CAFA's Coupon Restrictions

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);

and

``(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

this section.

staff Writer

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