Using up most of settlement fund shows settlement is reasonable

Larsen v. Trader Joe’s Co., No. 11-cv-05188, 2014 WL 3404531 (N.D. Cal. July 11, 2014)

This is a final settlement approval of claims based on products labeled “All Natural” or “100% Natural,” when they allegedly contained synthetic ingredients.  The settlement provided for the discontinuance of the use of those terms on the products, and created a settlement fund of $3.375 million.  Proof of purchase entitled a class member to full reimbursement, while absence thereof allowed reimbursement for up to 10 products.  Leftover amounts were to be distributed in the form of products to cass members.  Notable here are the claim rates: As of June 2014, class members made 59,830 claims representing a value of $1,906,884,75.  Twenty-three members opted out and 18 objected.  The court here rejected the objections and granted the attorney fees requested of $950,000, or 28% of the settlement fund as consistent with the lodestar and the success achieved.  The remaining amount in the fund to be distributed as product was about $55-85,000.

Some observations: as to the strength of the case, the court noted that “recent decisions have made class certification in food labeling cases an uncertainty.”  Given the uncertainties and risks, the settlement was reasonable for both sides.  Plus, the settlement fund was represented to be 50% of what would be available had the case gone successfully to trial.  (Although wouldn’t the lawyers get paid separately in that circumstance?)  It was also large enough to compensate all the claimants.  This, plus the change in labels, discernibly benefited class members.

In addition, the size of the claimant pool weighed in favor of finding the settlement favorable. And the fact that there were a few opt-outs and objectors indicates that class members read the notice and understood it enough to make an informed decision about whether to participate. 

The court rejected objections that the suit was frivolous; it had already decided that the claims were meritorious enough to proceed with discovery, which was what then produced the settlement: 

Objections directed to the merits of the claim are objections on behalf of Trader Joe’s and not the class. The objectors referenced above disagree with this lawsuit as a matter of principle. While I understand this perspective, in determining whether the settlement is fair, adequate and reasonable, I am not acting as a fiduciary to the defendant, which is represented by able counsel and capable of making decisions to protect its own interests.

The court also rejected objections based on the idea that the bulk of the settlement would be distributed in the form of products, which was disproved by the claim numbers.  (Interestingly, the court doesn’t say whether the claim rate represented a high percentage of actual purchasers. The parties represented that the fund was equal to 50% of Trader Joe’s profits on the products. But we’d need more information to understand what that implied about the percentage of purchasers who made a claim.)