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From Products Liability Law Daily, August 5, 2013

Settlement agreement in class-action suit over Pampers Dry Max diapers deemed unfair to unnamed class members

By Kathleen Bianco, J.D.

A decision certifying the settlement class and approving a settlement agreement in a class-action lawsuit against the manufacturer of Pampers Dry Max Diapers was reversed by the United States Court of Appeals for the Sixth Circuit because the named class members had put their own interests ahead of the unnamed class members and the agreement gave preferential treatment to the class counsel, while providing only perfunctory relief to unnamed class members (In re: Dry Max Pampers Litigation, August 2, 2013, Kethledge, R.)

Background. Following the commencement of an investigation by the Consumer Product Safety Commission concerning whether Pampers Dry Max diapers manufactured by Procter & Gamble (P & G) tended to cause severe diaper rash, twelve lawsuits were filed against the manufacturer. The district court consolidated all twelve cases. The investigation determined that there was no connection between the use of Dry Max diapers and diaper rash. The manufacturer filed a motion to dismiss. In the interim, however, the parties began discussing settlement. Eventually, a deal was reached that required that the class be certified under Rule 23(b)(2), so that unnamed class members could not opt out of the deal. The deal further required P & G to reinstate, for one year, a refund program that had already been made available to customers, which limited refunds to one box per household and required consumers to provide an original receipt and the UPC code from the Pampers box. P & G also agreed to add a box-label to its packaging for two years and add language regarding diaper rash to the Pampers website.

The treatment of named class members in the settlement agreement was significantly different, in that named class members were required to release all of their Pampers-related claims in exchange for an “award” of $1,000 per affected child. Finally, class counsel was awarded fees in the amount of $2.73 million. The district court certified the class and approved the settlement agreement over the objections of three class members. Daniel Greenberg, one of the objecting class members, appealed, arguing that the settlement agreement was unfair to the unnamed class members.

Settlement agreement. In determining the fairness of a settlement, the court must look at whether the agreement gives preferential treatment to the named plaintiffs or class counsel while only perfunctory relief to unnamed class members. In this case, the disparate treatment of the unnamed class members was not subtle. The settlement agreement awarded named class members $1,000 per child affected and class counsel a fee of $2.73 million for doing very little. At this point in the litigation, no depositions had been taken, no discovery requests made, and counsel had not even had to file a response to the defendant’s motion to dismiss. Alternatively, the settlement agreement provided unnamed class members with a “medley” of injunctive relief, which, upon review, were found to have little or no value to the unnamed class members. Accordingly, the appellate court concluded that the settlement agreement was not fair and that the district court abused its discretion in finding that it was fair.

Class representations. The measure of the adequacy of the class members’ representation is based upon two factors: the representatives must have common interests with unnamed members of the class, and it must appear that the representatives will vigorously prosecute the interests of the class through qualified counsel. Essentially, this requires that class members have interests that are not antagonistic to one another. Under the settlement, the named class members exercised their rights and received an award of $1,000 per child; the unnamed members were barred from exercising the same rights and received nothing but illusory injunctive relief. Consequently, it was determined that the $1,000-per-child payment acted as a disincentive for the named class members to care about the adequacy of the relief provided to the unnamed class members and, in fact, encouraged the class representatives to compromise the interest of the class for personal gain. As such, the named class members were deemed to be inadequate representatives of the class and the district court abused its discretion in finding otherwise.

Circuit Judge Cole issued a dissenting opinion.

The case number is No. 11-4156.

Attorneys: Adam E. Schulman (Center for Class Action Fairness, LLC), for Appellant; Lynn Lincoln Sarko (Keller Rohrback, LLP), for Plaintiffs-Appellees; D. Jeffrey Ireland (Faruki Ireland & Cox PLL), for Defendants-Appellees.

Companies: Procter & Gamble

MainStory: TopStory ClassActLitigationNews SettlementAgreementsNews BabyProductsNews KentuckyNews MichiganNews OhioNews TennesseeNews

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