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IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

NICK PEARSON and RICHARD JENNINGS, )

)

) No. 11 CV 7972

)

Plaintiffs, )

)

vs. ) Chicago, Illinois

)

TARGET CORPORATION; NBTY, INC., a Delaware )

Corporation; REXALL SUNDOWN, INC., a Florida) October 4, 2013

Corporation )

)

Defendants. )10:47 o'clock a.m.

TRANSCRIPT OF PROCEEDINGS

BEFORE THE HONORABLE JAMES B. ZAGEL

For the Plaintiffs:

STEWART M. WELTMAN, LLC

BY: Stewart M. Weltman

53 West Jackson

Suite 364

Chicago, Illinois 60604

(312) 588-5033

DENLEA & CARTON LLP

BY: Peter Newton Freiberg

Jeffrey Ian Carton

One North Broadway

Suite 509

White Plains, New York 10601

(914) 920-7400

Court reporter:

Blanca I. Lara, CSR, CPR, RPR

219 South Dearborn Street

Room 2504

Chicago, Illinois 60604

(312) 435-5895

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Appearances (continued:)

For the plaintiffs:

BONNETT FAIRBOURN FRIEDMAN & BALINT, PC

BY: Elaine Ryan

2325 East Camelback Road

Suite 300

Phoenix, Arizona 85016

(602) 274-1100

For the defendants:

SIDLEY, AUSTIN LLP

BY: Kara L McCall

Michael W. Davis

Christopher Matthew Gaul.

One South Dearborn Street

Chicago, Illinois 60603

(312) 853-7000

For Objector Ted Frank:

CENTER FOR CLASS ACTION FAIRNESS

BY: Melissa A. Holyoak

1718 M Street NW, No. 236

Washington, DC 20036

(573) 823-5377

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(Proceedings taken in open court:)

THE CLERK: Case number 11 CV 7972, Pearson versus

Target Corporation.

MR. WELTMAN: Good morning, Your Honor.

Stewart Weltman on behalf of the plaintiffs.

MR. FREIBERG: Good morning, Your Honor.

Peter Freiberg also on behalf of the plaintiffs.

MR. CARTON: Good morning, Your Honor.

Jeffrey Carton also on behalf of the plaintiffs.

MS. RYAN: And Elaine Ryan on behalf of the

Plaintiffs.

MS. MC CALL: Kara McCall from Sidley & Austin on

behalf of the defendants.

MR. DAVIS: Hello. Michael Davis, Your Honor, on

behalf of defendants.

MR. GAUL: And Christopher Gaul on behalf of the

defendants.

MS. HOLYOAK: Melissa Holyoak on behalf of the

objector Ted Frank.

THE COURT: I have some questions.

MR. WELTMAN: Sure.

THE COURT: I've looked through the remedies. There

is, I think, an obvious difficulty. Not the fault of the

lawyers, in fact probably not the fault of the parties either,

and I've dealt with this in one prior case, although it

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resolved itself. When you're dealing on an individual basis

relatively small damages and damages that may be difficult for

an individual to prove, I don't think -- I actually searched

the drawer that I have where I throw things. I don't think I

have a receipt in any of those for any item worth less than

$80.

And I looked in a drawer where I routinely and

foolishly just toss receipts because I find the effort of

walking an additional four or five steps to the trash basket

too much for me, so I open a drawer and I stick this stuff in.

And then after a year or two and the drawer is becoming

difficult to close, I take them, throw them out, and then I

start the process over.

So the actual value, the number of refunds, is likely

to be small. And, in many cases, even if somebody has this

stuff, they may not think it's worth the candle to send it in.

So what I regard as the single most defensible value of

settlement in this case to plaintiffs has to do with the change

in information.

MR. WELTMAN: The labeling changes.

THE COURT: The one question I had was, are there any

studies about how many people read these things?

MR. WELTMAN: How many people read the labels?

THE COURT: Yeah, read the labels.

MR. WELTMAN: Well, Your Honor, actually, yes. I'm

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going to cite them to you, but yes, people do read the labels.

THE COURT: Right. How many people read the labels?

MR. WELTMAN: I would say most of the people, I

can't -- that wasn't what I was prepared to respond to today,

Your Honor, but there are consumer studies, we're familiar with

them, I'm familiar with them, that discuss this very point,

that, in fact, the point of purchase, the front of the label,

is the critical transaction point. It's when the consumer

makes the decision --

THE COURT: Well, the question is, reading fine print.

I'll give you an example of in another field entirely. And

part of it is because I knew people who practiced in the field,

but part of it is the evaluation that I saw from the time I

took the bench in 1987 to, maybe, 1992, 1993, and it had to do

with Blue Sky Laws which said, well, you do this prospectus for

stock you're going to issue and you have to tell certain

things.

