GavelRecently, a District Court approved a class action settlement of an action against a manufacturer of allegedly defective windows.  The class representative was lead class counsel’s father-in-law; class counsel was embroiled in separate litigation and a state bar investigation over misappropriation of fees; the proposed settlement awarded class counsel $11 million in attorney’s fees without any reliable valuation of the class’s claims; and the claim procedure built into the settlement was so burdensome and prohibitive that the likelihood of any real class recovery was minimal at best.  On June 2, 2014, the Seventh Circuit emphatically rejected the settlement, which may seem unremarkable based on these facts.  What is noteworthy is the Court’s specific recognition of the risks of abuse associated with class actions and emphasis of the importance of close judicial scrutiny of class action settlements, which too often is undermined where both parties — the plaintiffs and their lawyers who want attorneys’ fees, and the defendant who just wants to cut its losses and avoid risk — jointly urge the court to approve a settlement and get a case off its docket.  The case is Eubank v. Pella Corporation, Seventh Circuit Case Nos. 12-2091, -2133, -2136, -2165 and -2202 (7th Cir. June 2, 2014).
Continue Reading Wary of Class Action Abuses, Seventh Circuit Slams ‘Scandalous’ Settlement Over Allegedly Defective Windows

After being hit with a class action, one question consumer products companies often face is:  should we modify our business practices in response to the suit?  Sometimes it makes sense.  Changing the challenged practice can, in some cases, help defeat class certification and may help limit liability.  Others would argue that changing business practices in response to a lawsuit is an admission of culpability that could negatively impact how the judge and jury will view the case.

A recent decision provides an additional reason consumer products companies will want to carefully evaluate whether to change business practices after being sued in a class action.  Judgment

In Henderson v. J.M. Smucker Co., CV 10-4524-GHK VBKX, 2013 WL 3146774 (C.D. Cal. June 19, 2013), the plaintiff sued claiming that the defendant’s labels included misleading “health and wellness” claims on products that actually contained unhealthy amounts of high fructose corn syrup and trans fat.  The court dismissed the case because the plaintiff had filed for bankruptcy and the trustee had settled her individual claim.  But the plaintiff’s lawyers still moved for attorney’s fees under a “catalyst theory,” seeking more than $3 million on the ground that the defendant had changed its business practices in response to the suit (by removing the high fructose corn syrup and changing certain labels).
Continue Reading Cautionary Tale – Modify Business Practices and on the Hook for Catalyst Fees

AlmondsLast year saw a trend in consumer class actions attacking advertising for products labeled as “all natural.”  The cases produced mixed results, and the extent to which this theory will succeed remains unclear.  Some cases settled.  See, e.g., Trammell v. Barbara’s Bakery, 12-cv-02664 (N.D. Cal. June 21, 2013).  Others were dismissed.  See, e.g., Rapcinsky v. Skinny Girl Cocktails LLC, 11-cv-6546 (S.D.N.Y. Jan. 1, 2013).  Some were allowed to proceed.  As this litigation unfolds, plaintiffs are trying a new, similar theory — that advertising products as “raw” is misleading.

The dismissals in the “all natural” cases often focused on the plaintiffs’ inability to define “all natural.”  Without a plausible definition, a plaintiff cannot state a cognizable claim that he or she was deceived by the phrase.  See, e.g., Pelayo v. Nestle USA Inc., 13-cv-5213 (C.D. Cal. Oct. 25, 2013).  Dismissals based on this issue appeared to have more success where the product at issue contained synthetic or processed ingredients.  However, cases involving products containing genetically modified organisms, or “GMOs,” seemed more immune to this theory.  See, e.g., Parker v. J.M. Smucker Co., 13-cv-00690 (N.D. Cal. Aug. 23, 2013) (motion to dismiss denied based on the “simple[] argument” that consumers would assume products labeled as “all natural” would not contain bioengineered ingredients).
Continue Reading Consumer Class Actions Trending From Attacking ‘All Natural’ to ‘Raw’