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Schlesinger v. Ticketmaster: California Trial Court Rejects “Pure” Coupon Settlement As Well As “Clear Sailing” Agreement To Pay Class Counsel $15 Million In Attorneys’ Fees

Posted in Class Action Settlements

On September 26, California Superior Court Judge Kenneth Freeman rejected a proposed class settlement of allegations that Ticketmaster had misled ticket buyers by implying that fully disclosed charges for an Order Processing Fee and delivery by U.P.S. represented its actual costs.

Before commenting on the grounds for rejecting the settlement, though, I can’t resist observing that this is still another illustration of a lawyer-driven class action that attacks a practice that causes no actual harm to consumers. While at first blush it might appear unseemly to charge delivery fees that exceed the amount actually charged by UPS, it is a matter of straightforward economics that consumers care only about the total cost of obtaining the desired tickets. If I value the opportunity to attend a Springsteen concert at $150, it doesn’t matter one whit to me whether Ticketmaster charges me $140 for the ticket and $10 for UPS, or instead charges me $130 for the ticket and $20 for UPS. How Ticketmaster takes its profit does not affect whether I will be willing to pay $150 to see the Boss.

So what we start with here is a shakedown class action that serves no valid public purpose but carries with it enough risk (because of the size of the class) to leave the defendant with little choice other than to settle. It should come as no surprise then that the settlement itself reflects the economic realities of the case. To buy peace, the defendant entered into a so-called “clear sailing” agreement under which it would pay class counsel $15 million. And having accomplished what they set out to do, class counsel turned around and agreed to a “pure” coupon settlement, under which class members would, for a limited time, receive discounts on future purchases from Ticketmaster. Judge Freeman offered a host of reasons for finding the coupon settlement in this case to be objectionable, including that many members of the class were one-time purchasers and hence will get no benefit from the settlement; the discount is time limited; it is non-transferrable; and class members may forget to redeem it. (For such reasons, the Class Action Fairness Act places significant restrictions on coupon settlements, but this case pre-dated CAFA and proceeded in state court.)

Judge Freeman also denounced the cy pres component of the settlement, under which Ticketmaster would provide charitable organizations with free tickets to certain events, because Ticketmaster had sole authority to choose the charities and had discretion as to the quality of seats and the timing of making them available. In other words, class counsel had agreed to give Ticketmaster “credit” for giving away tickets it can’t sell.

Unsurprisingly, given the bad taste in his mouth created by the coupon and cy pres components of the settlement, Judge Freeman rejected the attorneys’ fee component—even though the fees would come directly from Ticketmaster, not the class. Although Judge Freeman didn’t question either the rates requested or the hours class counsel represented that they had expended, the lodestar came to only approximately $6.5 million. Given the inadequacy of the settlement, Judge Freeman pointedly held that “the results in this litigation do not warrant a fee award of twice the lodestar (and certainly not 2.312 times the lodestar).”

As a result of this ruling, some of the $8.5 million in excess of the lodestar that Ticketmaster was willing to pay for peace will become available for cash payments to class members and possibly cy pres beneficiaries. Though that would be an unwarranted windfall to the class members, it certainly is preferable to letting the lawyers make out like bandits.