Antitrust Law Daily Wrap Up, ADVERTISING—Cal. App.: Steroid facial cream settlement affirmed in false ad suit, (Jun 27, 2016)

By Greg Hammond, J.D.

A class action settlement—which disposed of claims that a skin care company engaged in false advertising by failing to disclose that its healing cream products contain levels of steroid substances with serious side effects—was affirmed by the California appellate court in Los Angeles. The appellate court concluded that the objecting consumer plaintiffs failed to demonstrate error and the one-time publication of the notice of settlement did not violate California’s Consumers Legal Remedies Act (CLRA) (Choi v. Mario Badescu Skin Care, Inc., June 21, 2016, Aldrich, R.).

Consumers alleged that Mario Badescu Skin Care, Inc. advertised that its healing cream prevented acne scars and speeded up the healing process for irritated or acne-erupted skin. Mario Badescu, however, allegedly failed to disclose that its healing cream products contain levels of Hydrocortisone and Triamcinolone Acetonide, which are steroid substances with serious side effects. The trial court granted final approval of the settlement, which disposed of the CLRA and false advertising claims.

On appeal, one group of objectors contended that the trial court erred in certifying a settlement class because the named plaintiffs were inadequate class representatives. Another group of objectors argued that the notice of settlement was constitutionally and statutorily deficient, the settlement was not fair or adequate, the release was overly broad, and the attorney fee and incentive awards indicated collusion.

Adequate class representatives. The first group of objectors—who allegedly all suffered physical injury—claimed that the named plaintiffs were inadequate class representatives because they did not suffer personal injury from the creams and their interests conflicted with those of the class. The court, however, noted that any claims seeking remedies for personal injuries were withdrawn from adjudication by the settlement’s releases, rendering the case as nothing other than a garden variety non-personal injury consumer class action. Further, there was no conflict of interest that would render the named plaintiffs inadequate as representatives because the settlement preserved class members’ personal injury claims for future litigation, according to the court. Lastly, the court concluded that the named plaintiffs protected the class members’ interests in obtaining the settlement, rendering them adequate representatives.

Notice. The method of giving notice did not violate the CLRA, the court next decided. In particular, the court noted that the notice of proposed class action settlement is governed by subdivision (f) of section 1781 of the Civil Code, which mandates that notice of a settlement class be given "as the court directs." Consequently, the objectors failed to demonstrate that notice was rendered constitutionally infirm merely because the trial court allowed publication of the notice once in a magazine, rather than four times.

The content of the notice was also sufficient, according to the court. The objectors argued that the word "steroids" is absent from the stipulation of settlement, the claim form, and the settlement documents. This term was not required to be in the documents because advising the class members that the undisclosed ingredients were certain forms of corticosteroids would be important to class members who suffered personal injury, according to the court. However, this case did not involve personal injury claims.

The appellate court also concluded that the trial court did not abuse its discretion in determining that the settlement and the attorney fee award were reasonable.

The case is No. B257480.

Attorneys: Young Wook Ryu for Wankyu Choi. Ronie M. Schmelz (Tucker Ellis LLP) for Mario Badescu Skin Care, Inc.

Companies: Mario Badescu Skin Care, Inc.

Cases: Advertising CaliforniaNews