Settlement Objectors

No Pay, No Play

** District Court Rejects Settlement Deal That Extracts a Broad Release of Claims But Provides No Money to Class Members **

Pay writing on Keyboard

It is not common for judges to reject class settlements, usually because lawyers for the opposing sides — putting aside their adversary roles — are savvy enough not to give the judge cause.  That was not the case recently, however, in a long running homeopathic product false advertising case in the Southern District of California.  Allen v. Similasan Corp., No. 12-CV-376-BAS-JLB, 2016 WL 4249914, at *1 (S.D. Cal. Aug. 9, 2016).

The allegations in this case, which are similar to those of other recent homeopathy cases (see e.g., Nat’l Council Against Health Fraud v. King Bio Pharms., 107 Cal. App. 4th 1336, 1348 (2003); Herazo v. Whole Foods Mkt., Inc., No. 14-61909-CIV, 2015 WL 4514510, at *1 (S.D. Fla. July 24, 2015); Conrad v. Boiron, Inc., No. 13 C 7903, 2015 WL 7008136, at *1 (N.D. Ill. Nov. 12, 2015)) complain that Similasan engaged in false advertising by omission by not including on its products’ labels statements to the effect that (i) the product was not FDA approved as medically effective and (ii) the active ingredients were diluted.  Notably, neither of those disclaimers is required on homeopathic products – but even so, many companies voluntarily include them.

In Similasan, after four years of hard fought litigation  the Defendant had successfully narrowed the claims by summary judgment [Dkt. No. 142] and Plaintiffs had certified  a class [Dkt. No. 143].  Similasan, however, filed a motion to decertify, arguing that Plaintiffs would not be able to prove materiality or falsity with their expert witnesses’ survey evidence [Dkt. No. 164].  With the motion to decertify pending, the parties settled and sought judicial approval of their agreement [Dkt. No. 196].  But the settlement was not a cure the district court could swallow.  Judge Bashant noted her role in the fairness hearing was to look for “subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” (2016 WL 4249914, at *3 citing In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir.2011)).  In this case, the signs were not subtle, and it was not a close call for the Court to deny approval.

In particular, Judge Bashant took exception to the following features of the proposed agreement:

  • The remedy for the unnamed class was injunctive relief only. While the company agreed to add the disclaimers that Plaintiffs’ counsel had complained were omitted, Similasan was not required to compensate class members;
  • The only money went to the class representatives who would pocket $2,500.00 each and Plaintiff’s counsel who secured a clear-sailing agreement which would permit an award of fees in excess of $550,000.00;
  • In exchange for injunctive relief, class members released Similasan from all claims identified in the complaint;
  • The release covered a nationwide class even though the Court had certified a California class only.

These settlement terms were not good enough for the Court.  The class was being asked to give up the right to sue but receiving nothing in return.  Indeed, to the extent the remedy was an injunction, a class member who opted out would receive the same benefit without forfeiting any rights.  Tellingly, eight State Attorneys General (Arizona, Arkansas, Louisiana, Michigan, Nebraska, Nevada, Texas and Wyoming) filed an amicus curiae brief urging the Court to reject the proposed settlement. [Dkt. No. 219].

The Court also discussed the role that notice (or lack thereof) played in its decision making.  The Court observed that the proposed class would have been in the tens of thousands [Dkt. No. 216], but the settlement notice prompted only 136 views of the settlement information website and 21 phone calls to the settlement hotline.  The Court attributed this lackluster response to the weakness of the notice, which consisted of a single ad in USA Today and some incidental online placements.  But the reality is the paucity of the economic return (i.e. zero) likely resulted in mass indifference.