And, ordinarily, when there was an objection when

somebody filed a class action for all of the people who bought

this stuff, bought these stocks, would say, well, you know,

they didn't tell us about this risk, they didn't tell us about

that risk, and then the case settled or the company went to

bankruptcy, one of those two things happened. And there was,

by the time I got on the bench, the prospectuses were pretty

large. And they became larger and larger as time went on, and

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they got to the point where the cases started to disappear,

they started to find fewer and fewer Blue Sky cases. The cases

really depended not on the prospectus but on some public

statement that the CEO had made.

MR. WELTMAN: Right.

THE COURT: And one of the reasons that it was shifted

to them is, these prospectuses became so long that I once

hypothesized that you could have an issuance of the new share,

new set of shares, and that you'd have 20 or 30 pages of fine

print about all of the things that could go wrong. And I

reached the conclusion that you could probably, I wouldn't say

certainly, probably get away with putting something in a

prospectus which said we do not vouch for the honesty of the

directors and founders of this company, it is possible that

they will pocket money for their own purposes and not

diligently pursue the business.

My view is is that with the possible exception of the

people at the brokerage firms who have to read this stuff

seriously, the average citizen would buy the stock anyway, and

the reason they buy the stock anyway is to not read through 30

pages.

And my concern is whether I had a phenomenon here in

which case the label might be perfectly good but if the print

is small enough and it tells you all you need to know about the

medication or the vitamin or the non-FDA substance that's being

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sold, does this actually influence, is the apparent injunctive

relief actually worth very much to the public. And,

particularly, what is the correction here, "individual results

may vary"?

MR. WELTMAN: No. No, Your Honor.

THE COURT: But what actually good do the "individual

results may vary" do?

MR. WELTMAN: That one is not an important labeling

change.

THE COURT: Yeah, but what did that one do? Because

there were fights about that one, too.

MR. WELTMAN: We just had that one because there is a

high placebo effect -- in fact, we make it very clear in our

papers, that one was just for people to know, who might not

otherwise presume that, that that would be, you know, a

possibility that individual results would vary. But that was

not -- I mean, that is not the keystone labeling change here,

of course.

The keystone labeling change is, as we've set forth in

our papers and put graphically, you can see it, we've attached

it as exhibits, each of the labels that's subject to this

change basically had a series of prominent representations

about the product, generally one, and generally two, sometimes

three. This is one of those. And right underneath the product

name, there were these three representations or two

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representations, and if you saw the exhibits you will see that

that is no longer going to be there.

And we submitted, again under seal, Your Honor,

evidence from the company's own documents that shows that a

very, very high percentage of the people who purchased these

products deemed that to be a key message.

So it is an important result, as far as we're

concerned. People buy these products based upon basically two

reasons, one is what I will call the palliation reason, which

is the feel better joint inflammation or whatever, and then the

rebuilds, renews. People think and buy this for a long-term

basis believing that somehow they are going to rebuild or renew

their cartilage, and that's a key message that's no longer

going to be made on the labeling of these products.

Our view is --

THE COURT: The other thing that disturbed me about

this is, your position from the very beginning is, and I was

unclear on exactly where this stood, but let's take the lesser

form --

MR. WELTMAN: Sorry?

THE COURT: There are two things you can say about

something that has only a placebo effect, and we're assuming,

this is hypothetical, you got something that says only placebo

effect. You can tell people it doesn't work for anybody, alter

the structure in some way, but you're actually not saying to

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them the only valuable purpose served by this is that it has a

placebo effect, in which case you could take a label and put a

glucosamine on it and instead of actually putting glucosamine

in the pills you could put sugar pills on there, a classic

placebo effect structure.

My difficulty is, if, basically, somebody can prove to

me, or to anybody, that glucosamine chondroitin doesn't do any

of the things by itself other than a placebo effect, the issue

then becomes is what the appropriate remedy is. And the

appropriate remedy in your case seems to be, we're going to

tell people, basically, there's no guarantee here, you could

even put more on it and say that studies have shown that it has

no effect at all, a lot of stuff like that, but why are we

going to the issue of injunctive relief in putting notices on

bottles for something which, if all that you said in the

complaint is true, shouldn't be on the market at all.

MR. WELTMAN: Well, Your Honor, this was the subject

of negotiation.

THE COURT: Right.

MR. WELTMAN: And, again, I want to point -- I want to

make it very clear that in our complaints there are two

separate issues, separate categories of what we contend to be

misrepresentations about the products, one is what I will call

the palliation, joint flexibility, pain relief, lubrication of

the joints, whatever you want to call that. There's a second

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approach, that's the rebuilds, renews representation. These

are two separate types of representations.

If you take a look at the expert report of Dr. Thomas

Schnitzer you will see he was our expert who testified in the

Osteo Bi-Flex case we had in California, those are two separate

issues. We negotiated a deal where we tried to get as much as

we could, but for us to negotiate an entire complete label

change would've required us to go to trial.

So we looked at this, we knew the science was solid,

and we convinced defendant that it was solid on the renews,

rebuilds, sufficient enough they were willing to take out that

key representation. They were not willing to concede every

contention that we made in our complaint. They were not

willing, though we tried to bargain, to change some of the

palliation representations.

