I just received notification that an online retailer I’ve used in the past (ProFlowers.com) has settled a class-action lawsuit, and that as part of that settlement I’m entitled to a *discount * on my next purchase from that retailer. (Which probably won’t happen - I think I only used them once.)
Some quick Googling reveals that, indeed, there was a class-action suit and that it has been settled.
Here’s my question: Is it normal to allow a company to settle a class-action suit by driving more revenue-generating business to itself?
Is that SOP in the class-action world?
In the past when I’ve discovered I was part of a plaintive class (various cases - phone company, utility, Netflix…) I was always presented with a free benefit. A refund, a voucher, something that required no purchase.
(note: I put this in GQ because I am curious about the prevalence of these kinds of settlements. I’m not attempting to start a debate about whether or not it should happen that way. If MODS feel it should go somewhere else, feel free to move.)
I’m not sure if it’s typical in the sense of being standard practice, but it does happen with some regularity.
Some time ago, i found out that i could benefit from a class action lawsuit against the manufacturers of flash memory devices (USB keys, memory cards, etc.). Class action members had the option to take a 5% refund on any devices they had already purchased, or a 10% discount on a future purchase. I never bothered signing up for the class action, but i did start a thread about it.
Even more egregious in terms of allowing the defendant to gain revenue-generating business was the Netflix case. Netflix settled a class action lawsuit after being accused of throttling, or restricting the deliveries of DVDs to high-volume users. People who signed up for the suit were rewarded with an extra DVD on their Netflix account for a period of one month. That is, if your standard package was 3 DVDs at a time, for one month you were given 4 DVDs at a time. If you were a former Netflix member, you were given one month of free membership.
The kicker was that, once this month was up, if you didn’t cancel your extra DVD or your free one-month membership, you would automatically be signed up permanently to the larger number, at the higher price. It was effectively an “opt-out” marketing scheme. After a lawsuit filed by the group Trial Lawyers for Public Justice, with an amicus brief from the Federal Trade Commission, Netflix agree to revise the terms to make the permanent upgrade an “opt-in” instead of an “opt-out” system.
Those are the two examples i know off the top of my head. I couldn’t tell you what the actual percentage is of such payout schemes.
I received notice that I was a member of the class of a lawsuit against a financial institution. My “settlement”? A free credit report. Legal fees for the plaintiffs? 3 million dollars. Class action suits are fun.
Yes it is reasonably common. Although it may seem like a trivial benefit, there is a good chance that the settlement was agreed upon because the plaintiff class had a relatively weak case, so even if the plaintiff went through trial and won, the recovery would be small.
In the federal system, and I believe all states, all class action settlements must be approved by the judge to see that they are fair to the class. To the extent that the settling parties show that the claims were weak, or the potential recovery was small to each class member, the judge may find it acceptable to approve this type of settlement.
I’ve received several such notices over the years from suits involving CompuUSA, Best Buy, etc. One was over false listing of computer screen sizes. Always of the form “get $20 off the next purchase of $400 or more (sale prices excluded)” or some such. Yeah right. Just give me my 10 bucks.
Fark had a link a year or two ago to a Florida case (guess the tag!) where the lawyers tried to convince the judge that mailing out settlement checks to the defendants would be too costly and that the lawyers should just be allowed to keep all the money.
Class action cases like this are pretty much a lose for everybody but the lawyers.
Coupon settlements are very common. That was one of the arguments made in favor of the Class-Action Fairness Act of 2005: http://fl1.findlaw.com/news.findlaw.com/hdocs/docs/clssactns/cafa05.pdf
Class action cases tend to be expensive to try, even if they are strong. And **Billdo ** is right, this one was probably weak to begin with. The judge would have taken that into account when reviewing the settlement.