A federal judge has approved a $35.5 million settlement in a class action in which plaintiffs alleged that Babies “R” Us and a group of baby product manufacturers violated antitrust law.
U.S. District Court Judge Anita B. Brody of the Eastern District of Pennsylvania also awarded $11.75 million in fees and $2.23 million in costs to the plaintiffs counsel, which included co-lead counsel Hagens Berman Sobol Shapiro of Oak Park, Ill., and Spector Roseman Kodroff & Willis of Philadelphia.
The class alleged that Babies “R” Us conspired with the defendant manufacturers to restrict competition by requiring all retailers to sell their goods at or above a minimum resale price, and thus that the class paid inflated prices for baby products, Brody said in her memorandum opinion in McDonough v. Toys “R” US Inc. and Elliott v. Toys “R” US Inc. Tuesday.
The other defendants are Britax Child Safety Inc., Peg Perego USA Inc., BabyBjörn AB, Regal Lager Inc., Medela Inc., Maclaren USA Inc. and Kids Line LLC.
The settlement represented 24 percent of estimated actual damages, Brody said.
Among reasons for approving the attorney fees, Brody said that if all the claimants received 20 percent of the purchase price, which is proposed for the plaintiffs with proper documentation, as well as treble damages, for an item as expensive as a $300 Peg Perego stroller, there will be “plenty of funding to allow for the award of treble damages. … Thus, class members are likely to enjoy the maximum benefit from the size of the fund.”
Spector Roseman spent 20,945.5 hours on the case, Hagens Berman spent 13,561.75 hours on the case, and all of the 15 plaintiffs law firms spent 81,200.82 hours collectively on the case, Brody said.
Brody did “admonish class counsel” for not posting the motion for attorney fees and costs on the website dedicated to the class action until after the deadline to object to the proposed settlement had passed.
Among other factors weighing in favor of approving the settlement, the risk of establishing liability and damages weighed in favor of settlement, Brody said.
When the case was initiated, a resale price maintenance agreement was a per se violation of the Sherman Antitrust Act, but then the Supreme Court “overturned nearly a century of precedent to rule that RPM agreements are no longer per se violations. … Defendants, therefore, could argue that the challenged agreements constituted reasonable restraints on trade and thus were legal,” Brody said. “Even if the plaintiffs could establish liability they would not have had an easy time providing damages because there were no universal price ‘mark-up.’”
Brody also pointed out that the U.S. Supreme Court and the 3rd U.S. Circuit Court of Appeals have rendered opinions that make it more difficult for district courts to grant class certification, so verdicts in favor of the plaintiffs might face rejection by the appellate courts, Brody said.
Brody also said that the complexity, expense and likely duration of the litigation weighed in favor of the settlement.
“Parties reached this settlement just as they were preparing to conduct six separate, consecutive jury trials in which they would have had to address disputed contractual agreements between manufacturers, distributors and retailers,” Brody said. “Both sides would have likely called several expert witnesses to the stand and would have had to address disputed business practices over a number of years.”
Discovery involved the review of more than 1 million documents and more than 30 depositions, Brody said.
Over 1.28 million class members received notice of the settlement, Brody said. At least 41,000 claims have been filed.
“As the opinion notes, the settlement represents about 24 percent of damages and you know that we’re not going to get 100 percent of the class members submitting claims … those that submit claims are in line to receive a rather significant recovery of their damages,” class counsel Eugene A. Spector of Spector Roseman said.
The settlement benefited the class, Spector said.
BabyAge.com Inc. and The Baby Club of America Inc. filed a separate antitrust lawsuit against all of the defendants, alleging the plaintiffs were prevented from discounting items. Brody said in her opinion she consolidated that case for purposes of discovery.
Kendall Millard, an attorney for Peg Perego USA with Barnes & Thornburg in Indianapolis, said that the litigation resolved successfully for his client.
The action with BabyAge against Peg Perego was dismissed with prejudice, requiring Peg Perego to not pay any money at all, Millard said.
And the other settlement just approved by Brody required Peg Perego only to make a “cost of litigation settlement,” Millard said.
Peg Perego also has maintained that it did not commit antitrust violations, Millard said.
Marguerite M. Sullivan, an attorney for defendant Britax Child Safety Inc. with Latham & Watkins in Washington, D.C.; Neil E. McDonell, an attorney for BabyBjörn AB with Dorsey & Whitney in New York; Joseph A. Tate, an attorney for defendant Medela Inc. with Dechert in Philadelphia; Alan M. Pollack, an attorney for Maclaren USA Inc. with Robinson Brog Leinwand Greene Genovese & Gluck in New York; and Michael J. Hahn, an attorney for Kids Line with Lowenstein Sandler in Roseland, N.J., could not be reached immediately for comment.
David R. Martin, an attorney for Regal Lager with D.R. Martin in Atlanta, declined comment.
( Copies of the 36-page opinion in McDonough v. Toys “R” Us Inc. , PICS No. 11-4718, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. ) •