$1 cash payout to Uber 'safe rides' class members rescues $5.7 mln counsel fee

A screen displays the company logo for Uber Technologies Inc. on the day of it's IPO at the New York Stock Exchange (NYSE) in New York, U.S., May 10, 2019. REUTERS/Brendan McDermid

Dec 1 - Here's a million-dollar tip for class action lawyers: If your settlement agreement delivers minuscule recovery to your clients, make sure they can at least get that recovery in cash.

That's the lesson of a ruling on Wednesday from the 9th U.S. Circuit Court of Appeals, which affirmed a $5.7 million fee award for class counsel in a $32.5 million settlement with Uber Technologies Inc.

The appeals court conceded that the outcome was not exactly a rousing victory for the 22.4 million Uber riders in the class, the vast majority of whom will initially receive Uber account credits averaging $1.07. But because of the deal's structure, as I'll explain, the 9th Circuit concluded that class counsel were entitled to a percentage of the class settlement fund, despite strictures in the Class Action Fairness Act for fee awards in so-called coupon settlements.

Here's the background. The class alleged that Uber deceived riders by, among other things, charging a since-abandoned "safe ride" fee to cover the purported costs of its safety protocols. Uber denied the allegations but agreed in 2017 to settle the case for $32.5 million. Class counsel from Ahdoot & Wolfson won final approval of the deal -- including a $5.7 million fee award -- in 2019.

The settlement allowed class members to submit a claim for cash recovery: 25 cents for the first unwarranted surcharge and 5 cents for subsequent surcharges. But keep in mind that the average recovery available from the $32.5 million settlement was$1.07. So it's probably not a surprise that relatively few Uber riders -- only 82,375 people of the 22.4 million in the class -- submitted a claim to receive a cash payout from the fund. (I did the math: That’s a claims rate of less than .5% of the class.)

Everyone else in the class, under the terms of the settlement, will receive a credit to their Uber account. After a year, if class members don’t use the credit, Uber will attempt to remit its cash value, minus 7 cents for administration, to the credit cards in users’ files. In other words, if Uber class members who didn't previously file a claim for cash now decide that they want the money, they can wait a year to receive an average $1 remittance to their credit card.

The 9th Circuit Court of Appeals described that amount as “modest, even miniscule” in its ruling on Wednesday. But even such a trivial cash payout, the 9th Circuit said, was enough to save the Uber deal from Class Action Fairness Act fee restrictions.

Ahdoot & Wolfson won't get as high a percentage as class counsel usually receive in cases in the 9th Circuit. The trial judge in the Uber case, U.S. District Judge Jon Tigar of Oakland, California, awarded the firm only 17% of the settlement fund, not the benchmark 25%, because of the relatively small class recovery. Class counsel didn't ask for more from the 9th Circuit, which said Tigar's haircut properly reflected class counsel’s “modest degree of success” in the deal.

The $5.7 million fee nevertheless is nearly three times Ahdoot & Wolfson’s lodestar billings – not a bad outcome for a "modest" success.

Theodore Maya of Ahdoot, who argued for the class at the 9th Circuit in October, did not respond to my email query. I also did not hear back from Uber counsel Michael Harbour of Irell & Manella or from the objectors’ lawyers who asked the 9th Circuit to vacate the fee award, Robert Clore of the Bandas Law Firm and Albert Bacharach of the Law Office of N. Albert Bacharach Jr.

The objectors argued that the trial judge should not have awarded class counsel a percentage of the $32.5 million fund because the settlement was a coupon deal. The Class Action Fairness Act, as you probably remember, uses the leverage of attorneys' fees to discourage settlements that grant class members coupons or vouchers instead of cash, limiting fees in such settlements to the value of the coupons that were actually redeemed by class members.

The Uber objectors argued that the vast majority of class members in the case were slated to receive only a credit to their Uber accounts since less than 1% of the class filed claims for cash recovery. Those credits, objectors said, wouldn’t even cover a single Uber ride – which meant that class members would have to hand over more of their money to Uber to take advantage of the credit.

The coupon issue was murky enough that the trial judge, Tigar, changed his mind about it. As the 9th Circuit panel – Judges Clifford Wallace, Sidney Thomas, and Milan Smith – noted in Wednesday’s ruling, Tigar first said class counsel fees were subject to CAFA’s restrictions for coupon deals. But after additional briefing, the judge said he had given too much emphasis to the trifling size of the recovery for class members and too little to the availability of a cash option. On reconsideration, Tigar said CAFA coupon rules did not apply.

The 9th Circuit agreed. Thomas, who wrote the unanimous opinion, said the settlement was a coupon deal in one regard, because class members could only redeem the Uber credit by using Uber services.

But that’s only one of the factors the 9th Circuit considers under the coupon rules it established in 2015’s In re Online DVD-Rental Antitrust Litigation. Under the other two factors – whether class members have to shell out more of their own money to take advantage of their purported recovery and whether they can obtain the cash equivalent of the value of their coupon or voucher – the Uber deal was not a coupon settlement, according to the 9th Circuit, because class members can opt for cash instead of the Uber credit, either through an initial claim or by waiting a year for a credit card remittance.

When it comes to class action fees, cash is king, even if it's just $1.

Read more:

9th Circuit tosses $14.8 mln fee award in Whirlpool ‘coupon’ class action

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Thomson Reuters

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A Dartmouth college graduate, she has worked as a journalist in New York covering the legal industry and the law for more than three decades. Before joining Reuters, she was a writer and editor at The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin.