Some loyal readers of my blog may recall my June 8, 2011 blog post about the district court’s approval of the class action settlement in In re Dry Max Pampers Litigation. This case alleged that Pampers “Dry Max” diapers purportedly caused excessive diaper rash. Both the U.S. Consumer Products Safety Commission and Health Canada investigated the issue and found the allegations meritless. The parties then reached an innovative settlement that would provide injunctive relief (labeling and website changes) and a refund for one box of diapers (with proof of purchase), and would prohibit class members from bringing future class actions on the same issue, but would allow class members to file their own individual lawsuits for personal injuries or actual damages. The concept of barring future class actions but not individual suits was novel, and interesting.
The Sixth Circuit, however, found the settlement agreement unfair, although it did not focus on the agreement’s bar on future class actions. In re Dry Max Pampers Litigation, No. 11-4156, 2013 U.S. App. LEXIS 15930 (6th Cir. Aug. 2, 2013). The problems the Sixth Circuit had with the settlement included:
- The parties did not show that the one box refund program was of significant value given that consumers rarely retain receipts and UPC codes for years, and Pampers had already offered this relief voluntarily for a five-month period. Id. at *7-13.
- The court found that the labeling change, which advised consumers to call a 1-800 number for information on diaper rash, etc., as “little more than an advertisement for Pampers.” Id. at *14-15. The website change essentially told parents to call a doctor for advice on a severe diaper rash, particularly with other accompany symptoms. The court found that this was of minimal value. Id. at *15-18.
- The $2.73 million attorneys’ fee award was unjustified in light of the “illusory” relief the court found that the settlement provided to class members. Id. at *19.
- The $1,000-per-child compensation for the class representatives appeared excessive in comparison to their actual damages and created a disincentive for them to act in the best interests of the class. Id. at *21-24.
Judge Cole dissented, stressing that “[a]lthough the relief offered to the unnamed class members may not be worth much, their claims appear to be worth even less. Nobody disputes that the class’s claims in this case had little to no merit. In the absence of this settlement, class members would almost certainly have gotten nothing.” Id. at *25. The dissent has a fair point, although it does not address the size of the fee award.
What is the take away here? I think it should still be possible to settle an unmeritorious class action in a settlement that provides some small amount of relief to the class, and bars them from filing new class actions but not individual suits. But the class relief should pass a “smell test” (especially if it involves diapers), and the fee award should be more consistent with the relief being provided to the class.