Summary
The Fourth Circuit held that store vouchers provided to class members in a class action settlement were "coupons" under the Class Action Fairness Act (CAFA), requiring the district court to apply CAFA's fee provisions (28 U.S.C. § 1712) when calculating attorney's fees rather than treating the vouchers as cash. The court affirmed the underlying settlement approval as fair and reasonable under Rule 23(e), but vacated the attorney's fees award and remanded for recalculation using CAFA's coupon settlement rules. Key topics: class action settlement approval, CAFA coupon settlement provisions, attorney's fees calculation, vouchers vs. coupons, MDL litigation, and the quick-pay provision.
Topics
Practice areas
Questions Presented
- Whether the district court abused its discretion in approving the class-action settlement as fair, reasonable, and adequate.
- Whether the district court erred in failing to apply CAFA's coupon settlement provisions (28 U.S.C. § 1712) when calculating the attorney's fees award.
- Whether the settlement approval order survives vacatur of the attorney's fees order.
Holdings
- The district court did not abuse its discretion in approving the settlement because it properly considered the fairness and adequacy factors, including the posture of the case, extent of discovery, negotiations, experience of counsel, strength of claims, difficulties of proof, duration and expense of litigation, solvency of defendant, and low opt-out/objection rates.
- The vouchers are coupons under CAFA because they require future business with the defendant, are limited to select products, have limited transferability and expiration, and fit within dictionary definitions and legislative history. Therefore, the district court erred in not applying CAFA's coupon settlement provisions.
Key quotations
“a voucher entitling the holder to a discount for a particular product” (Part III.B.2.a)
“the portion of any attorney's fee[s] award to class counsel that is attributable to the award of the coupons [to] be based on the value to class members of the coupons that are redeemed” (Part III.B.2.a)
“the vouchers are 'coupons' under CAFA” (Part III.B.2.a)
“the settlement was structured to address any concerns about Lumber Liquidators' finances” (Part III.A.2.c)
Factual background
Lumber Liquidators sold Chinese-manufactured laminate flooring from 2009 to 2015. Purchasers filed class actions alleging false representations about formaldehyde emissions and durability. The cases were consolidated into two MDLs. After extensive discovery and mediation, the parties reached a settlement requiring Lumber Liquidators to pay $22 million in cash and provide $14 million in store vouchers. Class Counsel sought attorney's fees of $11,160,000. Objectors argued the vouchers were coupons under CAFA and that the settlement was unfair.
Procedural history
The district court approved a class-action settlement in two MDLs related to Lumber Liquidators' laminate flooring, creating a $22 million cash fund and $14 million in vouchers. The court also awarded $10,080,000 in attorney's fees. Objectors appealed both orders.
Remand instructions
Remand for the district court to apply CAFA's coupon settlement provisions (28 U.S.C. § 1712) in recalculating the attorney's fees award.