Southwest Airlines Voucher Litigation

Docket number: No. 13-3264
Citations: 799 F. 3d 701 (7th Cir. 2015), appeal from No. 11-cv-8176 (N.D. Ill.)

The Center’s client objected to a settlement over Southwest drink coupons given to “Business Select” passengers as a perk. Thanks to the Center’s involvement in the case, in 2017 the parties agreed to a resolution providing class members triple the recovery than would have been provided under the 2012 settlement agreement.

Business Select drink coupons entitle passengers to receive one alcoholic drink, which otherwise costs $5. In 2010, Southwest added expiration dates to Business Select drink coupons so they would have to be used on the day of flight. This change invalidated any unredeemed coupons, which prompted plaintiffs’ lawsuit. The 2012 settlement would have provided one drink coupon for every valid claim submitted by a class member. Counsel proposed to award themselves $3 million in cash, not coupons. Plaintiffs implausibly claimed that the coupons would be worth up to $29 million, but the Center’s 2013 objection accurately predicted that few class members would ever file claims for their coupons.

The district court approved the settlement, but it reduced the fee request substantially and only awarded $1.65 million overall. The Center appealed approval of the settlement and plaintiffs’ counsel appealed the reduction in fees. The Seventh Circuit denied plaintiffs cross-appeal in 2015, but it also affirmed approval. The panel found that the case was unusual for a coupon settlement and that the district court had appropriately scrutinized and reduced fees. However, the panel agreed with the Center that counsel had improperly failed to disclose a possible conflict of interest, so further reduced the fee request and disallowed a $15,000 “incentive payment” to the apparently conflicted named plaintiff. The Center moved to rehear the matter en banc, which was denied.

On remand before the district court, plaintiffs sought additional attorneys’ fees to bring their total to $3 million time spent defending the settlement on appeal. The Center opposed this fee request because it contradicted notice to class, which implied there would only be one fee request for $3 million. Further, hundreds of thousands of dollars of billing claimed by counsel was spent defending its meritless cross-appeal, where plaintiffs’ counsel was working solely on their own behalf. On April 25, 2016, district court agreed to award counsel an additional $458,823, and the Center moved to reconsider to disgorge the fees for the benefit of the class and provide new notice to class members concerning the additional fee request. On June 22, 2016, the district court granted the Center’s motion to provide class members notice and a new opportunity to object to counsel’s belated fee request, but it denied the motion to disgorge. Subsequently, the Center appealed this denial, and successfully argued against the settling parties’ deficient notice plan.

In January 2017, the Center agreed with settling parties to a resolution that triples recovery to class members and reduces the supplemental fee award to plaintiffs’ counsel from $458,823 to $231,176. Under this agreement, every claiming class member will receive three coupons for every one they previously claimed. Southwest was willing to provide additional relief because—as the Center predicted in 2013—few class members claimed. Only 161,054 coupons would have been sent under the original settlement agreement.

This case was originally brought by the Center for Class Action Fairness. From October 2015 to January 2019, it was a project of the Competitive Enterprise Institute.

Case Documents