952 F.3d 471
4th Cir.2020Background
- Two MDLs brought against Lumber Liquidators: Formaldehyde claims (2009–2015 CARB emission issues) and Durability claims; consolidated in E.D. Va. and heavily litigated through motions and discovery.
- Parties negotiated and agreed to a global settlement: $22 million cash plus $14 million in company store vouchers (non-reversionary common fund); vouchers generally transferable (limited), expire in 3 years in most states, usable only for Lumber Liquidators products.
- Settlement split classes into CARB1 (2009–2010) and CARB2/Durability (2011–2015) with differing remedies; participants could elect cash or vouchers (CARB2/Durability).
- Class Counsel sought ~31% of the $36M total ($11.16M) in fees (to be paid from the $22M cash fund under a quick-pay clause); district court approved the settlement and awarded 28% (~$10.08M) plus costs.
- Objectors (Cantu‑Guerrero and Johnston) appealed, arguing the vouchers are CAFA “coupons,” CAFA’s fee rules should apply (reducing fees), and the quick‑pay and fee valuation were improper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district abused its discretion in approving the class settlement | Objectors: settlement unfair/inadequate because vouchers may be worthless, quick-pay favors counsel, and fees consume cash | Appellees: settlement resulted from extensive litigation/mediation, low opt‑out/objection rates, vouchers have value and safeguards | Affirmed — district did not abuse its discretion; settlement was fair, reasonable, and adequate |
| Whether the Lumber Liquidators vouchers qualify as CAFA “coupons” | Objectors: vouchers function like coupons (force future purchases, limited use, possible out‑of‑pocket spending) | Appellees: vouchers are like gift cards (high average value, transferrable, multi‑year); not CAFA coupons | Vouchers are “coupons” under CAFA (court relied on legislative history, dictionary meanings, and multi-factor tests) |
| Whether CAFA’s coupon fee provisions apply to mixed settlements (cash + coupons) | Objectors: CAFA applies and limits/calculates fee portion attributable to coupons | Appellees: CAFA shouldn’t apply where settlement includes cash option or where vouchers resemble gift cards | CAFA coupon provisions apply to mixed settlements; district erred by declining to apply them |
| Appropriate remedy for attorneys’ fees calculation | Objectors: fees should be recalculated under CAFA rules and vouchers valued by redemption/utility, not face value | Appellees: percentage‑of‑recovery using full $36M and lodestar cross‑check was proper | Vacated the Attorney’s Fees Order and remanded for the district court to apply CAFA’s coupon provisions and recalculate fees in the first instance |
Key Cases Cited
- Sharp Farms v. Speaks, 917 F.3d 276 (4th Cir. 2019) (standard of appellate review for settlement approval — abuse of discretion)
- Berry v. Schulman, 807 F.3d 600 (4th Cir. 2015) (standard for appellate review of attorney’s fees awards)
- In re Easysaver Rewards Litig., 906 F.3d 747 (9th Cir. 2018) (multifactor analysis for CAFA coupon determinations and application to mixed settlements)
- In re Sw. Airlines Voucher Litig., 799 F.3d 701 (7th Cir. 2015) (CAFA coupon framework and application to voucher settlements)
- Synfuel Tech., Inc. v. DHL Exp. (USA), Inc., 463 F.3d 646 (7th Cir. 2006) (assessing coupon settlements that force future business)
- In re Online DVD‑Rental Antitrust Litig., 779 F.3d 934 (9th Cir. 2015) (distinguishing widely usable gift cards from coupons)
- In re HP Inkjet Printer Litig., 716 F.3d 1173 (9th Cir. 2013) (discussion of CAFA concerns and fee calculation approaches)
- Rodriguez v. W. Publ’g Corp., 563 F.3d 948 (9th Cir. 2009) (affirming settlement approval while vacating fee award)
- In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283 (3d Cir. 1998) (affirming settlement though fee issues remanded)