Federal Judge Rejects Class Action Settlement

A California federal judge recently rejected a proposed settlement that would have resolved a class action lawsuit filed against homeopathic remedy manufacturer Similasan. The class action lawsuit was filed on behalf of two classes of plaintiffs who alleged that the manufacturer’s claims about the effectiveness of its products used to treat earwax, sinus, and anxiety issues were deceptive. The parties notified the federal district court that they had reached a settlement agreement earlier this year, and the court had given preliminary approval to the proposed settlement agreement. However, when the case came back before the court in August 2016 for final approval, the court found sufficient reason to reject the agreement.

Problems with the Class Action Settlement

The federal district judge overseeing the case expressed serious reservations over the terms of the proposed settlement and refused to approve the settlement. Some of the court’s concerns included:

  •      The settlement expanded the class of plaintiffs well beyond what had been certified by the court and included plaintiffs across the nation (not just in California), numbering in the tens of thousands;
  •      The settlement also provided no monetary relief whatsoever for many of those tens of thousands of class members;
  •      Notice was required to be given to potential class members about the terms of the settlement and what they could do to voice opposition to it, but the effectiveness of the notice actually provided was quesitonable;
  •      Finally, the settlement’s release provisions were too broad and designed to protect Similasan, not the plaintiff-consumers.

childhands'The effect of these “troubling” provisions would have been such that potentially thousands of individuals across the nation who had been deceived by Similasan’s marketing materials regarding its over-the-counter homeopathic remedies would not be entitled to any monetary compensation from the company and would waive any legal claims they might have against the company.

For example, suppose you were a member of the “unnamed” class of plaintiffs who purchased a Similasan product to treat your anxiety. You purchased the product because of deceptive claims made about the effectiveness of the product, but you found that the product’s actual performance fell far short of its promises. If the settlement had been permitted to go through, you would not only receive no monetary compensation for your loss – not even the cost of the underwhelming product – but the settlement would have taken from you any independent right you might have had to bring your own lawsuit against Similasan.

In light of these problems, it is easy to see why the district court felt uncomfortable approving the settlement.

What Happens When a Class Action Settlement is Rejected

Because the settlement agreement has been rejected, the parties will return to court and the case will continue to proceed forward. The parties may try to reach another settlement, or they may move the case toward trial. These developments, though, underscore the need for litigants in a class action lawsuit to craft settlement agreements that are fair to all parties concerned. A settlement agreement may provide benefits to both plaintiffs and defendants, but it should not solely benefit the defendant at the expense of the plaintiffs.