Leftover Booze Coupons to Cost Southwest $29M

CHICAGO (CN) - Southwest Airlines will replace free drink coupons that it no longer honors, a federal judge ruled, approving a settlement valued at $29 million.

Under its old policy, Southwest rewarded customers who bought Business Select tickets with free-drink coupons that had no expiration date.

After finding that its flexible policy was hurting its bottom line, however, Southwest announced in August 2010 that Business Select drink coupons could now be redeemed only on the day of travel on which they were issued.

Adam Levitt and Herbert Malone filed a class action in November 2011 on behalf of all persons with unredeemed Southwest drink coupons for alcoholic beverages obtained with the purchase of Business Select tickets.

After mediation, the parties reached a settlement agreement.

Class members will receive a replacement drink voucher for each unredeemed drink coupon, which expires one year after its date of issuance, and they may sell them or give them away if they do not desire to use them.

In addition, Southwest agreed that if it issues any drink coupons in the future without an expiration date, it must honor the coupons on any Southwest flight at any time. For all coupons with an expiration date, it agreed to include conspicuous language indicating dates for which the coupon is valid to flyers.

Levitt and Malone will receive incentive awards of $15,000 each, and Southwest agreed not to oppose an attorneys' fee request of up to $3 million, and expenses of $30,000, subject to court approval.

U.S. District Judge Matthew Kennelly granted final approval of the settlement on Monday.

"The key factor in this particular case is that the proposed settlement calls for a full-value, one-to-one reimbursement of drink vouchers for class members and allows class members to sell or otherwise transfer the new vouchers should they desire," Kennelly wrote. "Though the replacement vouchers will have a limited duration, that duration is sufficiently long to permit the vast majority of class members to redeem the vouchers if they wish to do so, or to sell them or give them away if they do not want to use them or lack the opportunity to do so. In short, even if plaintiffs faced few uncertainties in proving their claims, the fact that they get back almost exactly what they lost weighs heavily in favor of approval of the proposed settlement."

In addition, only 13 class members of 2.4 million objected to the settlement, less than 0.01 percent.

"Such a low level of opposition supports the reasonableness of the settlement," the 22-page opinion states.

Kennelly approved the incentive awards to the two lead plaintiffs, finding the $15,000 awards reasonable given the significant amount of time they dedicated to the case.

He reserved ruling on the petition for attorney's fees and costs for a separate opinion.

Plaintiff's counsel Joseph Siprut called the approval of the "excellent result" gratifying.

"Class members are made completely whole through the settlement (valued at a minimum of $29 million), which we're very proud of," Siprut said in an email (parentheses in original). "The court also disposed of the overheated rhetoric directed at the settlement, which was mostly based on fundamental misunderstandings of the facts or the actual settlement terms."

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