The US Court of Appeals for the Ninth Circuit issued a decision on May 15, 2013, in In re: HP Inkjet Printer Litigation holding that CAFA required that any attorneys' fees attributable to the award of coupons must be calculated using the actual redemption value of the coupons.

The plaintiffs, consumers who purchased HP inkjet printers, commenced three separate class actions alleging that Hewlett-Packard (HP) engaged in misleading practices in the sale of ink for its printers. The three actions were resolved in a global settlement under which HP agreed to:

The district court approved the settlement, finding that it was fair, reasonable and accurate. The district court also approved an adjusted award of $1.5 million in attorneys' fees, based on a lodestar calculation, as well as $596,990.70 in costs.

The Ninth Circuit disagreed, noting that Congress enacted CAFA to curb perceived abuses of the class action device. The court explained that in coupon settlements, the interests of class counsel and class members may diverge because class counsel may be tempted to accept a settlement offer awarding coupons of relatively little value to the class but would provide substantial attorneys' fees in cash. The court found that the language of CAFA was designed to prevent this type of abuse.

Section 1712(a) of CAFA governs the award of contingent fees in coupon settlements and states that "[i]f a proposed settlement in a class action provides for a recovery of coupons to a class member, the portion of any attorney's fee award to class counsel that is attributable to the award of coupons shall be based on the value to class members of the coupons that are redeemed." The court interpreted this section to mean that any portion of an attorneys' fee award that is a consequence of a coupon settlement must be calculated based on the value of the coupons actually redeemed. Because the settlement also provided for injunctive relief, the court also considered Sections 1712(b) and (c). The Ninth Circuit held that if a portion of the settlement is based on relief other than coupon relief, that portion of the attorneys' fees may be calculated based on a lodestar amount.

The Ninth Circuit found that the district court had failed to undertake the two separate calculations necessitated by the terms of the settlement:

The Ninth Circuit noted that the fault for this failure rested not only with the district court but also with the parties, who specified in the settlement agreement that no coupons would issue until after entry of a final judgment, making it impossible for the court to calculate the actual redemption value of the coupons. It remanded the case to the district court for further proceedings consistent with its holdings.

Judge Marsha S. Berzon dissented. She disagreed with the majority's conclusion that all attorneys' fees based on coupon settlements must be calculated using the actual redemption value of the coupons. She noted that the goal of aligning class counsel's interests with those of the class members was accomplished by other safeguards outside of CAFA, including the practice of cross-checking the lodestar calculations against a percentage fee of 25%, the benchmark standard. Judge Berzon also explained the difficulty of following the majority's approach in mixed-settlement cases, where coupon relief was awarded with another type of relief. Parsing the hours that counsel worked to achieve each type of relief would not be straightforward in those cases.

Class counsel should be aware of the effect that CAFA may have on the award of attorneys' fees in a coupon settlement and should be cognizant that attorneys' fees will generally be affected by the value of the settlement to the class members.