In law, a coupon settlement is a resolution between disputing parties in a class action lawsuit, reached either before or after court action begins. In a coupon settlement, class members receive coupons or other promises for products or services instead of a cash award.
Full Answer
What is a a coupon payment?
A coupon payment refers to the annual interest paid on a bond between its issue date and the date of maturity. The coupon rate is determined by adding the sum of all coupons paid per year, then dividing that total by the face value of the bond. The term "coupon" originally refers to actual detachable coupons affixed to bond certificates.
What is the settlement date of a contract?
In spot foreign exchange (FX), the date is two business days after the transaction date. Options contracts and other derivatives also have settlement dates for trades in addition to a contract's expiration dates. Settlement date may also refer to the payment date of benefits from a life insurance policy.
What is a coupon bond?
The term "coupon" originally refers to actual detachable coupons affixed to bond certificates. Bonds with coupons, known as coupon bonds or bearer bonds, are not registered, meaning that possession of them constitutes ownership.
How do you calculate coupon rate on a bond?
Key Takeaways. A coupon payment refers to the annual interest paid on a bond between its issue date and the date of maturity. The coupon rate is determined by adding the sum of all coupons paid per year, then dividing that total by the face value of the bond.
What is a proposed settlement agreement?
The court, in its discretion, may also require that a proposed settlement agreement provide for the distribution of a portion of the value of unclaimed coupons to 1 or more charitable or governmental organizations, as agreed to by the parties.
When can a court approve a proposed settlement?
In a proposed settlement under which class members would be awarded coupons, the court may approve the proposed settlement only after a hearing to determine whether, and making a written finding that, the settlement is fair, reasonable, and adequate for class members.
What is expert testimony in a class action?
In a class action involving the awarding of coupons, the court may, in its discretion upon the motion of a party, receive expert testimony from a witness qualified to provide information on the actual value to the class members of the coupons that are redeemed.
What is a coupon settlement?
[6] Unlike cash settlements, coupon settlements typically involve offers for discounted goods or services whose actual value may differ significantly from their face value . As a result, ascertaining fairness often requires a more complex economic analysis than other types of settlements, and in some cases expert testimony is crucial.
What is the federal court hearing for a coupon settlement?
For example, prior to approving a coupon settlement, federal courts must hold a hearing and make specific findings that the settlement is fair, reasonable, and adequate, and that the class's interests are adequately represented. [11] This determination involves a consideration of numerous factors:
What was the settlement in Synfuel v. DHL Express?
v. DHL Express , [21] for example, the trial court approved a settlement that offered up to four prepaid DHL shipping envelopes or $30 cash in addition to injunctive relief. Noting that the trial court's role in reviewing a settlement agreement is "akin to the high duty of care that the law requires of fiduciaries," [22] the Seventh Circuit reversed because "the [trial] court did not attempt to quantify the value of [the] plaintiffs' case or even the overall value of the settlement offer to class members." [23] The court also criticized the "in-kind compensation" component of the settlement, noting that it was akin to coupons. While the DHL shipping envelopes were not "identical to coupons" because they represented an "entire product, not just a discount on a proposed purchase," they nevertheless shared some characteristics of coupons because some percentage of the prepaid envelopes would not be used and thus would not constitute a cost to the defendant. Like coupons, the envelopes also forced class members to continue doing business with the defendants. Given these similarities, the court stated that, even if CAFA was not theoretically applicable, the "in-kind compensation" component of the settlement was subject to higher scrutiny by the trial court. [24]
Why was the DVD subscription at issue in Chavez a variant of the coupon settlement?
In contrast, the DVD subscription at issue in Chavez was "a variant of the coupon settlement" because class members were not necessarily required to make a purchase, and the potential benefit to the defendant was reduced, limited, or altogether absent. [58]
What district of Florida rejected the $19 settlement?
Applying a "greater level of scrutiny," the Southern District of Florida rejected the settlement, reasoning that it was not the product of an informed, arm's-length negotiation. The parties failed to provide the court with sufficient information regarding the potential value of the litigation and the range of possible outcomes. Thus "the issue of whether the $19 is sufficient [had] still not been answered." [36] The court also rejected the use restriction improvements suggested by the parties' expert, noting that "enhancements to what is nothing more than a coupon settlement" did not make it "fair, adequate or reasonable." [37]
What was the settlement in Young v Polo?
In Young v. Polo Retail, LLC, the same court approved a proposed class settlement for $1 million in cash and $500,000 in gift cards to class members. [41] While noting that "the primary downside of the proposed settlement is the use of product vouchers," the court reasoned that the vouchers did not have product restrictions and were fully transferable. [42] Presumably because the gift cards did not constitute coupons, the court did not decide the case under CAFA, and thus did not limit attorney's fees based on the number of actual redemptions. [43]
Was the Chavez case a pure coupon settlement?
Moreover, the court concluded that the settlement was not a "pure coupon settlement, " explaining that:
What Is a Coupon?
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a year divided by the face value of the bond in question).
How to find coupon rate?
The coupon rate is determined by adding the sum of all coupons paid per year, then dividing that total by the face value of the bond.
What Is a Settlement Date?
The settlement date is the date when a trade is final, and the buyer must make payment to the seller while the seller delivers the assets to the buyer. The settlement date for stocks and bonds is usually two business days after the execution date (T+2). For government securities and options, it's the next business day (T+1). In spot foreign exchange (FX), the date is two business days after the transaction date. Options contracts and other derivatives also have settlement dates for trades in addition to a contract's expiration dates .
What causes the time between transaction and settlement dates to increase substantially?
Weekends and holidays can cause the time between transaction and settlement dates to increase substantially, especially during holiday seasons (e.g., Christmas, Easter, etc.). Foreign exchange market practice requires that the settlement date be a valid business day in both countries.
How long does it take for a stock to settle?
Most stocks and bonds settle within two business days after the transaction date . This two-day window is called the T+2. Government bills, bonds, and options settle the next business day. Spot foreign exchange transactions usually settle two business days after the execution date.
How long does it take to settle a stock trade?
Historically, a stock trade could take as many as five business days (T+5) to settle a trade. With the advent of technology, this has been reduced first to T=3 and now to just T+2.
How far back can a forward exchange settle?
Forward foreign exchange transactions settle on any business day that is beyond the spot value date. There is no absolute limit in the market to restrict how far in the future a forward exchange transaction can settle, but credit lines are often limited to one year.
