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Groupon class action settlement: when is $8.5 million not $8.5 million?


There was a lot of publicity about the "$8.5 million" Groupon will pay to settle a class action over expiration dates; several class members complained about the settlement to me, mostly because they viewed the lawsuit as silly. (So did Groupon, before their lawyers made them take down the original blog post criticizing the first of the many class actions brought against them.)

But the settlement is even worse than it looks. Before the settlement, if a Groupon customer had a problem with a Groupon, they contacted customer service, indicated dissatisfaction, and got a full cash refund.

After the settlement, if a Groupon customer has a problem with a Groupon that they purchased during the class period, they contact customer service, and customer service refers them to the class action settlement website, where they can fill out a claim form; after several months (and perhaps years), the class action settlement administrator will give the class member a pro rata share of the settlement fund—which, though the publicity says is $8.5 million, less than $6 million of it will be likely available to the class.

In other words, the class action attorneys have negotiated a settlement that makes their clients—who had suffered no damages because of the availability of refunds—worse off, and are asking for millions of dollars for their efforts.

I discovered this the hard way: I purchased a Groupon Voucher for a restaurant that closed, and tried to get my money back from Groupon. They told me to file a claim form. Fortunately, when I suggested that this was subpar customer service, they gave me a credit—which goes to show further that this is not a marginal benefit to the class of $8.5 million, but a change in accounting entries to rationalize a $2.125 million request for attorneys' fees.

Today I filed an objection. The case is In re: Groupon, Inc., Marketing and Sales Practices Litigation, No. 3:11-md-2238-DMS-RBB (S.D. Cal.), and the fairness hearing is scheduled for September 7. Lead class counsel is Robbins Geller.


I think I support the idea of these consumer class action lawsuits although it just seems like more and more we are seeing cases that just benefit the lawyers. Besides from people like you running around filing objections (and driving everyone crazy I'm sure), I can't figure out what we should do to distinguish between the good cases and the not so good cases.

Hey, just remember that plaintiffs' lawyers have yacht payments, too.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.