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DOJ Opposes Attorney Fees in Dial Soap Class Action

May 10, 2019 | Posted in : Challenging Fees, Class Action, Fee Award, Fee Award Factors, Fee Dispute, Legislation / Politics

A recent NLJ story by Nate Robson and Amanda Bronstad, “DOJ Opposes $3.8M in Legal Fees in Latest Swipe at Plaintiffs Bar,” reports that the U.S. Justice Department announced it is opposing a class action settlement in New Hampshire federal court that grants a $3.8 million attorney fee award to plaintiffs’ lawyers who alleged Dial overstated the ability of its antibacterial soap to kill germs.

The government said in a prepared statement that the fee award “would afford little value to consumers while handsomely compensating attorneys.”  The department’s opposition to the class action settlement was filed as a statement of interest by trial attorneys in the consumer protection branch, a component of the civil division.  The government argued that the settlement fund of $7.4 million fails to adequately compensate consumers and that the injunctive relief, in the form of changes to the soap’s ingredients, is “virtually worthless.”

“A class action settlement that affords little meaningful consumer benefit while rewarding attorneys with sizable fees is inappropriate,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division.  “Congress intended to prevent these types of unbalanced settlements with the Class Action Fairness Act.”  A final approval hearing is set for May 29.  Plaintiffs attorney Lucy Karl of Shaheen & Gordon and Robert Miller, of Sheehan Phinney, who represents Dial, did not respond to requests for comment. Both are in New Hampshire.

The Trump-era Justice Department has ramped up efforts to weigh in on pending class actions under the Class Action Fairness Act.  In a separate class action settlement with Lenny & Larry’s, the department in February criticized the purported $3.5 million settlement, preliminarily approved Nov. 1, for giving $1.1 million in legal fees to plaintiffs attorneys, while class members received up to $50 in cash or $30 worth of cookies.  Separately, the DOJ also filed a Feb. 4 amicus brief challenging a settlement over allegedly defective Tristar pressure cookers that gave $2.3 million to plaintiffs attorneys and discount coupons to class members.  The Arizona Attorney General’s Office, joined by 17 other states, has petitioned the U.S. Court of Appeals for the Sixth Circuit to unravel that deal.

Plaintiffs in the soap case, In re: Dial Complete Marketing & Sales Practices Litig., alleged that The Dial Corp. falsely advertised its “Dial Complete” hand soaps containing triclosan as more effective at killing germs over other brands’ soap.  Under a proposed settlement reached between the parties, Dial would pay $2.32 million to class members, with most class members receiving up to $8.10 in compensation for previous purchases of certain soap products, according to the statement of interest.  The settlement also provides for injunctive relief that would require Dial to refrain from using triclosan or claiming that its hand wash product “Kills 99% of Germs.”

Under the agreement, class counsel would seek a total of $3.825 million in attorney’s fees without opposition from Dial, including $1.9 million in fees specifically tied to obtaining the injunctive relief.  In its Statement of Interest, the United States argues that the injunction would provide no benefit to consumers, given that Dial years ago voluntarily made the same changes to its soap products that are required by the proposed injunctive relief.  Moreover, the U.S. Food and Drug Administration banned the use of triclosan in such products in 2016.  The case is pending in U.S. District Court for the District of New Hampshire, which must approve any settlement.

The government also complained about the use of cy pres in the settlement.  Under the deal, any unclaimed funds would go to the Ronald McDonald House Charities or Children’s Health Fund.  A footnote in the Statement of Interest said a cy pres distribution is “very unlikely,” given the government’s communication with the parties.  The settlement had no objectors.

The case got attention in 2017 when Dial appealed class certification based on the plaintiffs’ inability to identify class members, particularly in cases where people don’t keep receipts, like consumer products.  The U.S. Court of Appeals for the First Circuit refused to take up the interlocutory appeal, but, in a dissent, Judge William Kayatta warned his colleagues that the court’s recent precedent over how class members could be identified was destined to result in “further mischief” that could challenge the constitutional rights of defendants.