So we're confronted with, as class counsel, an offer

which achieves some of what we sought to obtain in this case.

In fact, a significant change, an entire category of

representations is being removed by agreement. And we, like

any other plaintiff's counsel in negotiation, has to make an

evaluation. Is this a good result, is it a perfect result?

No, it's not a perfect result. Of course, not. A perfect

result, if you accept our allegations, is to completely remove

all representations, but that's the byproduct of negotiation.

And I submit to you, Your Honor, that what we've

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achieved in terms of the rebuilds and renews, and getting a

main representation taken off of the front of the labels, is

fairly unprecedented if not completely unprecedented in private

consumer fraud class actions. You can take a look at the

cases, I don't think there are any. It's a major achievement

to get a defendant to take one of -- the real estate on that

package is not large. They choose the key messages they want

to put on that package and we got one of those messages removed

by agreement. Do we get all of them? No. You know, would I

have preferred to get all of them? Of course. But that's the

byproduct of compromise and we perceive this to be a major

accomplishment by way of the litigation. It was the reasons,

to me, a driving factor to submit this because it is a major

change.

THE COURT: Okay.

Do you want to be heard on this at all?

MS. RYAN: Unless the Judge has any questions that are

particular to the defendants ....

THE COURT: I cannot imagine that you would want to

say anything now.

MS. RYAN: No.

THE COURT: Okay.

The objector?

MS. HOLYOAK: I do have something on this, Your Honor.

You were talking about the injunctive relief and about the

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evaluation of it. And I think one of the problems with the

parties' briefs is that they ignore the Seventh Circuit law,

which is Synfuel, which says we need to look at the fairness of

the settlement based on how we're compensating these past

injuries.

Now, the parties have tried to distinguish Synfuel by

saying, well, they're not -- Synfuel doesn't apply because in

Synfuel they said they wouldn't be future victims. But here,

the real question in Synfuel was how are you compensating these

past injuries. And under the complaint they're basically

saying, hey, these class members, they wouldn't purchase the

product at all if they had known or they would have paid a lot

less if they had known that this really doesn't rebuild

cartilage, or whatnot.

And so the question here is, how do these future

changes, which apply to future customers and future purchases,

how does that compensate for this past injury for paying too

much. And it doesn't. And that's why in Synfuel it says the

fairness of the settlement should not be viewed differently.

THE COURT: But my question to you is, no matter how

large the pool you put aside for people who bought the product

and shouldn't have bought the product, or bought the product on

the basis of representations that shouldn't have been made,

how, in fact, do you set the system that is going to compensate

them for losses which, in many cases, may be 10, 15 dollars?

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We've dealt with this before, but usually when we deal

with it before -- well, the cases I've dealt with this before

are cases in which, for example, utility provides something,

some service that really is absolutely worthless or very close

to worthless, and the defendant has in its records the name of

every individual who purchased. And you could reconstruct this

and say, okay, we're going to send you a little notice, every

one of these people, that there are erroneous charges and we're

going to give you credit on your next bill, which is a way a

utility company can do that.

We now have a fairly substantial number of people

whose identities are not known, who have to trouble themselves

to put some kind of request via stamp, if people still use

that, although the e-mail is a lot cheaper, and say, you know,

I bought three bottles of this stuff and I want my $15 back.

There's some people who are going to do that, there's

absolutely no question, but, generally speaking, you are in a

situation where if you take what the Seventh Circuit said

literally, you've got settlements that cannot, in fact, be

achieved because you don't know to whom to send the money and

you don't know how much.

MS. HOLYOAK: Well, here we do. I mean, they did have

information for 4 million members. So they could've been --

they could've sent a check for 5, 10, 12 dollars, like the

maximum amount of the purchase, to those 4 million and still

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remained a claims process for the others, for the remaining

class members, to be able to send in claims.

I think the other problem here is --

THE COURT: Now, do I weigh against that the cost of

doing that?

MS. HOLYOAK: I'm sorry?

THE COURT: Do I weigh against that the cost of doing

that?

MS. HOLYOAK: The cost of sending the direct checks?

THE COURT: The cost of hunting down the people. You

wind up with a fairly expensive process. And, basically, you

may dispense a fairly small amount of money, but what does

happen is -- if, for example, the defendants are managing that

process, you have some argument that there's a level of

deterrence here because they're going to have to spend money

finding people who bought from their store, sending checks out,

and maybe they won't do it the next time, but that's not the

same thing as considering fairness in terms of compensation of

the people who bought it.

There's a social purpose if Target winds up spending a

fair amount of money and using people to look at a lot of

papers and trying to make a decision as to whether a claim is

legitimate or illegitimate, that's a penalty they're paying,

it's a cost, but it's not necessarily a benefit to any

significant part of the class.

