Shook, Hardy & Bacon Partner Jim Muehlberger and Associate Jeff Lingwall assert in an April 29, 2015, Law360 analysis that offering refunds to dissatisfied consumers can benefit companies by lessening the impact of a class action or averting one altogether.
"If many refunds are claimed, a court may find that named plaintiffs are not adequately protecting class interests and that a class action is not the superior method for resolving the dispute. If few refunds are claimed, this is evidence that plaintiffs’ counsel is creating litigation when none existed, again strengthening superiority arguments. If the named plaintiffs receive refunds, this can defeat their standing to bring a lawsuit and end the class action before a motion for class certification," they argue. "In each circumstance, a refund policy provides valuable preemptive insurance that can help stop a class action in its tracks."
Muehlberger and Lingwall provide examples for each proposition, citing cases in which courts looked to refund policies to determine whether a class action was the appropriate method of resolving the dispute and ultimately denied class certification. "Whether a company’s refund policy is widely used by consumers, largely ignored by consumers or only affects the named plaintiffs in a lawsuit, it can provide a valuable tool for combating class actions," they conclude.