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Hitting Back at Class Settlement Objectors

**Plaintiff Class Counsel Seek Sanctions Against Alleged “Lawyer-Driven” Objections to its Becks Beer Settlement**

Plaintiff’s Class Counsel have been successfully using the threat of sanctions to ward off late game class objectors.  See prior post.  Another recent case has highlighted the issue.  In 2013 Beck’s Beer was sued under the theory that it’s packaging claims such as “originated in Germany” with “German quality” and “export bier” implied that the beer was a German import.  And certainly while that was true at one time, after 2008 the Beck’s Beer label was sold to the Belgian brewer Interbrew which later merged with American giant Anheuser Busch – and production of the beer moved to the U.S (in fact Beck’s Beer is brewed in the same facility as the synonymous American: Budweiser).  Plaintiff’s sued on allegations of false advertising and a class settlement was reached in June 2015: the settlement allowed a maximum award of $50 per household (less for those consumers without proof of purchase).  Marty v. Anheuser-Busch Companies, 1:13-cv-23656-JJO (S.D. Fl. June 18, 2015) ECF No. 149.  The class settlement was capped at $20 million and the attorneys’ fees were set at $3.5 million.  Id.  Class member Rene Muller (through his counsel Stephen Field) filed a settlement objection – claiming, generally, that the settlement terms were inflated and that attorney fees were too high.  Id. at ECF No. 161 (September 29, 2015).  The Court considered the objection, held a fairness hearing and overruled the objections.  Id. at ECF No. 171 (October 22, 2015).  It then granted final settlement approval.  Id. at ECF No. 172 (October 22, 2015).  Class counsel however were not satisfied – they took the deposition of Muller who (class counsel alleges) revealed that he generally knew nothing about the case, or the settlement, or his objection and was interested merely in a payoff (similar to a payoff he had received in a previous class action objection).  Id. at ECF No. 174 (November 12, 2015).  As such – class counsel sought sanctions against Muller’s attorney Stephen Field under 28 U.S.C. § 1927 which provides that: “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”  Id.  Essentially, class counsel has argued that the only rational explanation for the objectors threadbare knowledge of his objection – was that the attorney Stephen Field put him up to it – in hope of a hefty settlement.  Id.  Field has opposed the Motion for Sanctions, amongst other things, noting the inherent irony of Plaintiff’s class counsel (who seek to get paid to settle suits) asking for sanctions against him for doing inherently the same thing.  Id. at ECF No. 177 (November 30, 2015).  The matter of sanctions is currently under advisement.



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Stop the Press – Lawyers Fighting Over Fees

**Plaintiffs’ Counsel for Class of Student Athletes Seeks Sanctions Against Late-in-the-Game Class Objectors’ Bid to Derail Settlement in Landmark NCAA College Football Case in the Northern District of California** . . .                                                                                                                                                                          

One of the blockbuster class actions cases of the last few years appeared to be settled in August of this year when Judge Wilken approved the settlement motion between Electronic Arts Inc., the National Collegiate Athletic Association and a class of former players whose names and likenesses were “licensed” (without compensation to the players) for use in video games.  O’Bannon v. National Collegiate Athletic Association, 4:09-cv-03329-CW, ECF No. 429 (N.D. Cal. Aug. 19, 2015).  Plaintiff’s counsel sued on the basis that the players’ “right of publicity” was unlawfully expropriated – and after 6 years of litigation – a $60 million settlement was agreed.  Id.  (This settlement should not be confused with the bifurcated issues of anti-trust violations by the NCAA also bought in this suit – which has recently been affirmed in part by the Ninth Circuit in favor of the athletes.)  Of the $60 million settlement in this “right of publicity” suit – the named class representatives (including name lead Plaintiff UCLA great Ed O’Bannon) will get incentive awards ranging from $5,000 to $15,000 and the balance split amongst approximately 20,000 college athletes who made claims.  Of course that is after attorney fees which were set at $17.8 million.  But not so fast.  Plaintiff counsel still had to deal with objectors who filed an appeal to the approval with the Ninth Circuit.  O’Bannon v. National Collegiate Athletic Association, No. 15-16860 (9th Cir. October 10, 2015).  On October 28, 2015, Plaintiff’s counsel made a pre-emptive strike: filing a scathing motion for sanctions.  Id. at ECF No. 9. The sanction motion makes a number of allegations against Objectors’ counsel – leaving little to the imagination – (and is worth the read).  Interestingly, Plaintiff counsel did not just seek dismissal of the appeal – they sought an award of sanctions – and engaged an expert to measure the “cost” of the delay in distributing the $60 million caused by objectors’ appeal.  The expert came up with this cost – $55,109.00.  Unsurprisingly, a week after Class counsels’ motion for sanctions Objectors stipulated to withdraw their appeal.

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