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MS. HOLYOAK: Absolutely. But that's not even a

question here. They do have the 4 million names that they

could send directly that money to those 4 million people. And

it's not very clear why they just left it for a clearance

process for all 12 million, but here -- but you hit the nail on

the head on why that ends up being unfair, because here, as

we've seen, 20,000 claims have been submitted, which, as you

have explained, who keeps receipts, you know, from Target

5 years ago for their dietary supplements, the majority of

these are going to be for the no-proof. So it's very likely

that the maximum amount that's going to actually get to the

class is $500,000, and then you have a side credit of

1.5 million and you have 4.5 million to the attorneys. They

are looking at more than six times what the actual class is

going to receive, and, of course, that is untenable under Baby

Products and under other cases. But so they very well could

have used a direct -- sent a check directly.

Can I talk about other points, Your Honor? Or do you

want to address something else?

THE COURT: No; go ahead.

MS. HOLYOAK: I want to talk a little bit about the

motion schedule, Your Honor. I think I -- I believe I

mentioned -- we argued this in our objection that under

In Re Mercury Interactive, it's a Ninth Circuit case, it said

when you're setting the objection schedule, you need to set --

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THE COURT: Are you telling me you want more time?

MS. HOLYOAK: Yes, I would like more time.

THE COURT: I'll give you more time.

MS. HOLYOAK: Thank you.

THE COURT: What else have you got?

MS. HOLYOAK: Well, no, that is just -- not for my

objections, I'm saying for all class members, what happened

here was the fee motion came after the objection deadline. And

so all class members were deprived of vital information about

the fee, fee motion, including here the fact that they're

seeking a multiplier of 2.7, and absent class members are

interested in the fact that they be paying their attorneys

$1,800 an hour for this result.

THE COURT: Have you actually talked to a lot of class

members?

MS. HOLYOAK: Have I?

THE COURT: Yes.

MS. HOLYOAK: Personally? No, I have not.

THE COURT: Well, that's another issue that concerns

me about this case. When we're dealing with very small stakes,

when it's $15, $20, you don't really expect that there's going

to be a lot of input from actual class members. You can

anticipate that there will be input from various entities

deeply concerned about their class action process in the United

States, but most of those people, and you are one of them, are

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speaking for people and speaking for the interest of people who

have, with the exception probably of a few very crabby people,

not spent a lot of time talking to you or to their lawyers. So

when you start talking like this, it's a little like hearing

some elected official telling us what the American people want

when that individual has talked, if any, to a very small number

of people.

MS. HOLYOAK: Well, part of --

THE COURT: But the question is, leaving aside the

people who were somehow damaged to the tune of 20 bucks or 30

bucks, leaving them aside and leaving whatever emotional tug

there is, which is very small when the amounts are very small,

there must be some other purpose that your objection seeks to

serve other than the class members in this particular case.

And it seemed to me that much of your briefing dealt

with the basic premise that forget what the class members may

or may not want and may not even want to consider, the process,

as exemplified by this settlement, isn't achieving its overall

goals, not necessarily the goals of the individual class

members but the goals of class actions in the first place.

I think that a strong undercurrent in what you're

briefing is that this is a classic example of something that

really should not be occurring the way it's occurring. And

there are all kinds of other alternatives, but they don't

necessarily exist because we have various federal regulatory

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agencies who regulate a variety of things, what we're dealing

with today is not one of them.

Although that's not the way it has to be. I know

people who actually have traveled to Berlin to buy vitamins

because the Germans certify and treat vitamins the way the FDA

treats penicillin or some new antibiotic, we don't do that

here. So, I mean, it's possible that there is some other

remedy but this is beyond the authority of anybody standing or

sitting in this courtroom now.

But tell me something about where you think the system

goes wrong without shedding a tear about the individual class

member and its 15 bucks.

MS. HOLYOAK: Well, I think you can do both at the

same time, because under, you know, 23(h) and the circuit

authority that we have, you need to have this fee motion prior

to the objection deadline which would solve some of the

problems.

I think some of the class members, more class members,

probably, would be objecting if they understood exactly that

they were paying $1,800 an hour, effectively, based on the

multiplier, to their attorneys for this result, but also based

on the, you know -- on the alleged value of this injunctive

relief and wanting to know where is this coming from.

I think there is some information not available to the

class members and more could have objected if so. In fact,

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that's one argument I would reject based on the settling

parties, they said that, well, it doesn't matter that our fee

motion came after the objection, and it doesn't matter that

this motion to seal came after the deadline because the

objectors will be able to respond. But there's other people,

the absent class members, may have objected as well if they had

more of this information.

But I agree with you, Your Honor, that there are lots

of problems just based on the class action law that the

settlement is untenable, again, based on the Third Circuit.

These ratios paying the class members 500,000, 1.5 and the

attorneys 4.5 is untenable under Baby Products and other

courts.

Did you have any other questions, Your Honor, about

how the Court should look at the settlement and these ratios?

THE COURT: I think I understand your position.

MS. HOLYOAK: Okay. Thank you, Your Honor.

