November 18, 2021

Massage Envy: Are All Vouchers Now Coupons Under CAFA?

Subscribe to Our Newsletter

Newsletter


Ross Weiner

|

November 18, 2021

The Ninth Circuit’s October 2021 McKinney-Drobnis v. Massage Envy Franchising decision might signal the death knell for voucher-based class action settlements that are not considered “coupon” settlements under CAFA. If this settlement cannot survive, it’s not clear what voucher-based settlement could.

The Back Story

In 2013, Massage Envy Franchising (“MEF”) began unilaterally increasing customers’ membership dues—first, $0.99 per month, then $10—without authorization. Years later, a class action was filed, followed by a nationwide class settlement, which permitted class members to submit claims for “vouchers” for MEF products and services, with each class member entitled to a voucher corresponding to the fee increase the class member paid. The vouchers:

  • Were usable at any MEF location;
  • Were freely transferable; 
  • Could be used in multiple transactions until exhausted;
  • Did not expire for 18 months; and
  • Could be used to buy any of MEF’s 251 products and services.

The settlement provided for a $10m “floor,” meaning if class members did not claim enough vouchers to account for the full $10m fund, then the per-claimant voucher amount would increase pro rata until the floor was hit. After a direct notice program that reached approximately 97% of the 1.7m class members, a total of approximately 106,000 claimants submitted valid voucher requests seeking less than $3m in value. With the pro rata adjustment, the awarded vouchers ranged in value from $36.28 to $180.68.  

The Trial Court Rules It’s Not a Coupon Settlement

At the trial court, class counsel sought a $3.3m attorneys’ fee award, which represented 33% of the $10m “floor.”  Class counsel argued that this was proper because the settlement was not a “coupon” settlement. In response, one objector argued that this was a coupon settlement, which would dictate that the attorneys’ fee award be based not on the overall value of the vouchers, but on the value of the redeemed vouchers. The trial court overruled the objection, found that it was not a coupon settlement, and ultimately awarded class counsel $2.6m, which was 25% of the $10m fund plus the $450k paid to the settlement’s administrator. The objector appealed.

The Ninth Circuit’s Ruling

Under CAFA, if a class action settlement is a “coupon” settlement, a court must (1) apply heightened scrutiny to its evaluation; and (2) base the attorneys’ fee awards on the redemption value of the coupons, rather than on their face value. In re EasySaver Rewards Litig. , 906 F.3d 747, 754-55 (9th Cir. 2018). Because “coupon” is not statutorily defined, it has fallen on courts to do so. In In re Online DVD-Rental Antitrust Litig., the Ninth Circuit outlined three factors to guide the inquiry: (1) do class members have to hand over more of their own money before they take advantage of a credit; (2) whether the credit is valid only for select products or services; and (3) how much flexibility the credit provides, including whether it expires or is freely transferable.  779 F.3d 934, 951 (9th Cir. 2015). No single factor is dispositive.

In applying the facts of the case to the Online DVD test, the Ninth Circuit found that the voucher at issue was, in fact, a coupon. This was surprising.

The first factor questions whether class members have to hand over more of their own money to use the voucher.  Curiously, however, the court conceded that even those class members receiving the smallest voucher ($36.28) “would be able to purchase entire products without spending their own money.”  So, on its face, the answer to the first question was “no.”  But because class members with the lowest voucher amount would not be able to purchase a single massage, i.e., “the service that is the basis for the membership fee that class members were allegedly injured by,” without spending their own money, the court concluded that factor one favored the conclusion that vouchers are coupons.  This easily could have gone the other way.  

The second factor asks whether the credit “is valid only for select products or services.”  Here, the court acknowledged that MEF offers “much more than massages,” including “251 different products within the sphere of health and wellness.”  And it appears that the voucher could be used on every single product and service that MEF sells. Yet, bizarrely, the court found that this still fell on the coupon side of the line, noting that 251 products “pale in comparison to the millions of low-cost products that Walmart sells,” a fact related to a different case in which this issue was litigated. But it is unclear why the court would compare MEF to Walmart, a store that is known for selling just about everything (except massages). This, too, easily could have gone the other way.  

