Can We Pay the Lawyers in Coupons?

Legal Pad can’t decide where to come down on coupon settlements.

On the one hand, if a consumer class action is at an impasse, it seems like a reasonable way to reach a middle ground: We will give you something, but it won’t hurt us as much as giving you cash, because to make good on it you have to shop with us again. For products people still want to consume (Legal Pad will probably use Airborne no matter how much they get sued), that seems all right. But on the other hand, the logic can seem a bit twisted: Consumers were so cranky about whatever you sold ’em that they sued, and now you’re giving them a discount that’s only good if they buy more of the same? We're torn.

Earlier this week, a Sacramento judge approved (.pdf) a settlement in a consumer class action against Ford. Since Legal Pad hasn’t owned a Ford Explorer, we’re not sure how we’d feel about being offered a one-year coupon for $500 off our purchase of another Ford Explorer (or, alternatively, $300 off any Ford, Mercury or Lincoln -- see paragraph 34). But the settlement struck us as good material for a philosophical question we’re kind of intrigued by: How best to put a dollar value on the lawyering that leads to coupon settlements?

(And spare us the lode-star formula, this-is-how-judges-do-it explanations -- we're way more interested in big-picture, creative answers.)

At issue in the suit was whether 1991-2001 Explorers had a tendency to roll over, whether the carmaker concealed it, and whether consumers were misled into paying too much as a result. Class counsel have asked the court (.pdf) to approve $25 million in fees and costs, including incentive awards for named plaintiffs of $2,500 to $10,000 apiece.

To be fair, even objectors to the settlement weren’t totally lambasting the fees. But, questioning the value of the results, they wanted them scaled back. (Word we heard from the objecting side is that some but not all of the fees have been approved already. But we haven’t heard anything official on that.)

McGeorge School of Law professor John Sims, who represented two class-member couples objecting to the settlement before Judge David DeAlba earlier this week, doesn’t begrudge those attorneys some millions. He acknowledges how far the litigation went before settling — the plaintiffs' materials say the case lasted seven years, and Sim further specifies it went through 50 days of trial — and compliments the quality of the lawyering. (San Francisco’s Lieff Cabraser Heimann & Bernstein and the East Coast firm Wilentz, Goldman & Spitzer were co-lead class counsel, while O’Melveny & Myers represented Ford.)

Sims just maintains that $25 million is going too far — he’d like to see that reduced by a chunk, with the difference put into some sort of cy pres arrangement to benefit auto safety causes. “I’m not worried about the nickel-and-dime aspect,” like the number of hours or rates billed, he said, making it clear that he thinks the litigation was at an impasse and the attorneys reached a settlement in good faith and at arms’ length. “But the thing is in a class action case, people can’t get paid based on good efforts … and here the results are negligible.”

As could probably be said for all coupon settlements, the quality of the results is surely up to interpretation. Sims said he’d like to know how many class members have claimed their coupons (the deadline is April 29), and that might be one indicator.

We’d be interested to know ourselves. But, maybe because it's Friday, the calls we put in this afternoon to two co-lead class counsel in the case haven’t been returned yet. We’ll update you if we hear back.

—  Pam Smith