MR. WELTMAN: Your Honor, there is value imparted in

the settlement. We submitted an expert report that shows that

these representations that are being removed were very

important and, in fact, he has estimated a value just for the

30-month period.

Now, whether or not this benefits current class

members, which we pointed out in the evaluation that they do,

because there are a substantial --

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THE COURT: The most significant aspect of the remedy

sought in this case is the future worth of the change. I don't

think you can get around, and I don't think you particularly

want to get around, the proposition that these individual

claims are very small. The collected claim by the class has

some substance, because if you put a lot of people with their

$15 together eventually it winds up into 6 and possibly 7

figures. So, I mean, there's something that's really there,

but the truth is, I have to consider the factual difficulties

and procedural difficulties in getting the funds to the people

who spent them.

And the truth of the matter is is the fact that you

have better data on some than you do on all does not alter the

fact that probably the number of known customers is less than

50 percent of the whole. And I'm reluctant to accept the

objector's proposition that when you were dealing with class

action, which all class members pretty much stand on exactly

the same footing, that one group of people whose damages are

easier to ascertain wind up getting paid and those who aren't

don't get paid, that, I think, is a general problem with class

actions, except usually in cases where the damages are

substantial you pretty much pay out to pretty much everybody

who was affected by it knowing that you're going to miss a few.

What we have here is a possibility that they could

adopt a procedure where you would have a better idea of the few

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and not much of an idea, which we're never going to have, not

much of an idea of the whole. So from my point of view, this

falls--and small-stakes cases almost always do--falls in this

category of cases where you're not going to have effective

class-wide monetary relief, which is why I think the basis

you're offering for the fee petition and for disbursement of

funds, and in terms of your expert, so much more focused on

future benefit than it is on concerns for remedying small

amounts of money that were lost by people who might not have

bought the product if the label were different.

Another thing that occurs to me, and this was actually

my last question, so if you have anything else you want to say

to me first, you can do so.

MR. WELTMAN: Okay. Well, Your Honor, the injunctive

relief is a very important factor in the settlement. We've

said that all along. We have provided a mechanism by which

people who were so inclined could seek payment in claims. They

didn't even have to have receipts, there was a tier that they

could just say they had non-document purchase.

THE COURT: Right.

MR. WELTMAN: But when we're dealing with societal

issues, the furtherance of and importance of societal issue,

the elimination in futuro, in the future, of a representation

that, by the documents we've shown you and the expert report

we've shown you, is an important representation to consumers.

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By eliminating what we contend to be a highly

misleading misrepresentation, we have furthered a very

important goal, a very important societal goal. And if the

Court does not take that into account -- the courts, not this

court but the courts in general, don't take into account

substantial future injunctive relief like this and compensate

counsel who fight for that--because we fought for it, we spent

time, a lot of time litigating this, hiring experts--if you

don't reward counsel for that and also approve it, then you

disincentivize future counsel from ever seeking these types of

very important social goals which are the social goals behind

the consumer fraud laws to begin with. That's what they're

about.

I mean, it's one thing to say, okay, we'll pay people

for their past damages as best we can, but to stop the conduct

which causes the harm in the future is the ultimate goal of

consumer fraud laws. So I submit to you, that's a reason to

approve the settlement, that is a reason to award counsel fees,

and the incentive awards that we've requested.

Now I'll answer your question.

THE COURT: I'll give you an example of why I'm

thinking the way I'm thinking. Many, many years ago there were

probably in the hundreds of cases filed against various banks

for their practices with respect to the administration of

mortgages, payment of taxes, property taxes, a variety of other

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things. All started in Minnesota, most of the cases were

brought by one law firm. A judge who later went to the Eighth

Circuit who was a district judge in Minnesota resolved a ton of

them and I may have had 80 or 90 that I resolved. What

eventually came to pass were two things, one of which educated

plaintiffs' counsel and the other educated all of us. The

cases originally started out because there were a group of

plaintiffs' lawyers who thought, with some justification, that

these banks had adopted policies, escrow policies, that were

designed by the leadership of the bank to extract extra money

from their customers. It became clear long before the cases

got to me that that was not true.

MR. WELTMAN: That was not true?

THE COURT: Not true.

MR. WELTMAN: Okay.

THE COURT: The upper level of banking couldn't have

cared less. The practices were started by mid-level managers

who didn't want to go to the bank and say we paid more in

escrow than we took out and the banks lost money. So they

over-escrowed.

Well, it takes a lot of the moral force out of the

case. The Jamie Diamonds of the world probably were not aware

of escrow practices because they probably never had a mortgage

on their own and they weren't interested in that grungy part of

banking. And the cases eventually settled, but one of the ways

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they settled was because as these agreements kept maturing, the

lawyers for both sides understood that some of these solutions

were not helpful to class members, and the things that the

lawyers thought were really good for the class met with a lot

of condemnation, usually by some lawyer from the neighborhood

who would yell, say, "you know, why are you forcing the bank to

do this, it's not something that my client wants, it's actually

damaging to my client."

