Yesterday, a divided panel of the U.S. Court of Appeals for the Sixth Circuit threw out a proposed settlement in a class-action suit against Proctor & Gamble. Judge Kethledge wrote the opinion for the court, joined by Judge Thapar (sitting by designation). Here is how he summarizes the opinion:
Class-action settlements are different from other settlements. The parties to an ordinary settlement bargain away only their own rights—which is why ordinary settlements do not require court approval. In contrast, class-action settlements affect not only the interests of the parties and counsel who negotiate them, but also the interests of unnamed class members who by definition are not present during the negotiations. And thus there is always the danger that the parties and counsel will bargain away the interests of unnamed class members in order to maximize their own.
This case illustrates these dangers. The class is made up of consumers who purchased certain kinds of Pampers diapers between August 2008 and October 2011. The parties and their counsel negotiated a settlement that awards each of the named plaintiffs $1000 per “affected child,” awards class counsel $2.73 million, and provides the unnamed class members with nothing but nearly worthless injunctive relief. The district court found that the settlement was fair and certified the settlement class. We disagree on both points, and reverse.
Judge Cole dissented.
UPDATE: For more on the particulars of this case, see the comments by Adam Schulman of the Center for Class Action Fairness, the attorney who challenged the settlement here and here.