On November 30, 2022, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s finding that a settlement was not a coupon settlement when applying the three factors outlined in In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 950 (9th Cir. 2015).
This case, McKnight v. Hinojosa, No. 21-16623, 2022 WL 17333820 (9th Cir. Nov. 30, 2022), concerned a class action for claims against Uber Technologies, Inc. and Rasier, LLC (collectively “Uber”). The allegations against Uber revolved around a fee, called the ‘Safe Rides Fee,’ which was allegedly misrepresented by Uber.
As a result of these allegations, Uber agreed to settle by providing relief to anyone who used Uber in the United States between January 1, 2013, and January 31, 2016, and was charged this fee. The terms of the settlement required Uber to pay $32.5 million into a settlement fund, which would then be used to distribute settlement payments to class members. Class members will first be able to submit a form claiming their payment in cash, through PayPal, or via eCheck. Class members who do not submit a form, will receive their share via credit on their Uber account. After 362 days, Uber will email class members who did not redeem this credit to update their payment method on file. Three days later, at the one-year mark, Uber will seek to return any unused credit to the class member’s form of payment on file, minus a $0.07 transaction fee. Funds unable to be distributed through any of these methods “will be distributed cy pres to the National Consumer Law Center.”
The Ninth Circuit reviewed whether this arrangement should be classified as a coupon settlement de novo. The Ninth Circuit affirmed the district court’s decision and held that this was not a coupon settlement.
Section 1712 of the Class Action Fairness Act (CAFA) requires courts to apply “heightened scrutiny when approving settlement agreements awarding coupon relief.” §1712(e). This statute, however, applies only if the settlement is a coupon settlement. Given that §1712 does not define a coupon settlement, three non-dispositive factors outlined in Online DVD are used to help define the term ‘coupon’ and make this determination in the Ninth Circuit.
The first factor, as outlined in Online DVD, is whether class members must use additional money before they can use the credit provided. In this case, the Ninth Circuit found this factor weighed against Uber’s settlement being a coupon settlement. The Court found that even though “most class members’ settlement awards are too small to purchase an Uber ride without paying more out of pocket,” class members could claim their reward in cash, in which case no additional money would be needed to utilize the reward. The Court cited In re Easysaver Rewards Litig. as precedent to claim that those who accepted credit must have valued it as equivalently useful to cash. 906 F.3d 747, 759 (9th Cir. 2018).
Online DVD’s second factor is whether the credit is only valid for select products or services. Since the credit option here can only be used through the Uber app for Uber services, the Ninth Circuit court found this “factor favors construction of the [s]ettlement as a coupon settlement.”
Finally, the third factor asks whether the credit expires or is freely transferrable. In this case the credits are not transferable. While they do technically expire after a year, the Court found this situation to be unique because at that point, the credit is refunded onto the class member’s method of payment. The Ninth Circuit found that these specific facts warrant a finding that this was not a coupon settlement.
This case is an important reminder that parties in class action settlements must remain diligent on whether the proposed settlement falls within the parameters of Section 1712.