The Sixth Circuit’s decision in In re: Dry Max Pampers Litigation (No. 11-4156) creates a new standard for class action settlements:  they must pass the smell test.  Judge Kethledge’s decision finds that the class received “nearly worthless injunctive relief” while the named plaintiffs received $1,000 per child and the plaintiffs’ attorneys received $2.73 million.  The decision weighs the realistic value of the injunctive relief (mostly just a label change the court characterizes as “an advertisement for Pampers”) against the attorney’s fees and the incentive award.  It also emphasizes the need to analyze the realistic value of the relief to the class members, rather than the costs imposed on the defendant.  The opinion concludes that the settlement is not fair because it “benefits class counsel vastly more than it does the consumers who comprise the class.”

Judge Cole’s dissent does not argue with the realities of the settlement, but argues that the class lost nothing because “nobody disputes that the class’s claims in this case had little to no merit.”  He would have affirmed the settlement under the Circuit’s prior precedent that weighed the worth of the claims (apparently zero in this case) against the value of the settlement to the class (nearly, but not quite, zero).

The panel’s decision may make it more difficult for class counsel in the Sixth Circuit to receive a big payday while the class gets coupons or injunctive relief.