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Aug. 2 (Bloomberg) -- A Procter & Gamble Co. settlement of a consumer lawsuit over its Pampers “Dry Max” diapers was overturned by a U.S. appeals court that called the relief afforded to most customers “illusory.”

The 2-1 ruling today by a panel of the court in Cincinnati canceled a 2011 agreement that the judges said gave people who filed individual suits gathered in the class-action case $1,000 per affected child and their lawyers $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.

The litigants still 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.

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.

‘Dubious’ Value

“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 that P&G had already offered it independently 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.”

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. The case was returned to the lower court for further proceedings.

“We appreciate the court’s consideration of the legal issues in this case and we’ll study our options in light of this opinion,” Paul Fox, a spokesman for Cincinnati-based P&G, said in a telephone interview.

Objector’s Counsel

Greenberg was represented by the Washington-based Center for Class Action Fairness LLC. Its founder, attorney Theodore H. Frank, said whether the parties resume litigating the matter or revise their agreement is up to them.

“If they come up with a fair settlement, we’ll step aside,” Frank said.

What was important about the ruling, he said, is letting lower court judges know, “you’re supposed to look at whether attorneys are advocating on behalf of their clients or aggregating the vast majority of the settlement for themselves.”

Frank said he founded the center, which seeks out and opposes class action settlements it deems objectionable, in 2009. The objector, Greenberg, was formerly an attorney for the organization, Frank said.

Plaintiffs’ attorneys Lynn Sarko and Gretchen Freeman Cappio, with Seattle-based Keller Rohrback LLP, didn’t immediately reply to telephone and e-mail requests for comment on the appeal court’s ruling.

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

To contact the editor responsible for this story: Michael Hytha at

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