As for the third factor, the court found that because the vouchers were transferable and did not expire for 18 months, this factor “favors not viewing the vouchers as coupons.”  

In all, given the strength of the vouchers in question here, this case would be as good as any to find that they were not coupons. And yet, upon a de novo review, the court held that they are “coupons and, consequently, are subject to CAFA’s requirements for coupon settlements.”  Accordingly, it vacated the district court’s approval of the attorneys’ fee award and remanded so that the district court could use the value of the redeemed vouchers in awarding attorneys’ fees.

An Interesting Concurrence

Judge Miller wrote separately to “note [his] disagreement with [the Ninth] Circuit’s approach to determining when vouchers are coupons” under CAFA. Judge Miller stated that traditionally, if a statute does not define a term, then the court should “look to its ordinary meaning.”  And yet, with “coupon,” something is amiss.

The Oxford English Dictionary defines coupon as a “form, ticket…entitling the holder to a gift or discount,” while Webster’s defines it as a “form, slip…resembling a bond coupon in that it may be surrendered in order to obtain some article, service, or accommodation,” or a “form or check indicating a credit against future purchases or expenditures.”  There is no question that the vouchers in the instant case fit those definitions. Indeed, according to Judge Miller, “class representatives’ counsel repeatedly (albeit unintentionally) referred to them as ‘coupons’ during oral argument.”  Despite this, Judge Miller lamented how Ninth Circuit precedent requires the use of the Online DVD test, which has “no basis in the statutory text,” and doesn’t explain how the three factors work together and/or which one holds the most sway.  

In short, Judge Miller suggests that in an appropriate case, the Ninth Circuit “should reconsider Online DVD en banc.”  Only time will tell if it will do so.  

***

Risk Settlements, the industry leader in structuring class action settlements, can help defendants in class action litigation evaluate the litigation options and design an optimal settlement structure that is backed by full risk transfer to an insurer. Risk Settlements offers two insurance solutions for defendants in class action litigation.

Class Action Settlement Insurance (CASI) provides companies with the certainty they need to get back to business. It is the only product on the market that allows companies to mitigate, cap and transfer the financial risk of settlement in existing class action litigation. Designed by Risk Settlements in response to businesses’ need for financial certainty in class action lawsuits and resulting settlements, CASI eliminates the unintended consequences of settlement and helps businesses exit litigation for a known, fixed cost.

Litigation Buyout (LBO) Insurance provides companies with the ability to successfully ring-fence litigation exposure and transfer the full financial risk of class action, antitrust, and non-class litigation. With LBO Insurance, the insurance carrier takes on the financial risks and liabilities for businesses – at any time before settlement and for a known, fixed cost. In the context of an M&A transaction or financing, LBO Insurance negates the requirement for the use of escrows or indemnities, providing certainty and finality to both parties to the transaction.

Contact us today to learn more about our creative insurance solutions to resolve existing or ring-fence threatened or existing litigation for a known, fixed cost.

Certum Group Can Help

Get in touch to start discussing options.

