NYT Auto-Renewals Class Settlement Gets Tossed Back on Appeal

A class action settlement to resolve claims over The New York Times’ subscription auto-renewal practices has been vacated, after the Second Circuit said the district court applied the wrong legal standard in reviewing the deal.

The district court also failed to adequately evaluate the substantive fairness of the settlement in light of the attorneys’ fee award and incentive award, it said.

Although such errors could conceivably be harmless, Judge Gerard E. Lynch said that wasn’t the case here.

Before Rule 23(e)(2) of the Federal Rules of Civil Procedure was codified, courts applied a presumption of fairness to agreements resulting from arms-length negotiations. But the presumption is no longer appropriate, according to the US Court of Appeals for the Second Circuit’s Thursday decision.

Courts must instead look to the four factors laid out in the rule to “holistically” evaluate the substantive and procedural fairness of a proposed settlement or other resolution, Lynch said.

Coupon Settlements, Fees

Lynch also said the $1.25 million attorneys’ fee award—representing about 76% of the $1.65 million settlement fund—violates the Class Action Fairness Act’s requirement for coupon settlements.

The settlement agreement allowed class members to choose between an access code that would provide one-month NYT subscriptions or pro rata cash payments.

Under CAFA, when a settlement involves coupons, courts are supposed to calculate contingent attorneys’ fees based on the value of coupons actually redeemed, rather than their total face value.

Because the district court incorrectly concluded the case wasn’t subject to CAFA’s coupon settlement provisions, it judged the propriety of the attorneys’ fees award based on the value of the entire settlement, including the access codes, which had a face value of $3.9 million.

Although class members don’t have to hand over more money before they can take advantage of the access codes, they do require the class members to continue doing business with the defendant. They are also only available for “select products or services,” and while good for 50 years, they are still “somewhat inflexible” and can’t be used like cash, Lynch said.

Lynch rejected the argument that the availability of a cash option should alter the coupon-or-not analysis. CAFA’s directive applies to any “proposed settlement under which class members would be awarded coupons,” Lynch said.

Objector Eric Alan Isaacson also challenged the class representative’s incentive award as per se unlawful.

But “providing incentive payments to class representatives for their role in advancing litigation is, on its own, insufficient to create conflict of interest,” Lynch said.

Lynch said the court wasn’t suggesting that the district court must “overturn the settlement” but was simply directing it to recalculate attorneys fees and to reevaluate the settlement in compliance with Rule 23.

Judges Barrington D. Parker and Raymond J. Lohier joined the decision.

Isaacson represented himself. The class is represented by Bursor & Fisher PA. The New York Times is represented by Dentons US LLP.

The case is Moses v. N.Y. Times Co., 2d Cir., No. 21-2556, 8/17/23.