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: CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005

Attorney's Fees and Coupon Settlements Don't Always Mix Well.

Cox v. Microsoft Corp., 2007 WL 7045224, *2+, 2007 N.Y. Slip Op., 52667(U), 52667(U) + (N.Y. Sup. Feb 02, 2007).

In this case, the Supreme Court of New York, New York County, declined the plaintiffs' counsel's request for an award of attorneys' fee on a higher percentage basis finding it inappropriate in coupon settlements, specifically when the Congress enacted CAFA in part on concerns over fairness of coupon settlements.

The parties settled this class action for over $183 million, and the plaintiffs' counsel sought $23.5 million in attorneys' fee, expenses and the incentive award to the class representatives. In a previous interim order, the Court had directed the defendant, Microsoft Corporation, to pay plaintiffs' counsel $5.1 million as attorneys' fees, which represented 5% of the claim. Now, the Court, using its discretion awarded $16,459,819.60 – roughly 9% of the value of the settlement – in attorneys' fees.

The Court found that this award was appropriate because: 1) Microsoft agreed to pay attorneys' fees separate from the settlement, and in no way diminishing the amount of benefits to the class; 2) the results of the settlement – over $ 183 million – had the potential to benefit the class members as a whole in a substantial way; and 3) the plaintiffs effectively avoided what would have been a difficult and costly litigation. 

The Court rejected the plaintiffs' counsel plea to award $ 23.5 million in attorneys' fees finding the fee as high as well as not warranted especially in 'coupon settlements.' The Court observed that coupon settlements had fallen under much criticism for failing to provide the class members with much of a benefits from the settlement vis-à-vis the large attorneys' fees that the plaintiffs' counsel pocketed in these settlements.  In fact, concerns over the fairness of coupon settlements were one of the reasons that prompted the Congress to enact CAFA. 

CAFA (28 U.S.C. § 1712[e]) specifically addresses the award of attorneys' fees in coupon settlements, and particularly precludes the calculation of attorneys' fees on the basis of any portion of cy pres relief that might form part of a settlement. Therefore, considering the unpopularity of award of attorneys' fees at a higher percentage, the Court concluded that the higher award was not appropriate or reasonable. 

The Court found that in similar class action lawsuits involving Microsoft, the attorney's fees represented a lower percentage of that face value. For example, in California, the face value of the settlement was $1.1 billion whereas, the attorney's fees were $101 million, and in Florida, the settlement was $202.80 million, and the attorney's fees awarded was $16.874 million. In both those cases, the percentage awarded was below 10%. Therefore, the Court ordered Microsoft to pay the plaintiffs counsel $11,359,819.60 – the balance amount from the total award minus the $5 million awarded in an earlier interim order.

Full post as published by CAFA Law Blog - Information, cases and insights regarding the Class Action Fairness Act of 2005 on May 05, 2010 (boomark / email).