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St. Louis: Lawyers Reap $21 Million, Clients Got $20 and Coupons Worth $24.66

In 2005, Congress enacted the Class Action Fairness Act (CAFA), which, among its features, deals with “coupon” class action abuse. Such abuse occurs when attorneys bring lawsuits purportedly to protect consumer rights, but often seek primarily to push targeted defendants into settlements that provide those attorneys with millions in fees while leaving their presumptive clients with nothing more than a nominal discount on future purchases of products or services. CAFA addressed such abuse by limiting lawyers fees relative to the value of redeemed coupons only. The federal law, however, applies only to class actions decided in federal courts. While some states have enacted similar safeguards, Missouri has not done so.

In May 2010, City of St. Louis Circuit Court Judge Angela T. Quigless approved a class-action settlement against mutual fund A.G. Edwards (now Wells Fargo). The lawyers will receive an immediate $21 million in fees plus about $600,000 in expenses.

By contrast, the 294,000 members of the class will divide $6 million among them and receive $34 million in semi-worthless coupons. This breaks down to providing each individual client with about $20 in cash and three coupons worth $8.22 each that can be used on a set schedule, one-per-year over three years, to offset fees. Of course, it is likely that many class members will not bother to take the time to fill out the necessary paperwork to obtain their award and redeem their coupons.

Despite objections, Judge Quigless approved the settlement. The economy may be floundering, but the class-action industry is alive and well in the “Show Me (Your Lawsuits) State.”