Defalco v. Vibram USA, Inc.
809 F.3d 78
1st Cir.2015Background
- Plaintiffs filed consolidated putative class actions alleging Vibram deceptively marketed FiveFingers "barefoot" shoes with false health-benefit claims; cases consolidated in D. Mass. and settled.
- Settlement created a $3.75 million common fund for refunds, pro rata up to $94 per pair; notices estimated typical recovery at $20–$50 per pair but warned recovery could decrease.
- Claim process: up to two pairs refunded upon Claim Form alone; refunds for more than two pairs required proof of purchase; objectors had to submit proof of purchase to object.
- About 154,927 timely claims were filed (279,570 pairs), producing an estimated payout of $8.44 per pair. Three objectors (Cain, Ference, Narkin) appealed final approval and fee award.
- District court found notice adequate, certified the settlement class for settlement purposes, approved settlement (including injunctive relief limiting future health claims absent reliable evidence), and awarded attorneys’ fees (25% of the fund).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of notice / disparity between estimated ($20–$50) and actual ($8.44) recovery | Notices were misleading and misrepresented likely recovery; settlement should be voided | Notices gave an estimate based on similar settlements and other notices warned recovery could decrease; estimate was not a guarantee | No abuse of discretion; estimate was not a misrepresentation and $8.44 was a fair compromise given litigation risks |
| Proof-of-purchase requirement for objectors | Requiring proof from objectors (but not from claimants for ≤2 pairs) is punitive and chills objections | Requirement was part of settlement procedures; fairness judged on overall settlement adequacy | No independent basis to invalidate settlement; district court scrutinized fairness and did not abuse discretion |
| Value of injunctive relief | Injunctive term is illusory because it merely restates existing legal obligations | Injunctive relief requires Vibram to stop health claims absent "competent and reliable" evidence — a meaningful concession | District court reasonably found injunctive relief valuable and not illusory |
| Attorneys' fees / clear-sailing clause | Clear-sailing (no opposition to fees ≤25%) indicates self-dealing; fee award excessive given limited litigation work | Clear-sailing not per se invalid; court must apply heightened scrutiny and calculate fees by accepted methods | Fee award affirmed — 25% reasonable under percentage method and consistent with lodestar cross-check; district court did not abuse discretion |
Key Cases Cited
- Nat'l Ass'n of Chain Drug Stores v. New England Carpenters Health Benefits Fund, 582 F.3d 30 (1st Cir.) (standard of review and balancing in settlement approval)
- In re Pharm. Indus. Average Wholesale Price Litig., 588 F.3d 24 (1st Cir.) (presumption of reasonableness where parties negotiated at arm's length after sufficient discovery)
- In re Thirteen Appeals Arising Out of San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295 (1st Cir.) (describing two methods for calculating class counsel fees)
- Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518 (1st Cir.) (clear-sailing agreements require heightened scrutiny)
- In re Volkswagen & Audi Warranty Extension Litig., 692 F.3d 4 (1st Cir.) (standard of review for fee awards)
- Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir.) (role of objectors in policing settlements)
- Latorraca v. Centennial Techs. Inc., 834 F. Supp. 2d 25 (D. Mass.) (example fee awards consistent with 25% of common fund)