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No Consideration, No Settlement?

Numerous courts have wrestled with the propriety of "unmanifested defect" class actions, generally finding that no cause of action exists for a plaintiff who has not yet been injured. But what about settlements for allegedly injured plaintiffs that provides them with no direct benefit?  Will they stand up to judicial scrutiny?

In related cases brought against Unilever, Red v Unilever, No. 5:10-cv-00387 (N.D. Cal.) and Rosen v. Unilver, No. 5:09-cv-02563 (N.D. Cal.) , Chief Judge James Ware initially declined to preliminary approve the proposed settlement.  Here, the plaintiffs claimed that they paid more than they should have for margarine advertised as good for cardiovascular health which actually contained dangerously high levels of trans fats.  Pursuant to the settlement, Unilever agreed to eliminate trans fat from its margarine spreads.  However, the settlement did not provide any compensation to the members of the class.

The parties to the settlement initially sought certification for settlement purposes under Rule 23(b)(2).  This rule allows for certification of classes seeking primarily injunctive relief and normally does not provide the opportunity to opt out of the class.  At the first preliminary approval hearing, Judge Ware expressed concern that the class members were asked to waive damage claims, were denied the opportunity to opt out, and received no monetary relief.

After further negotiations, which improved the settlement by setting a firm date by which tans fats would be eliminated in margarine sticks, and allowed for class members to opt-out of the settlement, the parties again moved for preliminary approval.  This time, Judge Ware granted the motion.

The plaintiffs' motion for final approval is now pending.  Only four class members opted-out of the settlement and there are no objections.  We hope to soon report on Judge Ware's final approval in this case.

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