Copley v. Bactolac Pharmaceutical, Inc.
2:18-cv-00575
E.D.N.Y
Mar 13, 2023

Background

  • Plaintiffs (named class representatives) sued NaturMed, Independent Vital Life (IVL), and Bactolac over All Day Energy Greens (ADEG), alleging misleading "all-natural" labeling and that the product caused gastrointestinal illness; NaturMed recalled certain lots in 2016.
  • The Settlement offered eligible class members a choice: a $10 coupon (redeemable for three years) or a pro rata cash payment from a $100,000 cash pool; defendants’ total cash outlay was $1.725 million with $1.625 million allocated for fees/costs/admin.
  • The class was estimated at ~188,897 persons; only 10,373 filed claims (6,136 chose cash; 1,698 chose coupons; 2,539 failed to choose and would receive coupons).
  • The United States (DOJ / U.S. Attorney) objected under CAFA/Rule 23(e)(2), arguing the settlement primarily benefits class counsel and that $5,000 service awards to representatives are disproportionate.
  • The Court found the settlement procedurally and substantively fair under Rule 23(e)(2) (mediated, after discovery), approved service awards, denied plaintiffs’ motion to strike the U.S. Statement of Interest, granted the U.S. motion to supplement, but rejected the proposed attorneys’ fee award as excessive and denied it without prejudice (ordering reallocation).

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Final approval / substantive & procedural fairness under Fed. R. Civ. P. 23(e)(2) (including coupon concerns under CAFA) Settlement yields real benefits (cash option, coupons, deterrence); negotiated at arm’s length after discovery and mediation Settlement is reasonable compromise given litigation risks, late-stage discovery, and uncertain defendant ability to pay Settlement approved as procedurally and substantively fair (mediator, discovery, Grinnell factors weigh in favor)
Coupon settlement valuation under CAFA (value of coupons and risk of illusory relief) Class counsel treated full face value of all coupons when valuing settlement Defendants relied on settlement structure; coupons offered as alternative relief Court declined to attribute full coupon value (assumed 0% redemption for fee valuation absent evidence); found coupon benefit de minimis given actual claims/redeemers
Attorneys’ fees: method (lodestar vs percentage) and reasonableness Counsel sought lodestar-based fee ~ $992,421 (downward from lodestar) and costs; alternatively up to one-third of aggregate claimed settlement value U.S. argued fee disproportionately large relative to concrete class cash recovery; delay fee approval until redemption or provide expert to value coupons Court chose lodestar method but reduced fee: denied proposed award without prejudice and required reallocation (court explained increasing class cash by $145,333.20 by reducing counsel’s fee to remedy disparity)
Service awards to named plaintiffs ($5,000 each) Plaintiffs note participation in discovery, depositions, and time/effort over four years U.S. argued awards disproportionate to class recovery and no special risk/skill shown Court approved $5,000 service awards as reasonable given participation and precedent
Procedural motions re: U.S. filings (motion to strike Statement of Interest; motion to supplement) Plaintiffs urged strike as untimely and prejudicial U.S. argued statutory right to file Statement of Interest and to supplement Court denied motion to strike (no prejudice; plaintiffs responded at hearing) and granted U.S. motion to supplement

Key Cases Cited

  • Berkson v. Gogo LLC, 147 F. Supp. 3d 123 (E.D.N.Y. 2015) (discussing risks and special scrutiny for coupon settlements under CAFA).
  • City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) (establishing multi-factor fairness inquiry for class settlements).
  • Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96 (2d Cir. 2005) (presumption of fairness for arm’s-length settlements after meaningful discovery).
  • Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000) (standards for reasonableness of attorneys’ fees in common-fund cases).
  • Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (lodestar principle and adjustment for results obtained).
  • In re Sw. Airlines Voucher Litig., 799 F.3d 701 (7th Cir. 2015) (criticizing coupon settlements and discussing fee calculation issues).
  • Chambers v. Whirlpool Corp., 980 F.3d 645 (9th Cir. 2020) (addressing lodestar use and accounting for coupon redemption rates).
  • Galloway v. Kan. City Landsmen, LLC, 833 F.3d 969 (8th Cir. 2016) (reducing fee because coupon recovery produced limited value to class).
  • Linneman v. VitaMix Corp., 970 F.3d 621 (6th Cir. 2020) (considering redemption rate in lodestar analysis for mixed settlements).
  • In re Sumitomo Copper Litig., 189 F.R.D. 274 (S.D.N.Y. 1999) (analysis favoring settlements reached after discovery).
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