Antitrust Law Daily Wrap Up, ADVERTISING—1st Cir.: Footwear maker’s settlement of health benefit misrepresentation claims upheld, (Jan 4, 2016)

By Linda O’Brien, J.D., LL.M.

In an action by consumers against footwear manufacturer FiveFingers over alleged false health benefit advertising claims regarding its "barefoot" footwear, the federal district court in Boston did not err in granting preliminary approval to a proposed settlement and awarding attorney fees to class counsel, the U.S. Court of Appeals in Boston has decided. Thus, the district court order was affirmed (Bezdek v. Vibram USA, Inc., December 31, 2015, Lynch, S.).

Vibram USA Inc. and Vibram FiveFingers LLC manufacturer FiveFingers "barefoot" footwear—shoes that allegedly mimic barefoot running while providing some protection against the elements. In 2012, consumers filed three putative class action complaints against Vibram, alleging that the two companies misrepresented that wearing FiveFingers provides certain health benefits, such as muscle strengthening and more natural movement and alignment, and representing that those health benefits are supported by scientific research. The consumers’ claims were brought under Massachusetts and Florida false advertising and unfair and deceptive practices laws.

In December 2013, after extensive discovery, the parties reached a settlement agreement that would create a settlement fund of $3.75 million. The court preliminarily approved the settlement, and notice was distributed to the class in various ways. Objections were filed by three individuals. In January 2015, the court granted the plaintiffs’ motion for final approval of the proposed settlement and motion for attorneys’ fees and expenses. The three objectors appealed.

Settlement. The district court did not abuse its discretion in determining that the settlement terms were fair, adequate, and reasonable, according to the appellate court. The objectors’ argument that the settlement notices projected a higher settlement payment than the actual payments was rejected. The appellate court noted that there was no misrepresentation to class members, since the notices contained express language that recovery could “decrease depending on various factors” and provided an estimated range of recovery. Although the actual payments were modest, the amounts were a fair compromise that accounted for the risks of continued litigation.

Furthermore, the requirement that objectors file proofs of purchase, even though no similar requirement was imposed on class members filing a claim form, did not provide an independent basis for invalidating the settlement. The appellate court noted that the ultimate question before the district court was whether the settlement was fair, reasonable, and adequate. The district court carefully scrutinized the refunds provided to the class under the settlement and did not abuse its discretion in finding the settlement was fair.

The objectors’ argument that the injunctive relief in the settlement was illusory and did not provide meaningful relief was also rejected. According to the appellate court, the settlement requirement that Vibram discontinue its advertising campaign unless it obtained reliable scientific evidence to substantiate its claims was a meaningful concession and valuable contribution to the settlement agreement.

Attorney fees award. Additionally, the district court did not abuse its discretion in awarding attorney fees. The district court reviewed the amount of fees under both the percentage of the fund method and lodestar method. The fee award—25 percent of the settlement fund—was consistent with other jurisdictions found to be reasonable and given the amount of work that counsel performed. There was no abuse of discretion in concluding that, under either method of calculation, the attorneys’ fee award was reasonable, the appellate court concluded.

The case is No. 15-1207.

Attorneys: Janine L. Pollack (Wolf Haldenstein Adler Freeman & Herz LLP) for Valerie Bezdek and Brian DeFalco. Christopher T. Cain (Scott & Cain) and David Aisenberg (Looney Cohen & Aisenberg LLP) for Madeline Monti Cain and Justin Ference. Christopher M. Morrison and Dana Baiocco (Jones Day) for Vibram USA, Inc. and Vibram FiveFingers, LLC.

Companies: Vibram USA, Inc.; Vibram FiveFingers, LLC

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