The Third Circuit recently vacated a $35 million settlement of an antitrust class action filed against Toys R Us, Inc., Babies R Us, Inc. and several baby product manufacturers. The suit, brought by several named plaintiffs, alleged that the defendants conspired to set a price floor for the sale of certain baby products. The defendants agreed to pay $35 million into a settlement fund, with approximately $14 million going to class counsel in attorneys’ fees and expenses. At the time of the settlement’s fairness hearing, it was estimated that $8.1 million would be distributed to class members, with remaining funds, less administrative expenses, to be distributed to one or more cy pres recipients. The cy pres doctrine allows courts to distribute excess settlement funds to a nonparty for a charitable purpose when distributing the entire settlement fund to class members would be difficult. Subsequent estimates indicating that class members would receive only $3 million of the settlement funds prompted 10 unnamed class members to file formal objections to the settlement and, when the settlement was approved over their objections, an appeal to the Third Circuit. The Third Circuit vacated the settlement, finding cy pres distribution of more than six times the size of the direct class payment deserved a second look. The Third Circuit then remanded the case back to the district court to consider whether an alternative settlement could provide a more sufficient direct benefit to the class.
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In re Baby Products Antitrust Litigation, Case Nos. 12-1165, 12-1166, and 12-1167, 708 F.3d 163 (3d Cir. 2013)
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