Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Hyroxycut settlement gets final approval, (Nov 20, 2014)

By Linda O’Brien, J.D., LL.M.

The federal district court in San Diego has given final approval to the settlement of multi-district litigation against the manufacturer of the weight loss supplement Hydroxycut for false advertising claims (In re Hydroxycut Marketing and Sales Practices Litigation, November 18, 2014, Moskowitz, B.).

Iovate Health Sciences U.S.A., Inc. manufactures the Hydroxycut brand dietary supplement products. Purchasers of Hydroxycut filed class action consumer protection claims against Iovate and several retailers for allegedly making misrepresentations that the Hydroxycut products were clinically proven to be safe and effective for weight loss. In November 2013, the parties proposed settlement was denied final approval due to an inadequate cy pres distribution. In May 2014, the court granted preliminary approval to the current class action settlement. The plaintiffs moved for final approval of the settlement.

The settlement consists of a $7 million cash component and a $7 million product component, under which class members could opt to receive a cash amount or a product bundle for each Hydroxycut product they had purchased. Any amounts remaining in the cash component would be distributed to ChangeLab Solutions, a nonprofit organization. Any amounts remaining in the product component would be distributed in the form of additional product at the time of purchase by consumers.

Settlement. The court found that the settlement was reasonable and adequate. The plaintiffs faced significant hurdles to recovery, since their claims against the retailers had been dismissed and Iovate contended that the advertising of the effectiveness of its products were not misleading and its warnings were sufficient. Continued litigation would involve the expense of additional discovery and expert testimony as Iovate was expected to challenge class certification.

Additionally, the settlement offers substantial benefits to the class members, and many claimants will receive compensation that exceeds their damages. The parties engaged in substantial discovery and are in a position to accurately access the strengths and weaknesses of their respective positions. Class counsel is experienced in class action litigation and believes that the settlement represents an excellent recovery for the class. Furthermore, the reaction of the class members was positive as only six requested exclusion, two filed objections, and no objectors appeared at the final approval hearing, the court determined.

Attorney fees and incentive award. Class counsel is seeking a fee award totaling 25 percent of the settlement fund. The court noted that the percentage was typical and did not represent a disproportionate distribution of the settlement to counsel. The lodestar method confirmed the reasonableness of the percentage calculation. Moreover, the award was appropriate in light of the quality of representation by counsel, the excellent results achieved for the class, the risks of continued litigation, and the length and complexity of the litigation. Finally, the court concluded that the requested incentive payment of $2,000 for each of the class representatives was reasonable. Class counsel submitted declarations that the class representatives assisted the litigation by providing information and documents, meeting with and supervising counsel on behalf of the class, participating in settlement efforts, and approving the settlement amount proposed to the class.

The cases are No. 09md2087 (BTM) (KSC) and 09cv1088 (BTM) (KSC).

Attorneys: Timothy G. Blood (Blood Hurst & O’Reardon, LLP), and Andrew S. Friedman (Bonnett, Fairbourn, Friedman & Balint, PC) for plaintiffs. Alexandria Armida Amezcua (Morrison & Foerster LLP), Beverly Klundt Baudouin (Baldwin, Haspel, Burke & Mayer, LLC), and Daniel R. Johnson (Cozen O'Connor) for Iovate Health Sciences U.S.A., Inc., Muscletech Research and Development, Inc., Iovate Health Sciences International, Inc., Iovate Health Research, Inc., and Iovate HC 2005 Formulations, Ltd.

Companies: Iovate Health Sciences U.S.A., Inc.; Muscletech Research and Development, Inc.; Iovate Health Sciences International, Inc.; Iovate Health Research, Inc.; Iovate HC 2005 Formulations, Ltd.

Cases: Advertising StateUnfairTradePractices CaliforniaNews