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Allen v. Similasan Corp.

United States District Court, S.D. California

August 9, 2016

KIM ALLEN, LAINIE RIDEOUT and KATHLEEN HAIRSTON, on behalf of themselves, all others similarly situated, and the general public, Plaintiffs,
v.
SIMILASAN CORPORATION, Defendant.

          ORDER: (1) DENYING JOINT MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT (ECF NO. 216), AND (2) DENYING AS MOOT MOTION FOR ATTORNEYS’ FEES (ECF NO. 211)

          Hon. Cynthia Bashant Uuited States District Judge.

         Plaintiffs and Defendant Similasan have filed a Joint Motion for Final Approval of Settlement Agreement [ECF No. 216] and Plaintiffs have filed a Motion, unopposed by Similasan, for attorneys’ fees, costs and incentive awards. [ECF No. 211.] Because the Court determines ultimately that the proposed settlement agreement is not fair, adequate or reasonable for unnamed class members, the Court DENIES the Joint Motion for Final Approval [ECF No. 216] and, therefore DENIES AS MOOT the Motion for Attorneys’ Fees, Costs and Incentive Awards. [ECF No 211.]

         I. BACKGROUND

         On behalf of a California and a Florida[1] class, Plaintiffs filed a class action complaint alleging that Similasan engaged in false or deceptive labeling of its homeopathic products. [Third Amended Complaint, ECF No. 58 (“TAC”).] Plaintiffs alleged that most consumers who purchase homeopathic drugs “are unaware of homeopathic dilution principles” and do not understand that these drugs have undergone no scrutiny by the FDA. [TAC ¶¶ 22, 23.] Thus class members were and are likely to be deceived by Similasan’s advertising and marketing practices. [TAC ¶127.]

         According to the TAC, although other homeopathic drug manufacturers have voluntarily agreed to implement an FDA disclaimer indicating on their labels that “The FDA has not determined that this product is safe, effective, and not misbranded for its intended use, ” along with additional disclaimers explaining homeopathic dilution, Similasan has not implemented these disclaimers. [TAC ¶¶ 26-27, 84, 136.] Hence, the Plaintiffs sought injunctive relief on behalf of the class. [TAC ¶136.] Plaintiffs also sought disgorgement, restitution of all monies from the sale of the homeopathic products, return of the purchase price of products, damages and punitive damages. [TAC ¶¶71, 85, 92, 96.]

         This Court granted in part and denied in part Similasan’s Motion for Summary Judgment. [ECF No. 142.] The Court limited the time period of recovery and dismissed the claims for injunctive relief as to the named Plaintiffs only. [Id.] The Court further granted in part Plaintiffs’ motion for class certification, certifying two classes, “all purchasers of Similasan Corp. homeopathic Products in California…” with respect to Nasal Allergy Relief or Sinus Relief (first class) and Allergy Eye Relief, Earache Relief, Dry Eye Relief and Pink Eye Relief (second class). [ECF No. 143.] The Court approved Plaintiffs’ proposal for notice on Similasan’s website, along with advertisements posted in California editions of “U.S. Today, ” in the “San Diego Union-Tribune” and on Facebook. [Id.]

         Similasan filed a Motion to Decertify the class, arguing that Plaintiffs would not be able to prove materiality or falsity, and a Motion for Partial Summary Judgment, requesting in part that the Court extend its Order dismissing claims for injunctive relief to the entire class. [ECF Nos. 164, 171.] Plaintiffs’ counsel responded to these Motions. [ECF Nos. 173, 175.] Trial was scheduled to begin March 29, 2016. On January 26, 2016, the parties notified the Court it had reached a settlement which was filed on March 31, 2016. [ECF Nos. 196, 202.]

         II.THE SETTLEMENT

         The Settlement Agreement jointly proposes that this Court certify a class defined as:

All purchasers of all Similasan Corporation homeopathic Products nationwide for personal or household use and not for resale, as listed in Exhibit A to this Agreement [including 41 Similasan products] from February 10, 2008 to the present.

         [ECF No. 202-4 §2.2.] Thus, the proposed Settlement greatly expands the class beyond what was alleged in the TAC and beyond what was certified by this Court to include a nationwide class involving many more Similasan products.

         The Settlement provides for injunctive relief only, including a disclaimer on all Similasan product labels that “These statements are based upon traditional homeopathic principles. They have not been reviewed by the Food and Drug Administration.” Similasan agrees to make these label changes no later than twelve months after the effective date of the Settlement Agreement. [ECF No. 202-4 §5.1.4.] The Settlement Agreement also provides that Similasan shall maintain a homeopathic dilution explanation web page or portion thereof on all websites that it owns or operates regarding the Products. The explanation shall conform to the explanations provided by HPUS (a private organization of homeopaths), and the web pages shall include a link to the FDA web site’s Compliance Policy Guide §400.400. [ECF No. 202-4 §5.1.3.] The Settlement Agreement includes no monetary relief for unnamed class members.

         In exchange for the Settlement Agreement, all class members release:

.With the exception of claims for personal injury, any and all claims, demands, rights, suits, liabilities and causes of action of every nature and description whatsoever known or unknown, matured or unmatured, at law or in equity, existing under federal and/or state law including without limitation a waiver of all rights under Section 1542 of the California Civil Code, that [any class member] has or may have against [Similasan or any related parties] arising out of in connection with or related in any way, directly or indirectly, to Defendant’s advertising, marketing, manufacturing, packaging, labeling, promotion, sale, or distribution of the Products, that have been brought, could ...

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