To read this month’s litigation story further analyzing CAFA’s coupon settlement provision, click here.
The Class Action Fairness Act of 2005 (CAFA) addresses coupon settlements in the following passage. To access the full text of CAFA through the U.S. Government Printing Office, click here.
“Sec. 1712. Coupon settlements
“(a) Contingent Fees in Coupon Settlements.–If a proposed
settlement in a class action provides for a recovery of coupons to a
class member, the portion of any attorney’s fee award to class counsel
that is attributable to the award of the coupons shall be based on the
value to class members of the coupons that are redeemed.
“(b) Other Attorney’s Fee Awards in Coupon Settlements.–
“(1) In general.–If a proposed settlement in a class
action provides for a recovery of coupons to class members, and
a portion of the recovery of the coupons is not used to
determine the attorney’s fee to be paid to class counsel, any
attorney’s fee award shall be based upon the amount of time
class counsel reasonably expended working on the action.
“(2) Court approval.–Any attorney’s fee under this
subsection shall be subject to approval by the court and shall
include an appropriate attorney’s fee, if any, for obtaining
equitable relief, including an injunction, if applicable.
Nothing in this subsection shall be construed to prohibit
application of a lodestar with a multiplier method of
determining attorney’s fees.
“(c) Attorney’s Fee Awards Calculated on a Mixed Basis in Coupon
Settlements.–If a proposed settlement in a class action provides for an
award of coupons to class members and also provides for equitable
relief, including injunctive relief–
“(1) that portion of the attorney’s fee to be paid to class
counsel that is based upon a portion of the recovery of the
coupons shall be calculated in accordance with subsection (a);
“(2) that portion of the attorney’s fee to be paid to class
counsel that is not based upon a portion of the recovery of the
coupons shall be calculated in accordance with subsection (b).
“(d) Settlement Valuation Expertise.–In a class action involving
the awarding of coupons, the court may, in its discretion upon the
motion of a party, receive expert testimony from a witness qualified to
provide information on the actual value to the class members of the
coupons that are redeemed.
“(e) Judicial Scrutiny of Coupon Settlements.–In a proposed
settlement under which class members would be awarded coupons, the court
may approve the proposed settlement only after a hearing to determine
whether, and making a written finding that, the settlement is fair,
reasonable, and adequate for class members. The court, in its
discretion, may also require that a proposed settlement agreement
provide for the distribution of a portion of the value of unclaimed
coupons to 1 or more charitable or governmental organizations, as agreed
to by the parties. The distribution and redemption of any proceeds under
this subsection shall not be used to calculate attorneys’ fees under