And over a period of time, they worked out a series of

solutions. They worked out the solutions because they found

from actual practice that some things were good for the class

and other things were not good for the class and that in some

cases what was good was the kind of thing where the bank was

willing to give options, choose one, two, or three, and you

choose and do what's best for you.

So the final settlements of these cases were much less

controversial than the original ones. Granted, that in some

cases the banks were concerned because the transaction costs of

achieving this were a little high. You know, they had to have

somebody sending out papers saying you have choice 1, 2, or 3

and somebody had to record it, but it wasn't much, and it

worked out very well.

What I looked at when I saw what I thought was the

principal aspect of this case was the proposition that based on

what expert witnesses have told us, is that people pay

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attention to labels. And if you make these changes to the

label, the sales will be, I guess in your case, given

compromise, far less contaminated by whatever salesmanship the

defendants want to have. But the lesson I learned from the

mortgage cases was, why do I have to look into the future, why

don't they make the changes and see what happens to their

sales, see what the actual damage was, see what the actual

benefits are.

What I am asked to do here is to pay a certain sum of

money for the value that is delivered to the plaintiff class

and to the public in general, why do I have to make that

decision as to how much should be paid for this before I know

what happens?

The truth is, if this has no effect at all on their

sales, none, zero, I wind up paying you and extracting costs

from the defendants that does not achieve the goal that your

expert thinks it will achieve. It may very well be that you

can come in here and say to me, the proof is now, the medical

proof is uncontrovertible that the only effect this has is

placebo. And, as a result, I don't know, let's say 20 percent

placebo for everybody that takes the pill, you have a whole

bunch of people who don't buy it, their sales plummet, and you

come in here and say this shows the public value of what we

have done in this case, we have forced them to do something

that the FDA doesn't do because they don't exercise the

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jurisdiction, we have forced them to give honest information to

consumers, and as a result of this the consumers aren't buying

it, and they shouldn't buy, and this is a great benefit and

now, Your Honor, after the last 6 months or year has passed we

can tell you, this is the benefit we have brought, and you can

come in here and say we underestimated what this was worth to

the public and we want more as a reward for our public service.

And I understand that usually the last thing you want

to say to a lawyer is, wait for your money. We have many

practitioners of law in the United States -- what was that

great line? It was a criminal defense lawyer. It turned out

to be true, I can't remember his name, it was a guy in the

1940's, 1930's, famous New York defense lawyer, when somebody

would call him and tell him what their trouble was and seek to

come and discuss this with him, he would stop them within a

minute or two of their description and his answer was "I don't

listen, I don't think, I do not wish to hear until I receive"

and then he mentioned whatever amount it was.

So, basically, I understand why this may not be the

most attractive possible result for you. It also seems to me

to be significant in light of the argument that even the

objector is making, because the objector is making certain

assumptions about what people would or would not do under these

circumstances and she doesn't know either. This is her best

guess. And this proposal is your best guess. Why should I

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guess when I don't have to guess? And why don't I adopt a

structure that says wait and see on the money? And in a

situation where your only incentive is the money possibly can

get bigger, but probably you think it won't, and if I were in

your shoes I wouldn't think it's going to get any bigger

either.

Go ahead.

MR. WELTMAN: May I answer the question?

THE COURT: Because I wanted you to understand exactly

what I'm thinking.

MR. WELTMAN: I understand.

Your Honor, if that were a possibility "maybe" would

be my response, but it's not a possibility. You can't

prospectively try to figure out what the -- you know, you

can't, like, start to say today we've got a benchmark, this is

the yearly sales of Osteo Bi-Flex, and then they're going to

implement the labeling change, and now let's see what the

yearly sales are. There's no -- you can't -- there may be

other people who buy the product for different reasons, but you

are not going to be able to measure the amount of people who

don't buy the product because of the removal of a key

misrepresentation.

THE COURT: Oh, that part I don't have a problem with.

MR. WELTMAN: So I don't know how we prove up the fact

that --

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THE COURT: You just take a look at what their sales

are, what percentage of the market they had, if they had any

percentage, and what percentage of the market the drugs

themselves had. From that, you have a chance of making a

reasonable inference that this change was instrumental. Was it

entirely instrumental? Maybe not.

Examine, for example, if you want to take an extreme

example, you set out this thing saying "it absolutely doesn't

help" and then somebody in Sweden discovers that if you don't

take glucosamine with water from pure springs you increase your

cancer risk by 15 percent. Well, I think that would put a dent

in glucosamine sales and it would have absolutely nothing to do

with what's on the label. So there are lots of things that

could, theoretically, happen, but I'm still better off in terms

of knowledge if I take a look at what happens to sales

post-correction of the label. Maybe its not the most accurate

thing, but it's better than what I got now.

