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On Nov. 19, the 7th U.S. Circuit Court of Appeals denied a $6.5 million glucosamine supplement class action settlement proposed by defending company NBTY Inc., ruling the proposed settlement amount is “selfish” and will only provide minimal benefits to Class Members and maximize attorneys’ profits.
The proposed and formerly approved NBTY glucosamine supplement class action settlement would have resolved allegations that NBTY and its subsidiary Rexall Sundown Inc. falsely labeled and marketed their glucosamine supplements as products that can “rebuild cartilage” and “lubricate joints.”
The panel slammed the NBTY glucosamine supplement class action settlement for several issues, including the exorbitant Class counsel fee’s award of $1.9 million leaving only $900,000 in meager payouts to eligible Class Members. The circuit panel also took the company to task for a “kicker clause,” which states that any fees outlined under the original glucosamine supplement class action settlement that a judge determined to be excessive would automatically be returned to NBTY.
The appellate panel called the kicker clause “a gimmick for defeating objectors,” which they claim NBTY cannot justify including in the glucosamine supplement class action settlement. In denying this motion, the appeals court has effectively reversed and remanded the settlement ruling approved by the Illinois federal court.
The opinion states, “The settlement, a selfish deal between class counsel and the defendant, disserves the class. Class counsel shed crocodile tears over Rexall’s [the glucosamine supplement’s] misrepresentations … conferring these meager benefits class counsel should receive almost $2 million.”
The glucosamine supplement settlement was supposedly based on the Class Counsel’s estimate that the NBTY class action settlement would be worth $19 million based on the assumption that all of the 4.7 million Class Members notified of the settlement agreement would seek a refund of $3 per bottle of the glucosamine supplement.
However, the 7th Circuit is suspicious of this claim, finding it hard to believe that the Class Counsel would have banked on a high claim rate by Class Members when taking into account the modest settlement award, the extensive claims process, and the fact that most class action settlements have low claim filing rates in general.
The panel also noted:
“It’s hard to resist the inference that Rexall was trying to minimize the number of claims that class members would file, in order to minimize the cost of the settlement to it. Class counsel also benefited from minimization of the claims, because the fewer the claims, the more money Rexall would be willing to give class counsel to induce settlement.”
Additionally, because the glucosamine supplement class action settlement was proposed based on the potential benefits for claimants rather than the actual benefits, the panel claims the Class Counsel had little incentive to push back.
More information about the NBTY glucosamine supplement class action settlement was not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.
The Class is represented by Stewart M. Weltman of Stewart M Weltman LLC, and Elaine A. Ryan and Patricia N Syverson of Bonnett Fairbourn Friedman & Balint PC.
The NBTY Glucosamine Supplement Class Action Lawsuit is Pearson, et al. v. NBTY Inc., et al. Case No. 14-1198, in the U.S. Court of Appeals for the Seventh Circuit.
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