September 15, 2015 Practice Points

Southwest Airlines In-Flight Alcohol Suit Causes Circuit Split

The underlying suit involved certain drink vouchers that the airline stopped honoring

by Erin Wilson

On August 20, 2015, the Seventh Circuit held that the “coupon settlement” provision of the Class Action Fairness Act (CAFA), 28 USC § 1712, allowed the district court to award class counsel an attorney fee based on the lodestar method. In re Southwest Airlines Voucher Litigation, Nos. 13-3264, 13-3462, 14-2591, 14-2602, 14-2495, 2015 WL 4939676 (7th Cir. Aug. 20, 2015). The Seventh Circuit’s decision represents a split from the Ninth Circuit’s decision in In re HP Inkjet Printer Litigation, 716 F.3d 1173 (9th Cir. 2013).

The underlying suit involved certain in-flight drink vouchers that Southwest Airlines stopped honoring. The parties reached a settlement to provide replacement drink vouchers to all class members, as well as certain injunctive relief. The Seventh Circuit repeatedly stated that unlike many “coupon settlements,” the settlement here was extremely favorable to the class members, in that it provided them with nearly all the relief that they could hope for if the case were to proceed through a successful trial. Objectors, however, appealed approval of the settlement, arguing that the district court erred in using the lodestar method to calculate attorney fees. Specifically, the objectors argued that the proper basis for a fee award under CAFA would be based on a percentage of the value of coupons actually redeemed by class members. This is the view that a divided panel of the Ninth Circuit previously adopted in HP Inkjet. The Seventh Circuit, however, found that CAFA does not prohibit the use of the lodestar method to calculate attorney fees in coupon settlements, though it does prohibit the calculation of fees based on the face value of all coupons available to the class.

Premium Content For:
  • Litigation Section
Join - Now