P&G Pampers Class-Action Settlement Undone by Appeals Court

A Procter & Gamble Co. (PG) settlement of a consumer lawsuit over its Pampers “Dry Max” diapers has been overturned by a U.S. appeals court that called the relief afforded to most customers “illusory.”

The Cincinnati-based panel’s 2-1 ruling today quashed a 2011 agreement it said gave named plaintiffs $1,000 per affected child, class counsel $2.73 million, “and provides the unnamed class members with nothing but nearly worthless injunctive relief.”

The litigation began in 2010 after complaints that the diapers tended to cause a severe diaper rash. The U.S. Consumer Product Safety Commission and a Canadian agency found no connection between the product and the rash after reviewing 4,700 cases, the appeals court said.

Still, the litigants fashioned a settlement that barred class members from opting out or from being able to participate in any future group suit against Procter & Gamble, entitled them to a one-box purchase price refund provided they could produce an original receipt and required the company to make temporary changes to its product packaging and on its website.

Program Dubious

Objections raised by three class members were overridden by U.S. District Judge Timothy S. Black in Cincinnati, who approved the accord in September 2011. One objector, Daniel Greenberg, appealed.

“The value of the one-box refund program to unnamed class members is dubious on its face,” U.S. Circuit Judge Raymond Kethledge wrote for the court, noting P&G had already offered such a program independent of the settlement.

“The relief that this settlement provides to unnamed class members is illusory,” Kethledge said. “But one fact about this settlement is concrete and indisputable: $2.73 million is $2.73 million.”

U.S. Circuit Judge R. Guy Cole dissented, saying that while the consumers’ recovery may not have been worth much, their claims were worth even less.

“In the absence of this settlement, class members would have almost certainly gotten nothing,” Cole said.

Greenberg’s attorney, Adam Schulman of the Washington-based Center for Class Action Fairness LLC, didn’t immediately reply to a voice-mail message seeking comment. Lynn Sarko, the plaintiffs’ attorney with Seattle-based Keller Rohrback LLP, couldn’t immediately be reached for comment.

Paul Fox, a spokesman for Cincinnati-based P&G, said he couldn’t immediately comment on the court’s decision.

The case is In re: Dry Max Pampers Litigation, 11-4156, U.S. Court of Appeals for the 6th Circuit (Cincinnati).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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