A recent Sixth Circuit opinion provides yet another cautionary tale in settling class actions without ensuring that the interests of the unnamed class members are properly served. This time, the settlement would have required absent class members to provide almost impossible proof to receive minimal compensation, and would have included injunctive relief of marginal benefit to the class. But again, class representatives and class counsel would have benefitted handsomely.
In In re Dry Max Pampers Litigation, the putative class consisted of purchasers of Pampers diapers. The lawsuit came on the heels of a Consumer Product Safety Commission investigation into whether a new version of Pampers caused severe diaper rash. After the CPSC found no connection between the new diapers and diaper rash, Procter & Gamble—the manufacturer of Pampers—moved to dismiss.
The case was settled before the plaintiffs even responded to the motion. Under the settlement, P&G agreed to reinstate a refund program that had previously been in effect while the CPSC was pending, but the program limited refunds to one box per household and required consumers to provide both an original receipt and a UPC code clipped from a Pampers box. P&G also agreed to add a sentence to its box label suggesting that consumers contact Pampers via telephone or the Internet for additional information on common diapering questions, and to add to the Pampers website some basic information about diaper rash that suggested consumers “[s]ee your child’s doctor” if certain severe symptoms develop. P&G further agreed to contribute $400,000 to various pediatric programs.
Named plaintiffs, however, were to receive an award of $1,000 for each affected child, and class counsel were to receive a fee award of $2.73 million. Notably, the parties agreed to seek class certification under Rule 23(b)(2), under which absent class members would have been unable to opt out of the settlement, on the ground that the relief was primarily injunctive.
The Sixth Circuit, noting that courts must scrutinize class action settlements for “subtle signs” that class counsel have inadequately protected unnamed class members, observed that “[t]he signs are not particularly subtle here.” The panel found it inconceivable that any significant number of class members—particularly those who had not already availed themselves of the refund program when it had previously been in effect--would have saved receipts and UPC codes for diapers purchased as long ago as August 2008 (the beginning of the class period). The panel held that the additional language on the Pampers box “amounts to little more than an advertisement for Pampers.”
As to the additional information on the website, the court opined that “we would denigrate the intelligence of ordinary consumers” if it concluded that, absent a suggestion from P&G, parents would not otherwise consult their child’s doctor if their child suffered severe symptoms from diaper rash. While the court articulated no objection to the $1,000-per-child award to named plaintiffs, it did criticize the $2.73 million fee award given that class counsel neither took discovery nor responded to P&G’s motion to dismiss.
One judge on the panel dissented, arguing that while the settlement might not have been worth much to the class, the case itself lost much of its value when the CPSC investigation came back clean. This observation, however, addresses only the adequacy of the overall settlement package—not whether the package was distributed equitably among named class representatives, unnamed class members, and class counsel.
The majority opinion paints a picture of class counsel and class representatives who were overly eager to settle, at the expense of the class, and of defense counsel who readily acquiesced to a patently unfair settlement. While it is the duty of class counsel, not defense counsel, to represent the interests of the class, defense counsel must also concern themselves with fairness if they hope to obtain approval of the settlement.