The Seventh Circuit Court of Appeals affirmed a class settlement over objection in a case involving a hair-smoothing product (“the Smoothing Kit”) that allegedly destroyed users’ hair and burned their scalps. Plaintiffs sued Unilever United States, Inc. (“Unilever”) in the Northern District of Illinois. Related actions in Kentucky and California were transferred to the Northern District of Illinois.

The settlement class consisted of “all persons who purchased or used the Smoothing Kit in the United States before February 17, 2014” excluding those who previously signed a release for consideration. Unilever USA created two settlement funds: a reimbursement fund of $250,000 and an injury fund of $10,000,000, for a total of $10,250,000.

The reimbursement fund is available to any member of the settlement class who seeks compensation but is limited to a one-time payment of $10 per person. The injury fund compensates any personally injured member of the settlement class (excluding those who opted out), who suffered bodily injury under one of three options: Benefit A capped at $40 per claimant for class members who incurred expenses for hair treatment but who no longer have supporting receipts; Benefit B for claimants who had receipts, such as hairdresser or medical bills, capped payments at $800; and Benefit C which covers significant bodily injury and provides for an award up to $25,000 per claimant. A special master appointed by the district court makes the Benefit C determinations. Per the settlement agreement, class counsel’s fee was to be provided for separately from the $10,250,000 available for class compensation.

One of the class members objected to the settlement. She claimed the court lacked sufficient data to confirm the benefit to the class, the size of the class, the amount of the settlement and Unilever USA’s ability to pay. The objecting member also asserted that there the distribution scheme was not fair in the way that it treated tort and injury claims, did not enjoin the sale of the product, upheld unconscionable releases by excluding those who signed releases from the class, imposed undue burdens on Benefit C claimants and violated the class members’ due process rights by allowing the class counsel’s fee to be resolved after the settlement was approved without allowing the class members to comment on it.

Before ruling on the merits of the objections, the Seventh Circuit explained that the principles that guide a court’s evaluation of the proposed class settlement include (1) the strength of the class’s case; (2) the complexity and expense of further litigation; (3) the amount of opposition; (4) the reaction of the class members to the settlement; (5) the opinion of competent counsel; and (6) the stage of the proceedings and the amount of discovery that was completed.

In overruling the objections to the settlement agreement, the Seventh Circuit found that the trial court had sufficient data to confirm the benefits conferred by class settlement because, among other things, the settlement occurred more than two-thirds of the way through the claims period. There was no reason to believe that a trial would have produced substantially different results. The Seventh Circuit rejected the concerns about the application of different applicable law because the settlement agreement provided for a single choice of Illinois law.

The Seventh Circuit found that it was not an abuse of discretion for the court to approve the settlement agreement even though it did not contain an order ensuring that all Smoothing Kits had been removed from store shelves. The court considered such an injunction and rejected it.

The Seventh Circuit also found that the objecting member lacked standing to raise a complaint about the exclusion of purchasers who previously signed releases because she did not sign a release herself. The court also rejected the objection that the burden on Benefit C claims was unfair because the need for better documentation of claimed significant injuries is not a surprise and the special master can review such claims. The objecting class member failed to provide any evidence that the special master had imposed unrealistic requirements on any of the claimants.

Finally, the Seventh Circuit rejected the challenge to the procedure for class counsel’s fee in which the consideration of the fee was deferred until after approval of the settlement. First, the petition for fees was submitted two weeks before the deadline for objections which provided the objecting class member the opportunity to object to the fee, which she actually did. Second, the fees were kept entirely separate from the funds available for the compensation for the class members. The court noted that “this type of provision is to be encouraged, not criticized.”

Martin v. Reed, 2016 WL 1169134 (7th Cir. March 25, 2016)