Here is a report of what looks to be an abusive coupon settlement in a class action in California. It prompts me to do some explaining, as I’m a consumer class action lawyer.
As the linked report explains, the case involves a California false advertising class action in which two consumers filed a class action against Honda for overstating the mileage on its Civic Hybrid. I’m going to assume that Herb Weisbaum, the MSNBC Consumerman columnist, got the story right. He usually does a good job on consumer issues. I don’t know anything about the case or have access to the court file. I’m relying on his report for this analysis.
The story goes that Honda and the class reached a settlement that provided for coupons and an informational DVD for the class, incentive payments for the class representatives, and a seven-figure attorney fee award for class counsel.
The coupons are the problem. According to the linked report, the coupons are worth $500-$1,000 but only redeemable on the purchase of a qualifying model of a Honda or Acura. That stinks. And it stinks in both directions. If Honda did wrong, then it should provide real relief to the class and shouldn’t be rewarded with a marketing campaign for consumer ripoffs. If, on the other hand, Honda did not violate California law then it shouldn’t be paying millions to attorneys who pursue class actions.
And as for the lawyers for the class it stinks because coupon settlements are acceptable under a rare set of circumstances. Here are some things that should be in place to make for a fair coupon settlement. They make sense when the coupons are for widely-purchased consumer goods, like gasoline or toothpaste. To be a fair settlement, coupons should almost always be transferable and/or redeemable for cash. Consumers who receive coupons to settle a class action should be able to get real benefit from them. The reported Honda coupon settlement fails on all fronts.
It’s possible that I’m missing something, and if so, as is my general practice, I will update this post. But save me the defamation threat letters that don’t include a thorough and documented explanation of how I’m missing the mark.
I imagine that much criticism will be heaped on the class lawyers for this settlement. Let’s be clear. Based upon the reported facts in the MSNBC column, that criticism is well-deserved. It looks like Honda chose to pay millions to class counsel to snuff out a liability and promote future sales of various products. Settlements take two sides. Honda deserves some of the darts on this deal as well.
The other piece is that it seems to me that class members may want to strongly consider objecting to this settlement. Class action settlements must be reviewed and approved by the court, so if you’re a class member and you get a notice, you might want to consider whether to object. A rejection of this settlement might send a message to both sides that consumers deserve better.