Blockbuster's settlement would keep late fees in place

Associated Press

BEAUMONT, Texas — A state judge has approved Blockbuster Inc.'s proposal to settle a class-action lawsuit over late fees by issuing certificates for video rentals with a face value of an estimated $450 million.

If the judge's ruling is not appealed, customers could begin getting coupons for free or dollar-off movie rentals in two to three months, lawyers who sued the video chain said.

Judge Milton Gunn Shuffield said in an opinion issued last week that the settlement would be an economic benefit for customers who were charged late fees from 1992 to April 1 of last year.

Lawyers for Blockbuster and its customers estimated that 38.5 million people could receive discount coupons. It's unclear, however, how many of the coupons would be used.

As a result, Blockbuster doesn't know how much the settlement will cost, said spokesman Randy Hargrove.

Kevin Buchanan, one of the lawyers who sued Blockbuster, estimated that the settlement could cost the chain at least $100 million, based on a company official's testimony that 20 percent of coupons were redeemed in a similar refund in Michigan.

Some plaintiff attorneys had argued for cash rebates. But Rugger Burke, another plaintiff attorney who negotiated the settlement in Beaumont, said Blockbuster would have insisted on a less generous settlement in cash.

Blockbuster's general counsel, Ed Stead, said last year that the company preferred the coupon settlement because it brought customers back into its stores.

The settlement allows Blockbuster to continue its practice of charging customers for a new rental period when they return a tape late and, because the judge's opinion upholds the late-fee policy, future lawsuits over the issue may be blocked, lawyers said.

Hargrove said the company will keep its late-fee policy. He said the company agreed to the settlement because it was "more efficient" than battling a number of lawsuits filed around the country.

The settlement allows about a half-dozen law firms that sued Blockbuster to split $9.25 million in attorneys' fees. The judge said Blockbuster had negotiated a similar settlement with lawyers in Illinois but the deal collapsed over the issue of attorney fees.

Blockbuster and the plaintiff lawyers who negotiated the settlement hope the Beaumont judge will issue a final settlement next week, which they believe would virtually kill other pending class-action lawsuits around the country.

About 500 Blockbuster customers opted out of the Beaumont settlement and could sue the company on their own, but lawyers said that was impractical given the small amounts due to individual customers.