Recent Content

By Patrick Dempsey September 1, 2026
This is the first post in Certum Group's seven-part series bringing our Trade Secret Litigation Playbook to the blog. It draws on Part I of the Playbook, Why Trade Secret Claims Matter Now. Read or download the full Playbook here . In 2025, federal trade secret filings reached an all-time high — roughly 1,551 new cases in U.S. district courts, up from 1,203 just two years earlier. 1 That is not a blip, and it is not a quirk of the docket. It is the visible edge of a structural shift in how companies create value and how easily that value now walks out the door. Trade secrets used to be the quiet cousin of the intellectual property family — patents got the valuation multiples, trademarks got the brand meetings. That era is over. For a lot of growth-stage companies, the trade secret portfolio can be worth more than the patents, copyrights, and trademarks combined. It rarely shows up on the balance sheet, and it is almost never insured against the risk it actually faces — which is not that someone will design around it, but that someone will take it. So it is worth understanding why the numbers are climbing, because each driver points to a specific exposure that a business owner can do something about. Employees move more, and faster The single largest source of trade secret disputes is not corporate espionage. It is ordinary talent mobility. Roughly 60% of misappropriation cases involve a departing employee, typically heading to a direct competitor. Tenure has shortened, remote work has normalized discreet cross-company job searches, and the volume of departures that touch sensitive information has grown accordingly. The prototypical case a decade ago was a sales rep leaving with a customer list. Today it is a design lead, a data scientist, or a process engineer carrying the company's hardest-won know-how — sometimes in a file, more often in their head. The cost of taking information has collapsed A USB drive, a personal cloud folder, an auto-forwarded email rule, a screenshot script — what once required filing cabinets and a truck now takes a few minutes. The technical friction that used to deter casual misappropriation is largely gone. That has two consequences. It makes the taking easier, and it makes the forensic trail richer: badge records, git commit histories, egress logs, and download timestamps now tell a story that is often more persuasive to a judge than any witness. The evidence exists. The question is whether the claim holder preserves it before it rolls off a ninety-day retention setting. AI has raised the stakes Machine-learning models are trained on data, code, and process knowledge that is frequently proprietary. Competitors racing to ship an equivalent product have a powerful incentive to shortcut the long, expensive path of independent development — and in software, life sciences, financial services, and advanced manufacturing, a six-to-twelve-month head start can be worth hundreds of millions of dollars. When the crown jewels are unpatented know-how, misappropriation is not a nuisance. It is an existential competitive event. Apple's 2026 trade secret suit against OpenAI — built around aggressive hiring from Apple's hardware teams — is only the most visible example of a pattern now playing out across the economy. A single, credible venue Finally, the law itself has changed the calculus. Since 2016, the federal Defend Trade Secrets Act has given claim holders a nationwide cause of action, federal discovery tools, and remedies strong enough to matter — including an extraordinary ex parte seizure procedure. 2 Enforcement is more predictable than it was under a patchwork of state statutes, and predictability attracts plaintiffs. It also attracts capital, which is where a firm like ours enters the picture. What it means for you From the underwriter's chair, the trend line is unambiguous: more valuable secrets, more mobile employees, cheaper theft, and a legal framework that rewards claim holders who move deliberately. The companies that fare worst are the ones that treated their secrecy program as a compliance checkbox and discover, only in a complaint, that it was the strategy all along. The companies that fare best have thought about identification, preservation, and enforcement economics before they ever need them. If your business runs on information other people would love to have, the record filing numbers are not abstract. They are a forecast. Go deeper with the Playbook. This post covers one piece of a much larger picture. For the full framework — what the law requires, what a strong pre-filing case looks like, how damages experts value these matters, how counsel fee structures change your economics, and how litigation finance fits in — read Certum Group's Trade Secret Litigation Playbook , our field guide for business owners and the counsel who advise them: certumgroup.com/the-trade-secret-playbook . And if you are evaluating a live dispute — or simply want to pressure-test what a matter is worth and how it might be funded — get in touch. A confidential conversation with Certum is free and carries no obligation, whether or not you ultimately seek funding. Reach us at certumgroup.com/contact-us . Sources 1. Lex Machina, Trade Secret Litigation Report (2026), reporting an all-time high in federal trade secret case filings in 2025; see also Lex Machina, Trade Secret Litigation Report (2024) (1,203 federal filings in 2023). 2. Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 18 U.S.C. Section 1836 et seq.
