The last thing parties to a class action settlement want to see is an objection from state attorneys general (AGs). AG objections to class action settlements are relatively rare, and courts tend to give AG objections more weight than private party objections. However, not all of the AG’s objections are successful, and in the recent consumer fraud case of Hesse vs. Godiva Chocolatier, Inc.#1: 19-cv-972-LAP (SDNY), a six-state objection filed by Florida, Idaho, Maryland, New Jersey, Ohio, and Utah AGs failed to persuade Judge Loretta Preska to dismiss the proposed settlement.
Hesse concerned Godiva’s use of the word “Belgium” in the labeling and promotion of its products. According to the complaint, this practice has led consumers to believe, wrongly, that Godiva’s chocolates are made exclusively in Belgium and to pay higher prices for these products than they otherwise would have. The settlement offered by the parties for these claims is fairly standard. Anyone who purchased Godiva chocolate products between 2015 and last year could file a claim to recover $1.25 per purchase. Group members with proof of purchase could recoup up to $25 (for 20 purchases); those without proof were capped at $15 (for 12 purchases). Plaintiffs sought actual damages at $0.46 per purchase, so they called this repair more than a full recovery.
The actual notice was sent to 8.2 million people for whom the company has an email address and who therefore may be members of the group, which Godiva estimated at about half of the group. Godiva has also agreed to, among other measures, use Internet banner ads and maintain a case-specific website to notify potential class members of the proposed settlement. For some reason, the claims submitted in the settlement only reached $7 million, less than half of the maximum amount Godiva agreed to pay had the turnout been higher.
The objection of the AGs related mainly to the low claims ratio. To see State’s Attorney General’s concerns regarding the proposed settlement at 3 n.2, Hesse (7 March 2022) (ECF No. 98). “Low” is in the eye of the beholder, however, because Judge Preska agreed with plaintiffs’ attorney that a 2.83% claims rate in a consumer settlement with millions of class members, with some 500,000 people submitting complaints, was in fact “commendable”. “The AGs also damaged their own credibility by claiming that they had not found any of the Internet banner ads posted by the settlement administrator, but had only begun their search for these ads until ‘after the end of the advertising campaign. The AGs argued that Godiva should have posted a notice of settlement on its website, but the Court agreed with Godiva that this should not have been necessary in a case where the company emailed notice to more than 8 million customers. Overall, the parties spent nearly $1 million on notice costs, which the court found sufficient.
The AGs considered the $25 cap on claims, even when class members had proof of larger purchases, to be arbitrary and unnecessary. The Court disagreed, finding the cap necessary and appropriate to prevent fraudulent claims, and citing nationwide authority approving settlements with similar caps on claims even when class members had proof of purchase. Additionally, only 10,000 of the 500,000 people who filed claims submitted proof of purchase.
The AGs also argued that Godiva could have improved the complaint rate by obtaining purchase records from third-party retailers and providing direct buyers with the information in Godiva’s files regarding their purchases. Godiva and plaintiffs’ counsel argued that sending subpoenas would be cumbersome and likely inefficient, and that providing additional information to direct purchasers would benefit them over indirect purchasers. The Court agreed with the parties on these issues and dismissed the objections of the Attorneys General.
Separately, the AGs objected on the grounds that the settlement agreement did not include an injunction prohibiting Godiva from continuing to use “Belgium” on its product labels and in marketing materials. If the label was misleading and caused harm, the AGs argued, the settlement should have excluded the term or the required qualifications. The MAs found this particularly important given the low claims ratio. The Court, in its opinion approving the settlement, did not address this aspect of the AGs’ objection. In opposition to the AGs brief, Godiva argued that the injunction was unnecessary because the settlement does not purport to bind prospective purchasers.
Class action defendants who are considering structured settlements like the Hesse agreement should take note of objections from MAs. These objections failed in the Hesse cases, but cannot fail the next time these AGs or others raise them. The fact that objections have universally failed in Hessehowever, is quite noticeable.