Today, the U.S. Court of Appeals for the Seventh Circuit agreed to allow the Competitive Enterprise Institute (CEI) to go back to court and challenge the actions of professional, bad-faith objectors in the class action lawsuit, Pearson v. NBTY, Inc.
CEI’s Center for Class Action Fairness previously objected to the selfish settlement in this case, and as a result, parties negotiated a new settlement that provided class members with more than $3 million in additional recovery. However, bad-faith objectors opposed the new settlement and essentially demanded blackmail from the settling parties, enriching themselves at the expense of the class.
Today, the Seventh Circuit overturned the district court’s decision that prevented CEI from challenging the bad-faith objectors. The court agreed that courts must ensure that class members are protected and “selfish settlements by objectors are a serious problem.”
Senior Attorney Melissa Holyoak of CEI’s Center for Class Action Fairness said the following about the court’s decision:
"We are pleased that the Seventh Circuit recognized the serious problem of bad-faith class action objectors and look forward to returning to the district court to determine whether objector blackmail was paid in this case."
This class action case originated in November 2011 on behalf of consumers who purchased glucosamine, a dietary supplement advertised for its health benefits. Class members alleged that the companies, Target, NBTY, and Rexall Sundown, violated consumer protection laws by making false claims about the effectiveness of the supplement.
ABOUT: The Competitive Enterprise Institute’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Originally founded by Ted Frank in 2009, the center has secured millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, and the courts.