Ninth Circuit Affirms That Class Action Settlement Was Not A "Coupon Settlement"

• Published date: 12 December 2022
• Subject Matter: Consumer Protection, Litigation, Mediation & Arbitration, Consumer Law, Class Actions, Trials & Appeals & Compensation
• Law Firm: Holland & Knight
• Author: Ms Ariel Wossene and Travis Sabalewski

Highlights

• The U.S. Court of Appeals for the Ninth Circuit recently rendered a decision on whether a class action settlement is a "coupon settlement" and therefore subject to the restrictions on the award of attorneys' fees to class counsel imposed by the Class Action Fairness Act (CAFA). 28 U.S.C. Section 1712.
• In rendering its decision in McKnight v. Hinojosa, the Ninth Circuit affirmed the district court's application of the Online DVD factors from a 2015 case, in concluding that the class action settlement (the Settlement) was not a coupon settlement subject to the restrictions on attorneys' fees awards to class counsel under CAFA by reasoning that two of the three factors weighed against determining that the Settlement was a "coupon settlement."

The U.S. Court of Appeals for the Ninth Circuit in McKnight v. Hinojosa, No. 21-16623, 2022 WL 17333820 (9th Cir. Nov. 30, 2022) considered whether the proposed class action settlement was a "coupon settlement" and therefore subject to the restrictions on the award of attorneys' fees to class counsel imposed by the Class Action Fairness Act (CAFA). 28 U.S.C. Section 1712. Congress enacted CAFA in part out of "concern about settlements when class members receive little or no value, including settlements in which counsel are awarded large fees, while leaving class members with coupons or other awards of little or no value." CAFA, Pub. L. No. 109-2, ' 2, 119 Stat. 4 (2005). Section 1712 only applies if the settlement is a "coupon settlement" and addresses this concern in two ways. First, under ' 1712(e), courts must apply "heightened scrutiny" when approving settlement agreements awarding coupon relief. Id. at 949. Second, courts must apply "a series of specific rules" to attorneys' fees awards in coupon settlements under ' 1712(a)-(c). In re HP Inkjet Printer Litig., 716 F.3d 1173, 1178 (9th Cir. 2013).

The Ninth Circuit affirmed the district court's judgment awarding attorneys' fees by holding that the parties' settlement was not a coupon settlement and affirmed the district court's application of the percentage-of-fund method, reducing the requested award of $8.125 million to $5,689,440, representing 17.5% of the value of the fund and 2.9 times the lodestar, which represents the value of the work performed based on the number of hours reasonable spent and reasonable hourly rates for that work.

Case Background

In McKnight v. Hinojosa, the Ninth Circuit heard the consolidated appeal of the Plaintiff-Appellees...