Class Attorneys Poised to Rake in $745k while class gets $10 coupons
Objecting today to the class action settlement in Knapp v. Art.com, the Competitive Enterprise Institute’s Center for Class Action Fairness (CEI) opposes the settlement which provides class members with a $10 voucher while class counsel rakes in $745,000 in fees.
“This settlement exemplifies the abusive coupon settlements that Congress tried to stop with the Class Action Fairness Act,” said CEI attorney Ted Frank. “The plaintiffs’ lawyers get disproportionate fees, the defendant gets an inexpensive release of claims and increased business, while the class gets a coupon for a poster. And the parties know their settlement is illegal, because they implausibly try to claim the coupons aren’t coupons.”
Knapp v. Art.com is a class action suit alleging unlawful business practice claims against the online art vendor. CEI’s settlement objection, filed in the U.S. District Court for the Northern District of California on behalf of a class member, argues that when the parties are aware that such low-value coupons typically have redemption rates in the low single digits, and what little relief there is benefits only future customers of art.com rather than the past-purchaser class, resulting in the plaintiffs’ attorneys taking a disproportionate share of the settlement relief, it is an unfair settlement.
CEI took aim at the plaintiffs’ argument that the vouchers were not “coupons” subject to closer scrutiny by the court because of the history of coupon abuse in class-action settlements. The $10 vouchers expired in 18 months, could be used to purchase only a select number of items in full from the narrow product categories on Art.com’s websites, and were well below the average purchase price on the websites. As a result, class members were likely to have to spend more of their own money in order to obtain an item with the voucher. Class members were not given the option to receive cash in lieu of a voucher.
This settlement has all the indicia of an unfair, lawyer-driven settlement identified by the Ninth Circuit. The defendant suffers only a nominal penalty, the class counsel accumulates hundreds of thousands of dollars, and the class is left with illusory forms of relief.
See more about the case here.
The Competitive Enterprise Institute’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Originally founded by Ted Frank in 2009, the center has won millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, courts, and the general public.
Unfair settlements generally serve self-interested lawyers and third parties at the expense of absent class members, the group of people whose rights are traded away to settle a class action. Lawyers have an interest in their fees, defendants have an interest in cheaply disposing of a lawsuit, and the class’s interests can take a back seat in the process. CEI seeks to solve these problems by representing such class members pro bono and presenting judges with the other side of the argument.