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Levitt v. Southwest Airlines Co. (In re Southwest Airlines Voucher Litig.)

United States Court of Appeals for the Seventh Circuit

February 11, 2015, Argued; August 20, 2015, Decided

Nos. 13-3264, 13-3462, 14-2591, 14-2602 and 14-2495

Opinion

 [*704]  Hamilton, Circuit Judge. These appeals present several issues concerning class action litigation and settlements. The most general is whether the "coupon settlement" provisions of the Class Action Fairness Act, 28 U.S.C. § 1712, allowed the district court to award class counsel an attorney fee based on the lodestar method rather than the value of the redeemed coupons. Our answer to that question is yes.

In August 2010, Southwest Airlines stopped honoring certain in-flight drink vouchers issued to customers who had bought "Business Select" fares. Southwest customers Adam Levitt and Herbert Malone filed this suit against Southwest seeking to represent a class of similarly situated plaintiffs. The parties reached a settlement to provide replacement drink vouchers to all members of the class, as well as injunctive relief constraining how Southwest could issue vouchers in the future. The parties later negotiated an agreement on attorney [**3]  fees for class counsel.

The district court certified the class and approved the class relief components of the settlement but awarded class counsel a smaller fee than they had requested. Class members Gregory Markow and Alison Paul objected to the settlement and now appeal its approval. They argue both that the district court erred by using the lodestar method and that the settlement is unfair to the class because it is too generous to class counsel. Class counsel filed a cross-appeal seeking a larger fee.

We affirm. While the fee aspects of this class settlement include two troublesome features—"clear-sailing" and "kicker" clauses, both of which are explained and discussed below—the dominant feature of the settlement is that it provides class members with essentially complete relief. That degree of success on behalf of the class satisfied the district court that the class was not short-changed for the benefit of class counsel, and it satisfies us as well.

In one respect, however, we modify the terms of the settlement agreement. The financial and professional relationship between lead class counsel and one of the lead plaintiffs created a potential conflict of interest for both given [**4]  their fiduciary duties to the class. This conflict should have been disclosed to the district court but was not. Where another lead plaintiff had no conflict and the class received essentially complete relief, however, we see no basis for decertifying the class or rejecting the settlement. Instead, we modify the settlement as approved to remove the $15,000 incentive award for the plaintiff and to reduce the lawyer's fee by the same amount.

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799 F.3d 701 *; 2015 U.S. App. LEXIS 14601 **

IN RE: SOUTHWEST AIRLINES VOUCHER LITIGATION;ADAM J. LEVITT and HERBERT C. MALONE, individually and on behalf of all others similarly situated, Plaintiffs-Appellees/Cross-Appellants, v. SOUTHWEST AIRLINES COMPANY, Defendant-Appellee/Cross-Appellee.APPEALS OF: GREGORY MARKOW and ALISON PAUL, Objectors-Appellants/Cross-Appellees.

Prior History:  [**1] Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11-CV-8176 — Matthew F. Kennelly, Judge.

In re Southwest Airlines Voucher Litig., 2014 U.S. Dist. LEXIS 84072 (N.D. Ill., June 20, 2014)

CORE TERMS

coupons, settlement, attorney's fees, district court, class member, lodestar method, class action, calculated, fee award, conflicting interest, class representative, vouchers, negotiations, objectors, clear-sailing, replacement, clauses, kicker, adequacy, redeemed, drink, injunctive relief, Airlines, disclose, parties, class certification, class relief, lodestar, Awards, cases

Civil Procedure, Special Proceedings, Class Actions, Compromise & Settlement, Appeals, Standards of Review, De Novo Review, Questions of Fact & Law, Class Attorneys, Fees, Governments, Legislation, Interpretation, Abuse of Discretion, Appellate Review, Reviewability of Lower Court Decisions, Preservation for Review, Prerequisites for Class Action, Adequacy of Representation, Class Members, Named Members