When is a coupon not a coupon under section 1712(e) of CAFA?

Takeaway:  The law surrounding “coupon” settlements under 28 U.S.C. § 1712 of the Class Action Fairness Act (“CAFA”) continues to evolve.  Under section 1712(e), courts must: (1) apply “heightened scrutiny” when approving settlement agreements involving coupons; and (2) assess attorneys’ fees based on the actual redemption rate of the coupons, rather than based on the overall value of the settlement.  In 2015, the Ninth Circuit developed a three-part test for identifying a “coupon”: (1) whether class members have to pay out of pocket to take advantage of the award; (2) whether the award is valid only “for select products or services,” and (3) whether the award is transferrable or expires.  In re Online DVDRental Antitrust Litig., 779  F.3d 934 (9th Cir. 2015),

The Court of Appeals applied that test in McKnight v. Hinojosa, 54 F.4th 1069 (9th Cir. 2022), which involved a challenge to Uber’s “safety fee” and resulted in a settlement that included a tiny credit to affected users’ accounts.  The average credit was very small—only about $1.07 (with many class members receiving $0.35 or less)—and could only be used on the Uber platform (Uber or Uber Eats).  But after applying the Online DVD three-part test, the appellate court found that the parties had not entered a coupon settlement, reasoning that the first and third factors cut against finding a coupon settlement even if the second factor supported a coupon settlement.  The determining factor in McKnight appears to have been the availability of a cash alternative: class members could opt to receive either the credit or the entire credit amount in cash.

After McKnight, cash and credit settlements seem to qualify as coupon settlements under section 1712(e), but not cash or credit settlements.  Compare In re Easysaver Rewards Litig., 906 F.3d 747, 757-58 (9th Cir. 2018) (part cash, part store credit settlement was coupon settlement under section 1712(e)), and Chambers v. Whirlpool Corp., 980 F.3d 645, 655 (9th Cir. 2020) (finding coupon settlement where rebate portion of award could not be redeemed for cash), with McKnight, 54 F.4th 1069 (cash or credit option not coupon settlement under section 1712(e)).

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