MR. WELTMAN: Well, actually, I submit to you, Your

Honor, that it's not better, and here's why, all right: We

don't know what -- Osteo Bi-Flex is not prohibited from going

on a big marketing campaign and pushing their product based

upon the representations they have now. We will never be able

to know how many people don't buy the product in the future as

a result of removal of these representations, but what we do

know, we do know right now is that if this injunctive relief is

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put in place, then that particular misrepresentation will never

be made again, and that's an important goal.

THE COURT: But why do we know that it is important?

We don't know it's important, and, on top of it, we don't know

how important it is.

MR. WELTMAN: We do. We submitted to Your Honor

documents or evidence in consumer surveys as late as 2011 that

show that a very high -- I can't disclose it because it's under

seal, but if you can take a look at the report of Dr. Reutter,

in 2011 there was a consumer survey that showed a very high

percentage of people think of this representation is a key

representation. So you are now eliminating what we contend to

be a false representation in the future, that's the important

point.

THE COURT: Swell. But the fact is is what effect

does this have on the market. Are people stopping from buying

this stuff. And if they're stopping buying this stuff, are

they stopping it because of what you have gotten done or are

they stopping it for some other reason. If they're stopping it

because something else raises its head, what you did is you

made a terrific effort to eliminate something and it turned out

not to matter.

MR. WELTMAN: Well, let's assume nobody stops buying

it, okay.

THE COURT: Yeah.

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MR. WELTMAN: Let's put that hypothetical in front of

us. We've just eliminated the representation that we believe

is false and people still continue to buy it. Even then, even

then, the consumer fraud policies and purposes behind the

consumer fraud laws have been furthered because now they're

making purchases based upon the absence of this representation

which we contend is fraudulent.

So it's a free world, people can make purchased

decisions based upon other things, but we have eliminated, if

this settlement is approved, what we contend to be a false

representation. And if people continue to purchase the same

levels, that's what they do.

The estimate that Dr. Reutter prepared --

THE COURT: But what's the value?

MR. WELTMAN: What's the value?

THE COURT: Yes.

MR. WELTMAN: The value is is in the marketplace there

should be truthful information.

THE COURT: And what are you attaching to the dollars?

I'm trying attach dollars to this.

MR. WELTMAN: Well, we've attempted to do that based

upon --

THE COURT: Well, and that's my problem, it's an

attempt.

MR. WELTMAN: Okay.

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THE COURT: That's my problem, it's an attempt. That

there is a value to it --

You are leaping to his aid?

MR. CARTON: Well, if I may offer a word or two, Your

Honor?

MR. WELTMAN: Sure. Be my guest.

MR. CARTON: Thank you.

Your Honor, Jeffrey Carton of Denlea & Carton.

As interesting as the colloquy is, my concern is that

the Court's question sort of ignores altogether the value that

is otherwise being achieved in terms of the pool compensation

and address that's being made available to class members.

Your Honor doesn't have --

THE COURT: Wait. Wait. Wait. Stop. I started with

this premise not that that didn't count, what you're talking

about. I started with the premise that likely the greatest

value, if there is value in this, comes from what happens in

the future, not the past. If you want to tell me that paying a

fair number of people relatively small amounts of money to

compensate them? Yeah, that is a value. It's exactly the kind

of value that I'm trying to find with respect to future sales,

and it's dollars and it counts. What we're in the business

here of discussing is, what's the worth of that, how does that

contribute to the worth of these individual people, and how do

we measure the compensation to class counsel.

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MR. CARTON: Yes, and I appreciate that. And I think

we framed that discussion with the information that's available

to the parties at this moment in time.

THE COURT: Yes, absolutely no question you're doing

it with respect to what's happening now.

MR. CARTON: Correct. And what we do in that respect,

and it may be an imperfect science, but we do our very best to

value two aspects of the resolution: We value the aspect of

the recompense that we've provided to class members, which is

an unlimited pool which is available to all consumers, all

households, and then what we try and do at the same time, Your

Honor, is obviously do our best to provide a basis by which to

value that future relief. And that future relief is value

based upon what we --

THE COURT: I got that.

MR. CARTON: Okay.

THE COURT: What you have misunderstood that the only

thing I was talking about is the value and the change of the

label, that's the only thing I was talking about. I am not

talking about the compensation. Although to tell you the

truth, the fees requested in this case for compensation of

those who sold is likely to be significantly smaller than the

compensation that would be awarded if the future actions were

significant. But I've said my piece and I understand your

piece.

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MR. CARTON: Thank you.

MR. WELTMAN: Your Honor, if I could just make a

couple more comments?

THE COURT: Sure.

MR. WELTMAN: What Your Honor is asking is that at

some point in the future, I don't know, 2 years after, whenever

the labeling changes are made, is that we commission what would

be an extremely expensive study to try to figure out what the

causes are for whether or not -- whether --

THE COURT: I have a short answer for you for that.

MR. WELTMAN: Yeah.

THE COURT: You can get somebody to tell me how they

value and tell me how much it would cost.

