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Gallucci v. Boiron



If ever there is a justification for consumer fraud laws, it is surely "homepathic medicine," so you won't find any argument from me against the fact that plaintiffs brought a class action over Boiron, Inc.'s homeopathic products, which are so much snake oil. But, as snake oil goes, I'm suspicious of a settlement that (1) does not disclose how much of the $5 million fund the attorneys are going to ask for and (2) creates an extraordinary reporting burden in violation of Rule 23(e)(5) on any objectors who dare to raise questions about the division and the lack of disclosure. Press coverage unquestionably repeats the "$5 million" figure, though I strongly suspect the class will end up with less than a tenth of that amount: people who buy homepathic products are sufficiently defrauded that they don't think they're being defrauded (and the settlement and notice permits Boiron to stand by its deceptive advertising), so it's unlikely that many people will make a claim. [Top Class Actions; Lawyers and Settlements; related at The Telegram (Canada)]

Moreover, the notice and administrative costs come out of the $5 million settlement fund, which suggests the attorneys will be asking for a commission on these payments to third parties who aren't their clients.

The majority of the class members who contact the Center for Class Action Fairness LLC (which is not affiliated with the Manhattan Institute) to inquire about their settlements are highly-educated computer-literate civics-aware citizens of above-average income who find us through Google or who remember reading about me in high-end publications. It's been fascinating to see which unfair settlements generate inquiries and which don't. I can guess that, just as very few people will make claims in the Boiron settlement, few, if any will object to a settlement where there's no disclosure about how much the attorneys will be seeking. In short, settlements relating to classes with lower-end demographics are less likely to generate objections than those with higher-end demographics, and it's thus much more likely that attorneys will take advantage of poorer clients in negotiating class-action settlements and requesting attorneys' fees.

The district court here rubber-stamped a preliminary approval order that violated Rule 23(e) by failing to disclose the attorneys' fee request in the notice and placing impermissible burdens on objectors. I hope Judge John Houston of the Southern District of California will put a little more scrutiny into the Rule 23(h) fee request when it happens.

In this particular case, the negotiations and docket show a competing class action where the attorney is getting frozen out. But I haven't been impressed by the quality of objections from competing class actions to date.

The case is Gallucci v. Boiron, Inc., Case No. 11-cv-02039 (S.D. Cal.).

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.