Groupon Gift Card Expiration Date Settlement Reversed

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A $8.5 million settlement reached in 2012 was reversed by the Ninth District Court of Appeals following complaints of unfair disbursement and extravagant attorney fees.

Sunday, February 22, 2015 - The Ninth District Court of Appeals has in favor of vacating a $8.5 million settlement that plaintiffs were awarded in a multidistrict lawsuit against the internet coupon company Groupon. The decision to disburse the settlement, originally intended to reimburse customers that had purchased gift certificates with illegal expiration dates, was reversed by the court. The court cited further investigation into the size of attorney fees and fairness of award disbursement stipulated in the proposed deal as the main factors backing their case for reversal.

Two of the class members sparked the motions to reassess the settlement after they took issue with its conditions. Under the previous agreement attorney‘s fees were set at a quarter of the total amount awarded, over $2.1 million. Although the case will return to court in an attempt to review the parameters of the settlement, the Ninth Circuit Appeals Court did not offer any judgment in regards to the fairness of the original agreement.

The settlement was originally approved by U.S. District Judge Dana M. Sabraw in December of 2012 to end litigation originated in response to misleading expiration dates posted by Groupon. The plaintiffs claimed that illegal deal restrictions included on a variety of Groupon offers violated a host of regulations that help govern gift card activity. The allegations described conditions such as coupons with multiple stages that could only be used in one visit, and others that expired in less than the 5-year mandatory government minimum timeframe as listed under the Electronic Funds Transfer Act.

From the time that the settlement was first approved, there have been complaints from the class members about the disbursement of the $8.5 million. Attorney‘s fees were targeted as an inflated cost, but further concerns arose from the minimal reimbursement to those who were directly affected by the expiration guidelines. The 17 lead plaintiffs were to receive $500 each from the settlement, and the rest would be split among individuals that filed claim forms for a share of the remainder.

In reversing the settlement ruling, the circuit panel found that no findings on the impact or scope of the deal were revealed by the lower court. The court also cited a lack of investigation into whether the any of the rewards mentioned in the settlement were duplicates of existing relief already available to class members. The lack of facts available to the circuit court made it difficult for them to validate the goals set for the settlement was intended to establish a dollar-for-dollar benefit to the plaintiffs.

Class members who were upset with the settlement stipulations also claimed that the segments of the settlement that inflates the amount of illusory relief were enriched to increase the eventual attorney fees awarded. The complaints were aimed specifically at the errors made by the judges in approving the suspect settlement conditions. One statistic from the case in favor of reversal claimed that if only half of Groupon‘s users were to file for a share of the proposed settlement, they would only receive 37 cents a piece.

The circuit court claimed that their decision would not necessitate further fairness hearings or new notices to be sent to existing class members.