By Certum Group Team August 31, 2026
Certum’s William Marra was recently quoted in an article by MLex, a LexisNexis publication, on the widening debate over third-party litigation funding disclosure. “Litigation finance is the capital markets come to law,” Marra told the publication, emphasizing that funders are one of the few sources of capital available to an individual or small business facing a far larger opponent.  Responding to claims that litigation funding is a vehicle for foreign influence, Marra observed that “there’s just no evidence [of foreign influence] in the third-party funding space,” emphasizing that any real threat should be addressed through regulation covering foreign influence in litigation “in all of its forms.” The article also referenced Marra’s forthcoming New York University Law Review article on the third-party funding disclosure debate, which argues that any court-made disclosure rule should apply evenhandedly to all outside financing, and should not target only one form of third-party finance. “If you want to genuinely have a third-party litigation funding disclosure rule, then disclose all forms of third-party funding. Don’t just disclose the type of non-recourse litigation funding seeking money damages that is disproportionately used by poor individuals and small businesses.” The full article, Patent Litigation Drawn into Broader Third-Party Funding Disclosure Debate, is available here .
By Patrick Dempsey August 18, 2026
On July 10, 2026, the most valuable company in the world accused the most talked-about company in the world of theft. Apple sued OpenAI in the U.S. District Court for the Northern District of California, alleging that OpenAI built its hardware ambitions on a foundation of Apple’s misappropriated trade secrets.¹ Few disputes touch as much of Certum’s Trade Secret Litigation Playbook at once: reasonable measures to guard a secret, identifying with particularity what was taken, and the human-centered points — recruiting and employee departures — where secrets actually walk out the door. Nearly every core theme in Certum Group’s Trade Secret Guide is in this case. And the lesson beneath it is worth sitting with: for the companies with the most to protect, trade secret litigation is not a last resort. It’s a front-line instrument of competitive strategy. Background The dispute sits at the intersection of two of the most closely watched storylines in technology. In 2025, OpenAI acquired io, the hardware venture founded by former Apple design chief Jony Ive and a group of other Apple alumni, for a reported $6.5 billion, and set out to build its first consumer hardware device, widely expected to compete directly with the iPhone.² To staff that effort, OpenAI hired aggressively from Apple. According to the complaint, more than 400 former Apple employees now work at OpenAI.³ Two of those hires anchor Apple’s allegations. Tang Yew Tan spent roughly 24 years at Apple, where he served as a vice president of product design responsible for the iPhone and Apple Watch, before becoming OpenAI’s chief hardware officer. Chang Liu spent about eight years at Apple as a senior systems electrical engineer before departing for OpenAI in 2026.⁴ Apple’s theory is not that a single rogue employee walked out the door with a file. It is that the movement of talent was accompanied by a coordinated effort, one Apple describes as operating “at every level," to extract and exploit the confidential information those employees carried in their heads and on their devices.⁵ The Allegations The complaint reads less like a garden-variety departure dispute and more like a catalog of the exact conduct the Trade Secret Guide warns companies to watch for. Among Apple’s central allegations: Apple claims OpenAI’s hardware leadership directed recruiters to use Apple’s confidential project code names during the hiring process, and instructed job candidates to bring “actual parts” and “CAD/design artifacts” to their interviews.⁶ It alleges that OpenAI circulated internal Apple documents marked “Need to Know” that coached departing employees on how to evade Apple’s exit-security procedures, including the “dreaded walkout,” and to alert OpenAI before signing their exit agreements.⁷ The specifics attributed to individual employees are what give the complaint its texture. Apple alleges that Chang Liu exploited an authentication bug to reach internal network storage after his access should have been cut off, messaging a colleague, “LOL, I found out I can access the [network storage], so funny,” and noting within hours of his departure that he “still ha[d] another computer.”⁸ And Apple alleges that io “exploited and used Apple’s secret, proprietary industrial design techniques,” misleading one of Apple’s own manufacturing partners about whether it was authorized to use a confidential metal-finishing technique.⁹ The trade secrets Apple says are at risk span the full arc of its product-development process: technical specifications for unreleased technologies, engineering presentations and prototype data, component and vendor selection processes, and the proprietary manufacturing techniques that turn a design into a shippable product.