Trials & Litigation

Diaper deal that gave $2.73M to lawyers, one-box refund to customers is nixed by 6th Circuit

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A federal appeals court has overturned a class action settlement that gave the plaintiffs’ lawyers $2.73 million and Pampers customers with receipts and UPC codes a refund on a box of diapers.

The deal was part of a class action against Procter & Gamble filed on behalf of customers whose babies suffered diaper rash after wearing Pampers made with “dry max technology,” according to the opinion (PDF) by the Cincinnati-based 6th U.S. Circuit Court of Appeals. The Wall Street Journal Law Blog (sub. req.) has a story. A Consumer Product Safety Commission probe found no connection between dry max and diaper rash, yet the parties reached a settlement in March 2011.

The settlement gave $1,000 for each affected child to the name plaintiffs and “nearly worthless injunctive relief” to class members, according to the opinion. Consumers who wanted a refund would have to provide an original receipt and a UPC code clipped from a Pampers box in an extension of a previous refund program. Pampers also agreed to change its label to refer consumers to its website for more information on preventing diaper rash. The online warnings advised consumers to see a doctor if diaper rash became severe, with symptoms such as “pus or weeping discharge.”

The 6th Circuit opinion cited a need for courts to be particularly vigilant for subtle signs that the settlement negotiations have been affected by the lawyers’ pursuit of their own self-interests and by the interests of certain class members.

“The signs are not particularly subtle here,” the court said. “On the one hand, the settlement agreement awards class counsel a fee of $2.73 million—this, in a case where counsel did not take a single deposition, serve a single request for written discovery, or even file a response to P&G’s motion to dismiss. On the other hand, the agreement provides unnamed class members a medley of injunctive relief.”

Scrutinizing that relief, the court noted the refund requirements for original receipts, in some instances for diapers purchased as long ago as August 2008. An objecting party “sensibly asks who does this sort of thing. We have no answer. Neither do the parties—or more precisely they have offered none.”

The Center for Class Action Fairness, founded by Ted Frank, had objected to the settlement.

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