Judge Rejects Current/Elliott Jeans Settlement Over Inadequacies

A proposed class action lawsuit settlement alleging an upscale denim brand misleadingly labels its jeans as “Made in the USA” has been denied.

California Federal Judge Gonzalo P. Curiel issued the 16-page order rejecting preliminary approval of the Current/Elliott jeans proposed Class settlement, ruling that as a whole the settlement contains sufficient deficiencies warranting denial.

Plaintiff Sonia Hoffman originally filed the class action lawsuit against Current/Elliott in September 2014 in San Diego Superior Court. She claims, on behalf of the Class, that Current/Elliot brand jeans manufactures, distributes, and retails jeans that were labeled as “Made in USA” but actually contain foreign made components including buttons, rivets, zipper assembly, thread, and/or fabric.

According to Hofmann, Current/Elliott falsely marketed and concealed the true country of origin of the jeans’ components in violation of California law.

In October 2014, Dutch LLC, the parent company of the Current/Elliott brand had the case removed to California federal court.

The proposed Settlement provided for: $20 e-gift certificates for the plaintiff Class; $250,000 in cy pres awards; and up to $175,000 in plaintiff’s attorney’s fees with a clear sailing provision attached.

Specifically, Current/Elliott agreed to issue $20 gift certificates to Class Members who submit a valid claim.

However, Judge Curiel rejected the settlement provision, stating that Current/Elliott stand to benefit from the gift cards. Curiel further stated that the distribution of gift cards is essentially a coupon and therefore “inadequate.”

“The threshold issue is whether the gift certificate should be considered a coupon. Coupons require class members to pay their own money before they can take advantage of the coupon,” Judge Curiel reasoned.

“The gift cards in the instant case are essentially coupons because they require Class Members to pay out of their own pocket before they can take advantage of the coupons. While the face value of the coupon is $20, the average price of the Jeans is $205. Under the Settlement, the Class Members do not receive restitution, but rather an average 10 percent discount on a future purchase of denim,” the judge stated.

Furthermore, Class Members can only spend the coupons at the store’s website and not at a physical location, Curiel wrote.

“The least expensive item on the website, including clearance items, currently costs $58.80,” he stated. “Thus, the highest possible value for a Class Member’s coupons is a 34 percent discount on a future purchase.”

“Because the Class Members must pay out of pocket to utilize the gift card, the gift card amounts to a coupon,” he noted, commenting that “both the courts and Congress generally disfavor coupon settlements.”

Cy pres awards are settlement funds that cannot be distributed to Class Members but is instead allocated to a charitable donation paid over a period of years by the defendant to a third party.

For defendants, a cy press award can be considered a charitable contribution tax deduction. In Current/Elliott’s case, the cy pres remedy was to be allocated to Step Up Women’s Network, FIDM Scholarship, Race for the Cure, Juvenile Diabetes Research Foundation, and Ability First.

Both parties favored the cy pres award provision in the proposed settlement because the majority of the Class Members are women and the selected charities benefit women.

But Judge Curiel disagreed, declaring that “none of the chosen charities bear any relation to the goal of the statutes, consumer protection.”

“Additionally, the cy pres award does not provide reasonable certainty that Class Members will benefit because no connection exists between the recipients’ missions and the absent class members’ interests.”

The parties also agreed to a clear sailing provision for attorney’s fees, in which Current/Elliott will not contest any award of attorney’s fees that do not exceed $175,000. “Clear sailing” provisions carry a risk of “enabling a defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class.”

Judge Curiel wrote that “while $175,000 does not seem like an unreasonably high fee…Class Members receive almost no benefit from the settlement. At most, Class Members receive a coupon good for on-average 10% off another pair of jeans from a company they allege previously deceived them.”

The Class is represented by Camille Joy DeCamp and John H. Donboli of the the Del Mar Law Group, LLP; and David P. Hall of the Law Office of David P. Hall.

The Current/Elliott Jeans Class Action Lawsuit is Hofmann v. Dutch LLC., Case No. 3:14-cv-02418-GPC-JLB, in the U.S. District Court for the Southern District of California.

UPDATE: On Aug. 16, 2016, a second settlement proposal in a class action lawsuit alleging that Current/Elliott brand jeans were inaccurately labeled “Made in the USA” was denied by a federal judge who ruled that offering free tote bags was not enough to settle the litigation.