¹⁰ Notably, Apple’s opening ask is not a damages windfall. It is protection. Apple seeks to bar OpenAI from using or disclosing the information at issue, to compel the return of its confidential materials, and to preserve the evidence.¹¹ In other words, Apple is using the courthouse to do what its NDAs and exit interviews were supposed to do: keep its edge inside the building. OpenAI’s Response OpenAI has pushed back hard, and its answer is a preview of the fault lines any trade secret plaintiff should expect to fight over. On August 6, 2026, OpenAI moved to dismiss, characterizing the alleged conduct as “benign, lawful conduct” that Apple has mischaracterized, and arguing that its hardware executives simply followed standard industry recruiting practices.¹² As to Chang Liu, OpenAI contends he was “trying to help Apple” by assisting former colleagues who asked him to locate work information, not stealing anything.¹³ More pointed, and more instructive, is OpenAI’s argument that Apple’s own conduct undermines its case. OpenAI asserts that Apple allowed employees to use personal iCloud accounts for work and failed to properly revoke access when they left — noting that an Apple manager remained logged into Chang Liu’s personal iCloud account after his departure in order to transfer files.¹⁴ From that, OpenAI argues that Apple’s offboarding lapses created “confusion and unwanted access issues that Apple now characterizes as theft.” OpenAI also contends that Apple has not identified its trade secrets with adequate specificity, pointing instead to “generic categories of the product-development process.”¹⁵ OpenAI must file its full response by August 17, 2026, with oral argument on the motion set for October 1, 2026.¹⁶ Whatever the merits, OpenAI’s playbook is worth studying precisely because it is so conventional. Reasonable secrecy measures and identification of the trade secret with particularity are two of the elements every misappropriation claim rises or falls on, and they are exactly where a well-resourced defendant will apply pressure first. What This Means It is easy to read a case like this as celebrity litigation between two of the most valuable enterprises on earth. The more useful reading is that trade secret law has become core infrastructure for how modern companies protect competitive advantage. Apple did not respond to a $6.5 billion competitive threat with a press release or a patent portfolio. It responded with a trade secret complaint, because in a business where the crown jewels are unpatented know-how — manufacturing techniques, vendor relationships, unreleased designs — the Defend Trade Secrets Act and its state-law counterparts are the sharpest tools available. The case also throws the Trade Secret Guide’s central lessons into relief. The value of a trade secret program is only as good as the “reasonable measures” behind it; OpenAI’s opening move is to argue that Apple’s own iCloud and offboarding practices were not reasonable at all. The ability to describe what was taken, with specificity, is not a formality. It is frequently the whole ballgame at the pleading stage. And the human element — recruiting, exit procedures, the “dreaded walkout” — is where secrets actually leak, long before anyone reaches a courtroom. Companies that treat these as compliance checkboxes learn the hard way, in a complaint, that they were the strategy all along. For those of us who evaluate disputes for a living, Apple v. OpenAI is also a reminder of why high-stakes trade secret matters are among the most compelling on the plaintiff’s side. The conduct is often concrete and documentable, the competitive stakes are enormous, and, as the Federal Circuit’s recent decision in Versata Software v. Ford underscored, the damages framework can reach the full value of what the misappropriation delivered to the wrongdoer, not merely a discounted license fee. That combination is exactly what makes these cases worth pursuing, and worth backing. Apple’s complaint will be tested, as it should be, and the allegations remain just that — allegations. But the strategic signal is already unmistakable. When the most valuable company in the world wants to defend its future, it reaches for trade secret law. Certum Group’s Trade Secret Guide is built to help plaintiffs and their counsel do the same, whatever their size, and this case is a live illustration of why that playbook matters now more than ever. Certum Group can help. If you are evaluating a trade secret dispute or want to talk through options for funding or de-risking one, get in touch . Footnotes ¹ Complaint, Apple Inc. v. OpenAI, Inc. , No. 5:26-cv-07078 (N.D. Cal. filed July 10, 2026); see Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ² The wildest allegations in Apple's trade secrets lawsuit against OpenAI , TechCrunch (July 13, 2026). ³ Id. ⁴ Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ⁵ Apple sues OpenAI alleging trade secret theft, says scheme was "at every level," CNBC (July 10, 2026). ⁶ The wildest allegations in Apple's trade secrets lawsuit against OpenAI , TechCrunch (July 13, 2026). ⁷ Id. ⁸ Id. ⁹ Id. ¹⁰ Apple sues OpenAI over alleged trade secret theft , TechCrunch (July 10, 2026). ¹¹ Id. ¹² OpenAI Asks Judge to Toss Apple's Trade Secrets Lawsuit , Claims Journal (Aug. 7, 2026). ¹³ Id. ¹⁴ OpenAI says Apple's own security practices undermine its trade secrets case , TechCrunch (Aug. 6, 2026). ¹⁵ Id. ¹⁶ OpenAI Asks Judge to Toss Apple's Trade Secrets Lawsuit , Claims Journal (Aug. 7, 2026).