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CEI Settlement Objection Prevails in Similasan Corp. Case

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The U.S. District Court of the Southern District of California rejected a settlement in Allen v. Similasan, keeping class attorneys from a $545,000 payday while unnamed class members would have received nothing under the deal. The Competitive Enterprise Institute objected to the settlement on behalf of a class member on July 1, 2016.

The underlying suit alleges that Similasan falsely marketed its homeopathic products as “Naturally Effective & Safe,” and violated FDA regulations, among other claims. The rejected settlement purported to require Similasan to make label changes and maintain a website concerning homeopathic “dilution principles.” No unnamed class members would have received any compensation under the rejected agreement.

“Only the defendant and the class attorneys would have benefited under the proposed settlement,” said Ted Frank, director of CEI’s Center for Class Action Fairness. “That’s why we objected, and it’s why eight state AG’s supported our objection.”

The Attorneys General of Arizona, Arkansas, Louisiana, Michigan, Nebraska, Nevada, Texas, and Wyoming filed a brief on July 28, which also urged rejection of the settlement.

In rejecting the settlement, the court agreed with arguments raised by CEI and the state AGs. Only attorneys and two named plaintiffs would have benefited under the agreement, so the court found it inappropriate to release the claims of absent class members. The court also agreed with CEI’s objection that unnamed class members “would be better off opting out” of the rejected settlement because they would receive exactly the same alleged benefit either way.

The Court denied the settlement and the motion for attorneys’ fees. Unless they appeal, the parties will resume preparation for trial in the underlying case.

“The parties might settle again,” said Frank, “but hopefully they will not again bargain away the rights of absent class members.”