Groupon settles class action, pays $8.5M

Michael P. Tremoglie Apr. 3, 2012, 10:44am


SAN DIEGO -- Discount coupon seller Groupon has settled a class action lawsuit for $8.5 million.

The company had been subject to various suits alleging expiration dates on the discount coupons they offered to consumers was illegal.

The litigation consisted of 17 lawsuits that were consolidated in the U.S. District Court for the Southern District of California in San Diego before Judge Dana Sabraw. The settlement is pending the court's approval.

The plaintiffs alleged the Groupon brand gift certificates are sold and issued by Groupon with expiration dates that are deceptive and illegal and violate federal and state laws. The company partners with sellers to provide sales volume so that the sellers will grant discounts to Groupon customers.

But according to the lawsuits, these discount coupons contain expiration dates that are in violation of the Credit Card Accountability and Responsibility Disclosure Act and the Electronic Funds Transfer Act which require expiration dates of more than five years.

Groupon sets its coupon expiration dates within months of the purchase date. According to the complaint the company also pressures its customers to buy the coupons soon or they will not be able to avail themselves of the discount.

Consequently, according to the plaintiffs' allegations, Groupons customers buy coupons and never use them before the expiration date leaving them with a useless discount coupon and that has no value while Groupon and the sellers reap a windfall from the receipts of unredeemed discount coupons.

Various news organizations such as Reuters announced the settlement April 2. The company has not issued a statement.

According to the company website, Groupon was formed in November 2008. It features daily discounted prices for items "to do, see, eat, and buy in 48 countries." The concept for Groupon came from "a website called The Point, launched in November 2007." This website permitted to "start a campaign asking people to give money or do something as a group." Once a certain minimum number of people participated The Point helped "consumers, employees, citizens, activists, parents -- or anyone -- come together and solve problems that they couldn't solve alone."

Groupon may have other problems pending.

A shareholders' rights law firm, Robbins Umeda LLP, San Diego, announced April 3 it is investigating the company's financial reporting for violation of fiduciary breaches with stockholders. The law firm issued a written statement stating that it is trying to determine, "whether officers and directors of Groupon breached their fiduciary duties to shareholders by causing the company to incorrectly report revenue, overstate income, and issue materially false and misleading statements concerning Groupon's business and operations. The firm is also investigating whether officers and directors of Groupon breached their fiduciary duties by failing to maintain effective internal controls over the company's financial reporting."

Meanwhile, the Wall Street Journal reported April 3 that the Securities and Exchange Commission is looking into Groupon's revision of its first set of financial results as a public company. The newspaper said that its source informed it that the SEC has not determined whether it will begin a formal investigation.

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