Pearson v. NBTY, Inc.

NBTY, Inc. (NBTY) (defendant) and its subsidiary, Rexall Sundown (Rexall) (defendant), manufactured vitamin and nutritional supplements for individuals with joint disorders. Retail outlets such as Target (defendant) distributed the supplements to consumers. Nick Pearson and others (plaintiffs) filed a class-action suit in federal district court, alleging that the defendants had made false claims regarding the supplements’ efficacy in violation of several states’ consumer-protection laws. Five other similar class-action suits were initiated nationwide. Eight months later, class counsel in all six cases negotiated a nationwide settlement with NBTY and Rexall and submitted the settlement to the respective courts for approval. A claimant could receive $3 each for up to 4 bottles of supplements, or $5 each for up to 10 bottles with proof of purchase. The potential claimants were each mailed a postcard with instructions to visit a website, review a 10-page statement, and complete a claim form in order to receive compensation. The district court, which valued the settlement at $20.2 million, approved $1.93 million in attorneys’ fees, a $1.13 million cy pres award to the Orthopedic Research and Education Foundation, $865,284 to the 30,245 class members who submitted claims, and $1.5 million in administration costs. Additionally, the district court approved a 30-month injunction requiring Rexall to remove language regarding certain alleged benefits of the supplements from its packaging. The plaintiffs appealed.