SAN FRANCISCO – A federal appeals court has upheld a settlement awarding some $3.5 million to consumers who alleged they were placed in a membership rewards program without their consent and vacated a ruling on attorneys' fees.
On Oct. 3, the U.S. Court of Appeals for the 9th District upheld the U.S. District Court for the Southern District of California's ruling approving the settlement between the class action of nearly 3,000 consumers and Provide Commerce Inc. and Regent Group Inc. The 9th Circuit did vacate the $8.7 million in attorneys' fees sought in the case.
"We vacate the fee award because the district court failed to treat the credits as coupons under the Class Action Fairness Act (“CAFA”) when calculating that award," the court wrote. "We otherwise affirm."
Provide Commerce sells flowers, chocolates and fruit baskets online. The plaintiffs alleged that consumers purchased items from Provide and, "were then presented with a pop-up advertisement for $15 off another item from the same website," the ruling states.
The pop-up window allegedly directed them to a different website instructing them to enter contact information and unknowingly enrolled consumers into Provide's membership rewards program, the suit states. Payment information on those consumers was then transmitted to Regent Group, a separate company, the ruling states.
The consumers who filled out the information in the pop-up advertisement were then charged "a $1.95 activation fee and a recurring $14.95 monthly membership fee," according to the 9th District Court. Those consumers also alleged never received “the promised coupons, gift codes, or any other savings benefits,” the ruling states.
A class action lawsuit was filed in 2009 alleging violations of various California state laws. According to the ruling, "1.3 million consumers had been enrolled in the rewards program at some point since August 2005."
In January 2013, one of the class action members argued that the attorney’s fee award did not comply with Class Action Fairness Act’s requirements for settlements awarding coupons and that the cy pres award was improper.
Under the affirmed settlement, $3.5 million is to pay settlement administration costs and refund class members’ enrollment fees, "with any remaining funds designated for three cy pres beneficiaries," the ruling states.
"The settlement also provided that each class member would receive a $20 credit that may be used to purchase additional products from defendants. The settlement anticipated that class counsel would receive $8.7 million in attorney’s fees," according to the ruling.