In Duran v. Obesity Research Institute, LLC, ___ Cal.App.4th ___ (Jun. 23, 2016; pub. ord. Jul. 15, 2016), the Court of Appeal (Fourth Appellate District, Division One) reversed an order granting final approval of a nationwide, claims-made class action settlement. The case alleged CLRA and UCL violations against the maker of certain dietary supplements that were allegedly not "clinically proven" to help users lose weight, contrary to assertions made on the package.
Among other problems, the court noted that certain statements in the claim form (which the court treated as part of the class notice) were inconsistent with the terms of the parties' revised settlement agreement. See slip op. at 13-15. One of the problems was that the claim form referred to products that were excluded from the scope of the settlement! Id. at 13. It sounds like the parties amended the original settlement agreement in response to the trial court's comments at an initial approval hearing, but forgot to make corresponding changes to the claim form. See id. at 14. The Court of Appeal considered this problem so significant (and no wonder) that it reversed on that ground, even though the objectors had not raised the issue, either below or in their appellate briefing. Id. at 15-17.
The panel then turned to the method of class notice to be provided on remand (assuming preliminary approval is again granted). Id. at 18-24. Direct notice was sent by email to those who purchased the products on the defendant's website (but not those who purchased the products on Wal-Mart's website); published notice was made in USA Today; and a settlement website was established. Id. at 19. The court held that evidence should have been presented on the feasibility and cost of obtaining contact information for, and providing direct notice to, class members who purchased online from Wal-Mart, Amazon, CVS, Walgreens, and other retailers. Id. at 19-21.
The court also directed the lower court to reconsider whether published notice in USA Today was sufficient, observing that the products were never advertised in that paper, and noting the lack of evidence that the parties made any effort to target the relevant demographic (i.e., people interested in weight loss). Id. at 21-24. "For example, in Wershba, supra, 91 Cal.App.4th at page 251, a class action involving support for Apple computers, notice was published not only in USA Today, but also in MacWorld." Id. at 23.
Finally, the court held that the injunctive relief portion of the settlement, which required the defendant to make certain changes to its advertising, was "illusory" and duplicated relief already obtained by the FTC in a related proceeding. Id. at 24-26. "As such, it is difficult to conceive how this injunctive relief adds value." Id. at 26.