims were about insufficient tuna, and the settlement supplied the missing tuna—using a voucher instead of mailing cans to class members “does not transform the settlement from a tuna settlement into a coupon settlement” (and is almost certainly a better idea from an olfactory/health perspective).  CAFA’s restrictive coupon provisions don’t apply to all non-cash settlements; this was an in-kind settlement and the in kind redress could be provided with “a voucher that is sufficiently usable and related to the harm suffered.”

A partial dissent would have found that this was a coupon settlement. Judge Friedland doesn’t like the governing 9th Circuit standard for determining what’s a coupon (and would find this to be a coupon even under that standard).  These are coupons within the common meaning of the term: they’re only good for buying canned tuna. Lack of expiration and free transferability are important for things like cash cards or even credit cards [debit cards? The case citation is to gift cards redeemable at Walmart, a giant retailer] but not where the “vouchers” are “remarkably inflexible.”  Canned tuna bought five years from now is still canned tuna; you still have to buy the thing that was the source of your problem to benefit.  Transferability is also less relevant where the market for the vouchers is dependent on the fact that they are vouchers for canned tuna. “After all, Congress ‘targeted [coupon] settlements for heightened scrutiny out of a concern that the full value of coupons was being used to support large awards of attorney’s fees regardless of whether class members had any interest in using the coupons.’”  The dissent also pointed out that the vouchers were going to be in round dollar amounts; using them might require the consumer to make an outlay or leave tuna money on the table, which were coupon-like effects. “Even though many class members will leave a portion unredeemed, and even though many class members will not redeem the voucher at all—whether because they lose it, forget they have it, decide they no longer like tuna, or for any other reason—the majority’s holding that the vouchers are not coupons means all the distributed vouchers will be counted at their full face value for purposes of calculating the settlement value and the resulting attorney’s fees. This is exactly the sort of result Congress was trying to prevent when it adopted the coupon provisions in CAFA.”

If writing on a blank slate, the dissent would treat “any type of discount, credit, gift card, or voucher” as a coupon under CAFA, and would also treat vouchers for replacements for the original product as coupons even if the class member didn’t have to put in any more cash.  [The dissent doesn’t outright say that mailing cans of tuna would be “coupons,” but why not under that logic? If you’re concerned about overvaluation, Starkist would get to count the retail price of the tuna as the value of the settlement even though the production cost is much lower, so it’s possible to manipulate the final settlement value that way too.]  If the coupons were close-to-cash (e.g., Walmart gift cards), redemption rates would be high and attorneys’ fees would be based on those high rates. If not, then the fees wouldn’t be that high, which was Congress’s goal.  A bright line rule would also make things easier for district courts and for attorneys, who’d find it easier to tell whether they’d crafted a coupon settlement.

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