class actions settlements

Southwest gives away "premium drink" (i.e., "beer") coupons worth $5 to customers who buy a Business Select ticket. Of course, not everyone drinks, and half of the coupons are thrown away. After giving out 11 million or so of these coupons, Southwest changed its policy and held that the premium drink vouchers were only good on the day of the flight for which they were sold. A class action was born, alleging bait and switch. There's a lot of publicity over the settlement; Southwest Airlines is giving away new coupons, i.e., free beer. Press coverage accepts the claim of class counsel that the coupons, which will expire in a year, and are only good in flight, are worth "perhaps more than $29 million"; papers in support of the settlement go even further and ascribe a value of up to $58 million. Thus, the attorneys will ask for $7 million. [preliminary approval order; Chi Trib; L&S; h/t LAN3]

Thing is, we know from decades of history of coupon settlements that less than $1 million of these coupons are going to get used; heck less than $1 million are likely to be claimed. The settlement is worth "perhaps more than $29 million" only in the sense that "perhaps" the atoms in the chair you are sitting on will all simultaneously shift one foot to the left. Customers are getting notified by email, but the vouchers aren't being sent to them by email. That's because Southwest wants to limit its liability, but the attorneys want to maximize their payout; they both have the incentive to exaggerate the true value of the settlement. If they told the court the settlement was worth less than $1 million to the class, the court might ask questions why a disproportionate share is reserved for the attorneys; if they asked the court to follow the strictures of the Class Action Fairness Act, which requires attorney awards to be tied to the value of redeemed coupons, the attorneys would have no chance at $7 million.

One hopes a class member sees through this misleading unfairness, and finds pro bono counsel willing to object.

 The class consists of "All Southwest customers who purchased an Eligible Drink Voucher through the purchase of a Business Select ticket or otherwise, during the time period before August 1, 2010, but who did not redeem the Eligible Drink Voucher. The Class does not include Southwest customers who obtained drink vouchers or drink coupons through the Southwest Rapid Rewards program, unless those customers separately purchased, but did not redeem, Eligible Drink Vouchers through the purchase of a Business Select ticket or otherwise." The case is In re Southwest Airlines Voucher Litigation, No. 11-cv-8176 (N.D. Ill.).