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In re Kitec Plumbing System Products class action settlement

Kitec Systems has settled a class action accusing it of selling defective pipe. At first glance, the settlement seems almost reasonable: a $125 million settlement fund, with the attorneys asking for only a somewhat inflated $25 million. But, as in all too many class action settlements, the devil is in the details.

To make a claim and receive 50% reimbursement on repair costs, class members have to fill out and mail in a twelve-page form, and submit several required enclosures with the claims form, including a one-foot sample of defective pipe or fitting removed during the repair; at the end of the eight-year period, there's another distribution. Class counsel generously estimates that 30% of the 292,000-member class will make claims, despite these onerousness of the claims process, and the fact that there is next to no individualized notice. If I'm doing the math right, that's about $25-30 million over eight years for class members, another $60 million or so at the end of the eight-year period, while the attorneys get $25 million immediately. And, of course, there would be no repercussions to the class counsel if the claim rate turns out to be 3% instead of 30%, and 80+ million dollars is returned to the defendant.

Competing plaintiffs objected that even the $125M fund is too small, given the potential liability of other released defendants, and there was an interlocutory appeal pending in the Fifth Circuit from the judge's preliminary approval order enjoining pending litigation and arbitrations, but that appeal was voluntarily dismissed—despite the fact that Rule 23 prohibits objections from being dismissed without district court approval.

The case is In re Kitec Plumbing System Products, No. 09-md-2098 (N.D. Tex.) (MDL No. 2098) and No. 11-10537 (5th Cir.). (h/t A.S.)

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.