Something Stinks in Pampers Diaper Rash Settlement

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By William Peacock, Esq. on August 05, 2013 3:55 PM

Make no mistake about it: this judge, much like the Pampers at issue, is pissed.

Pampers made a special line of diapers called DryMax. Consumers alleged that the ultra-absorbent product caused frequent diaper rashes. Government agencies investigated and found no proof of the defect. Nonetheless, twelve class-action lawsuits were filed.

After "hard-fought" negotiations, and "strenuous" litigation (which included no depositions, no discovery, and no response to Proctor & Gamble's motion to dismiss), a settlement was reached: the named plaintiffs would get $1,000 per affected child, the lawyers would get $2.73 million, and the class members would get refunds (if, five years later, they kept their receipts and UPC codes), warning labels, and a few paragraphs on a website.

All-Out Sellout?

The court begins its discussion with the inherent conflict in class-action settlements. Lawyers are motivated to get fees. Named plaintiffs are motivated to get incentive awards. The defendant only cares about the total bill. The court, therefore, must be the guardian of the actual class.

That didn't happen here. Even though Daniel Greenberg, a member of the class, filed lengthy and intelligent objections to the settlement, the district court barely regarded his arguments at the settlement hearing before issuing a cursory order (drafted by the parties) approving the settlement.

The court repeatedly comes back to the $2.73 million figure before launching into a multipage rant about the absolute worthlessness of the settlement, ending with this incredible rant:

"In sum, we reject the parties' assertions regarding the value of this settlement to unnamed class members. Those assertions are premised upon a fictive world, where harried parents of young children clip and retain Pampers UPC codes for years on end, where parents lack the sense (absent intervention by P&G) to call a doctor when their infant displays symptoms like boils and weeping discharge, where those same parents care as acutely as P&G does about every square centimeter of a Pampers box, and where parents regard Pampers.com, rather than Google, as their portal for important information about their children's health. The relief that this settlement provides to unnamed class members is illusory. But one fact about this settlement is concrete and indisputable: $2.73 million is $2.73 million."

Incentive Awards

We've seen a handful of cases recently where settlements were tossed out based on suspicious incentive awards. Courts seem to be paying extra attention to conflicts-of-interest between named plaintiffs and the class.

Here, the named plaintiffs were "made whole" by a $1,000-per-child payment. The court notes that incentive awards are most fair when they do not make the named plaintiffs completely whole, and where the named plaintiffs are required to utilize the class recovery mechanism, like the unnamed plaintiffs, for relief. This provides motivation to fully represent the class.

Meritless Claims Merit Nothing

The dissent makes a great point: settlements should be evaluated against the likelihood of success on the merits. There were no merits here. The diapers were found to be perfectly safe.

Then again, "$2.73 million is $2.73 million."

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