The Ninth Circuit issued two opinions that provide further guidance for parties negotiating class action settlements.
In McKinney-Drobnis v. Oreshack, 16 F.4th 594 (9th Cir. 2021), class plaintiffs and defendant Massage Envy Franchising LLC entered into a class action settlement providing class members transferrable vouchers (ranging from $36.28 to $180.68) that could be used at any Massage Envy location. The Class Action Fairness Act (CAFA) imposes additional restrictions on settlement relief considered to be a “coupon,” and the court determined that the district court erred when it found the settlement vouchers were not coupons. The court came to this conclusion because the smallest voucher was not enough to purchase a massage—the service at issue in the litigation—and required class members to hand over their own money. And the limited products and services offered by Massage Envy stores necessarily restricted the voucher to purchases of only “select products or services.” The court therefore required the district court to re-analyze whether the settlement should be approved.
In a separate decision, the Ninth Circuit affirmed a district court’s approval of a settlement agreement that provided injunctive relief, cy pres payments to internet privacy advocacy groups, attorneys’ fees, and service awards to class representatives. In In re Google Inc. St. View Elec. Commc’ns Litig., 2021 WL 6111383 (9th Cir. Dec. 27, 2021), a class member objected that, among other things, the cy pres relief was inappropriate and the funds should be distributed to class members instead. The Ninth Circuit rejected the objector’s argument that settlements that consist only of injunctive relief and cy pres payments—and no monetary payments to class members—are impermissible. Instead, the court held that the settlement was properly approved when it was not feasible to identify class members, when the distribution of settlement funds did not violate the constitution’s prohibition on compelled speech, and when the cy pres beneficiaries were eligible to receive the funds.