Antitrust Law Daily Wrap Up, ADVERTISING—D. Mass.: Celexa maker reaches final settlement over misrepresentation claims, (Sep 10, 2014)

By Greg Hammond, J.D.

Forest Pharmaceuticals, Inc. and Forest Laboratories, Inc. (collectively, “Forest”) have reached a final settlement with Missouri consumers and third-party providers, over allegations Forest misrepresented and concealed material information in their marketing of Celexa® and Lexapro®. In granting final approval of the settlement agreement, the federal district court in Boston determined that the settlement was fair, reasonable, and adequate (In re: Celexa and Lexapro Marketing and Sales Practices Litigation, September 8, 2014, Gorton, N.).

Proposed settlement agreement. According to the court, Forest has already made an initial payment of $7.65 million into the common fund, in furtherance of the proposed settlement agreement. If approved, at least $4.215 million will be allocated for distribution to class members, and if the aggregated valid claims exceed that amount, Forest will pay up to $2.7 million more into the fund. The amount each class member would be entitled to depends on whether they purchased Celexa or Lexapro, and the date the purchase was made. In addition to payments made to class members, the fund will also pay out attorneys’ fees, incentive awards, and expenses. Class member claims will be required to be submitted by January 26, 2015.

Fairness. The court gave final approval of the settlement agreement, despite objections by Natalie Luster—a plaintiff in a parallel class action pending in a Missouri state court—who calculated higher damages and contended that the common fund was thus inadequate. The court presumed that the proposed settlement was “fair, reasonable and adequate,” as the agreement was the product of an arms-length negotiation following adequate discovery. However, even if the presumption did not exist, the court still determined that the proposed settlement was fair, as a settlement need not reimburse 100 percent of the estimated damages, and a settlement between $7.65 million and $10.35 million was “eminently reasonable.” In addition, the court noted that the plaintiffs would risk recovering significantly less if they proceeded to trial.

Although the settlement agreement was approved, the court did reduce the attorneys’ fees in this case, noting that class counsel are not entitled to recover a percentage based on the maximum value of the Common Fund. Instead, the court allowed initial attorneys’ fees in the amount of 30 percent of the amount recovered for the class—$2.295 million. In the event the valid claims exceed the amount available in the common fund, additional attorneys’ fees will be allowed at the rate of 20 percent of the additional claims paid. The court also capped attorneys’ fees at $2,846,250. The request for expenses, amounting to $325,000, was also approved, as well as incentive awards of $10,000 for the two class representatives.

Luster’s motion. Although Luster objected to the settlement, she also moved for attorneys’ fees, expenses, and an incentive award to be paid out of the common fund. The court decided to award $50,000 in attorneys’ fees, because her objections (1) aided the court in its consideration of the adequacy of the common fund and other aspects of the settlement, and (2) resulted in the court scrutinizing the request by plaintiffs for attorneys’ fees based on the maximum value of the fund. However, the court denied Luster’s request for an incentive award, as she was not a class representative in this action.

The case number is 09-2067-NMG.

Attorneys: Cicely I. Lubben (Stinson, Morrison et al.) and Danielle E. Kasten (Debevoise & Plimpton LLP) for Forest Laboratories Inc. and Forest Pharmaceuticals, Inc.

Companies: Forest Laboratories Inc.; Forest Pharmaceuticals, Inc.

Cases: Advertising MassachusettsNews