Judge rejects $53M settlement of false advertising lawsuit

A federal judge in San Francisco rejected on Monday a $53 million deal to resolve a class action against consumer goods company Reckitt over falsely advertising that one of its dietary supplements treats joint pain and stiffness.

U.S. District Judge Vince Chhabria noted some ambiguity regarding the amount that would be deducted from the nonreversionary settlement fund by those who choose product replacements over cash refunds because they differ in value.

"For each household that selects the product benefit, what is the proper per-bottle amount to deduct from the common fund?" he asked in a one-page order denying preliminary approval of the deal.

Plaintiffs' attorney Timothy Blood of Blood Hurst & Reardon LLP emphasized that the settlement is the largest ever to resolve claims concerning dietary supplements.

"This is an excellent settlement," he said. "We appreciate Judge Chhabria's detailed focus to make sure that it's as good as it possibly can be."

Reckitt and defense attorneys at Manatt, Phelps & Phillips LLP did not immediately respond to requests for comment.

The lawsuit filed in 2017 in the Northern District of California said Reckitt, formerly known as Reckitt Benckiser LLC, falsely advertised its dietary supplement "Move Free Advanced" as a treatment for joint pain and stiffness. A deal to resolve the claims was reached after four years of litigation and just weeks from the final pretrial conference.

The settlement is "far better than other[s] in this area" and "greatly exceeds other benchmarks, including prior class-wide settlement involving this product," plaintiffs' attorneys stated in a motion for preliminary approval. Yamagata v. Reckitt Benckiser LLC, 17-cv-03529 (N.D. Cal., filed June 19, 2017).

But Chhabria was unconvinced, finding that the motion did not sufficiently detail how claims for product replacements would be deducted from the settlement fund.

Under the deal, class members can receive cash refunds for up to three purchases of the supplement for a total of $66 without proof of purchase. They can alternatively buy $225 of various Reckitt products of their choosing.

Refund amounts are subject to change depending on the number of claims.

But the judge refused to advance the settlement because it doesn't explain the amount that will be deducted from the $50 million common fund for product replacement claims. He asked if a class member's choice of $225 in product replacements rather than the $66 in cash refunds will disproportionately reduce the amount of money available for claimants.

If it does, he proposed that the fund should instead be reduced by the amount of Reckitt's lost profit for giving away the products for free or by the settlement's cash equivalent of $66.

"The renewed motion must clearly identify what amount will be deducted from the common fund for each bottle's worth of product benefit claimed and explain why that amount is proper and fair to the class members," he wrote.