| Civil procedure in the United States |
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In law, a coupon settlement is a resolution between disputing parties in a class action lawsuit, reached either before or after court action begins. In a coupon settlement, class members receive coupons or other promises for products or services instead of a cash award.[1] Coupon settlements are recognised in state and federal courts in the United States.
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Coupon settlements have been used as a way for a defendant to forestall major liability by precluding a large number of people from litigating their claims separately, to recover reasonable compensation for the damages. However, existing law requires judicial approval of all coupon settlements, and in most cases class members are given a chance to opt out of class settlement, though class members, despite opt-out notices, may be unaware of their right to opt out because they did not receive the notice, did not read it, or did not understand it.
The Class Action Fairness Act of 2005 (CAFA) addresses some of these concerns. Coupon Settlements may be audited by an independent expert before judicial approval in order to ensure that the settlement will be of value to the class members (28 U.S.C.A. 1712(d)). Also, if the action provides for settlement in coupons, the attorney must take a corresponding part of his fee in coupons (28 U.S.C.A. 1712(a)).[2]
In the United States, federal courts must hold a hearing and make specific findings that the coupon settlement is fair, reasonable, and adequite and that the class members's interests are represented. The following can be taken into consideration during the hearing:
Another criticism has been that plaintiffs' lawyers involved in coupon settlements receive cash fees in amounts that generally dwarf the award recovered by individual class members.[1]