On May 10, 2013, Judge Thomas B. Russell of the Western District of Kentucky granted final approval of the $40 million settlement in In Re: Skechers Toning Shoe Products Liability Litigation, No. 3:11-md-02308, 2013 U.S. Dist. LEXIS 67441 (W.D. Ky.). The court also approved an award of $5 million in attorneys’ fees and costs. The settlement resolved a number of class action lawsuits alleging that Skechers violated various consumer protection statutes by falsely advertising that its toning shoes could provide a variety of fitness benefits that ordinary footwear could not, including that the shoes would improve posture, promote weight loss, strengthen the back, improve blood circulation, promote sleep, reduce stress, reduce physical stress on knees, legs and ankle joints, and burn calories. The settlement was reached in conjunction with the Federal Trade Commission (FTC), which had also accused Skechers of falsely advertising its toning shoes. In addition to the monetary relief for class members, Skechers entered into a Final Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief with the FTC. Pursuant to the Stipulated Order, Skechers is barred from making claims concerning weight loss or other health or fitness-related benefits for its toning shoes unless they are “non-misleading” and Skechers possesses and relies on “competent and reliable scientific evidence” that substantiates the claims. In addition to the $45 million paid in conjunction with the class action settlement, Skechers also paid $5 million to settle actions brought by the Attorneys General in 44 states and the District of Columbia. The $40 million settlement is the largest in terms of consumer recovery in the FTC’s history.
In approving the In Re: Skechers Toning Shoe Products Liability Litigation settlement, the court noted that class notice had reached 89% of the class members, an average five times, delivering over 732 million impressions or opportunities to see the notice through traditional media, online advertising, and in social media and blogs. As of April 13, 2013, more than 520,000 claims had been submitted. The court found that the notice program was adequate and consistent with the Federal Rules of Civil Procedure and the standards of due process.
In addressing the terms of the settlement, the court found that the settlement – which creates a $40 million settlement fund and provides consumers with recoveries ranging from $20 to potentially $84 per product purchased even without proof of purchase – was fair, reasonable, and adequate. The court noted that none of the other class plaintiffs (there were four in addition to the designated representative plaintiff) objected to the terms of the settlement, and that only 11 objections had been received from individuals. The court found that the objections, which fell into three categories, were without merit. The first set of objections claimed that class members should be reimbursed the full purchase price for their shoes, rather than the partial payout proposed in the settlement. The court rejected this argument finding that reimbursement of the full price would preclude payment to some class members since the settlement fund would be depleted faster, and also because “reimbursement of the full purchase price would overcompensate the class members.” The court stated that “the monetary relief available under the settlement is calculated to compensate the class members for the difference between the shoe they bought and the shoe actually received.” The second set of objections expressed satisfaction with the products, which the court found could not truly be considered objections to the settlement. Finally, one person objected on the belief that the settlement would bar her from seeking compensation for personal injury. However, the court noted that the proposed settlement only reached consumer fraud and economic injury claims, and did not affect a class member’s right to maintain a personal injury claim.
With respect to attorneys’ fees, the court stated that the settlement was atypical because Skechers agreed to establish a separate $5 million common fund for fees and expenses. The court noted that “[n]o party has fees and expenses that would consume the entire common fund if awarded under the lodestar approach” and that the court would, therefore, “award fees, costs, and expenses using the multiplier method so that the common fund will be consumed.” The court awarded $4,278,883.74 in fees (and $42,826.26 in costs and expenses) to lead class counsel, which performed most of the work in the case. The court performed a lodestar cross-check, which resulted in fees of $2,003,364.00. The court noted that the $4,278,833.74 fee award reflected a multiplier of 2.14, and only represents 9.5% of the combined $45 million settlement fund. The court found that multipliers of 2.0 had previously been approved in the Sixth Circuit, “and the excellent result achieve[d] in this action support[s] a multiplier only slightly higher than 2.0.” The attorneys that represented other plaintiffs received significantly smaller fee awards, which reflected multipliers between 0 and 2.12.