MR. WELTMAN: Well, Your Honor, another way, again,

and the law looks at it this way, forget about the value of the

injunctive relief, just look at it as injunctive relief. It is

injunctive relief, it's a significant label change. And in the

context --

THE COURT: Okay, except you're starting on a

significant label change and I have no way of measuring whether

that is true or not. Maybe it's not significant, maybe it

turns out not to be significant.

MR. WELTMAN: We've submitted to you contemporaneous

documents in the defendants' own records that show that it's a

key representation to a lot of consumers.

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THE COURT: I understand that that stuff is there, but

the truth of the matter is, I don't know how valid their things

are. So it's much better to take a look at this stuff on what

has actually happened as opposed to something in the future.

And as a matter of general policy, one of the most difficult

things with courts is trying to evaluate the effective future

injunctive relief.

Now, evaluating the future injunctive relief really is

not much of a problem if, for example -- what was that, and

this is the FDA that did this, that pain-killing drug that

drove people nuts because it was about the only thing that

worked, killed the pain of surgeries that involved screwing

something into a bone to separate two bones. It was a month of

television of people getting up and saying, you know, I can't

walk anymore because they've taken this drug off the market.

And they took it off the market because it did have adverse

effects. I can't remember the name. But that one, that's

pretty clear, you can get a pretty good idea.

But you're talking now about a mass market product,

you're talking about a widely advertised product, and maybe

putting that change in that letter on those words on the box

isn't going to have much of an impact. Now, do you want me to

tell you it's not going to have much of an effect? I don't

know. It might be massively effective, but I don't want to

make a judgment based on a guess where I don't have to guess,

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where I can get much closer to a rational assessment of the

value of this, and it might be very substantial. That's where

I am.

Let me hear from the objector.

MS. HOLYOAK: I just wanted to respond, Your Honor, to

the fact that they are arguing that their fee should be based

on the advancement of a social goal. A class action is not a

private AG type of action. They're not supposed to be rewarded

for trying to further social goals and social norms.

I understand that Your Honor wants empirical evidence,

okay, is it a tiny effect, a large effect. It really doesn't

matter. If it has enormous effect for the public, maybe that's

great, but they should not be compensated for that fact. And

the Seventh Circuit recognizes that. Because who are their

clients? The class members. And how are their class members

being compensated? And Synfuel shows that injunctive relief

that we're talking about does not compensate them for those

past injuries.

THE COURT: I'm glad you said that because I was

pretty sure that's exactly what you were going to say, but as I

have approached this case, I'd like to actually hear it as

opposed to guessing what you were going to say. Thanks.

MS. HOLYOAK: Understand, Your Honor. Thank you.

THE COURT: I will probably ask for some additional

papers. I think from the point of view of the defendants in

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this case, there's probably not a lot they want to say. They

just want it, I think, to be over. But the issue basically,

and you can give me a paper on it, on behalf of class counsel,

as to your views, duly considered probably after consulting

with experts, as to whether and to what degree it is possible I

might be in a much better position to decide the value of the

services after a period of some length. I'm not even

specifying the length because you may find experts who are

going to tell you about -- and there have been cases which I've

dealt with where you judge stuff on the initial effect, maybe

two or three, four months in, and there are some you can't tell

for a while.

So you may want to address on the hypothetical that I

choose to wait, you might want to address the issue as to how

long do I wait. And, obviously, you have some interest in

having that period be as short as possible, and maybe you can

defend the position that in three or four months we'll know

whether this had any effect.

At any rate, I am not going to rule today. Let me set

this for mid November.

MS. MC CALL: Your Honor, could I be heard on one

thing?

THE COURT: Absolutely.

MS. MC CALL: Thank you.

THE COURT: You've been so silent.

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MS. MC CALL: I just wanted to make clear. It sounded

like all of the discussions today is about the reasonableness

of the attorney's fee award and I didn't really hear the

objector, or, quite frankly, Your Honor, expressing any

concerns about the reasonableness of the compensation that's

being provided to the class, i.e., the reasonableness of the

settlement itself putting aside what the order of attorney's

fees might be.

And, you know, we have looked into this and the

Seventh Circuit does allow a final judgment without deciding

attorney's fees. It allows attorney's fees to be decided --

THE COURT: I am very well aware of that.

MS. MC CANN: Okay. Because our position would be,

we think that the settlement can be approved as final without

having to decide the attorney's fees.

THE COURT: That's absolutely true.

MS. MC CANN: Okay.

THE COURT: Although, there's one thing you should

understand, and that is, I am unlikely to excuse you from the

case, because if I decide on some method of evaluation, there

will be data that I will need from you, from your clients.

MS. MC CANN: Understood. Understood.

THE COURT: All right. That's fine.

Thanks.

Give them a date.

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THE CLERK: Wednesday, November 20th at 9:30.

(Which concluded the proceedings had on this date in

the above entitled cause.)

* * * * * * * *

I CERTIFY THAT THE FOREGOING IS A CORRECT TRANSCRIPT FROM THE

RECORD OF PROCEEDINGS IN THE ABOVE-ENTITLED MATTER

/s/Blanca I. Lara date

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