UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

NICK PEARSON, FRANCISCO PADILLA, 

CECILIA LINARES, AUGUSTINA BLANCO, 

ABEL GONZALEZ, and RICHARD JENNINGS,

On Behalf of Themselves and All Others Similarly 

Situated,

 

 Plaintiffs,

v.

NBTY, INC., a Delaware corporation; and REXALL 

SUNDOWN, INC., a Florida corporation; TARGET 

CORPORATION, a Minnesota Corporation

 Defendants.

THEODORE H. FRANK,

 Objector.

Case No. 11-CV-07972

CLASS ACTION

Hon. James B. Zagel

OBJECTOR THEODORE H. FRANK’S RESPONSE TO

PLAINTIFFS’ SUPPLEMENTAL MEMORANDUM OF LAW IN SUPPORT OF 

MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT, 

ATTORNEYS’ FEES AND EXPENSES, AND INCENTIVE AWARDS

Melissa A. Holyoak

CENTER FOR CLASS ACTION FAIRNESS

1718 M Street NW, No. 236

Washington, DC 20036

Phone: (573) 823-5377

Email: melissaholyoak@gmail.com

Attorneys for Objector Theodore H. Frank

FRANK’S RESPONSE TO PLAINTIFFS’ SUPPLEMENTAL MEMO

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INTRODUCTION

On October 4, 2013, the Court held a fairness hearing regarding the fairness of the 

settlement and the requested attorneys’ fees. At the hearing, defendants’ counsel argued that the 

objections related only to the attorneys’ fee request and that the court should proceed to enter final 

approval. This is not true. Objector Frank objected that the settlement’s structure was impermissible 

because it allocated 70% of the constructive common fund to class counsel; such disproportion was 

merely one of the settlement’s numerous signs of self-dealing. See Frank Objection (Dkt. 95) at 9-19. 

Indeed, Objector Frank emphasized at the fairness hearing the extent of the 

disproportionate allocation that had been revealed in the Parties’ Joint Response to Objections. The 

Parties’ Joint Response reflected that a total of 19,593 claim forms had been received as of August 

29, 2013. See Affidavit of Michael E. Hamer (Dkt. 113-2). A generous estimate results in actual class 

benefit of $500,0001

, cy pres award of $1.5 million and $4.5 million to class counsel. These ratios are 

worse than those found in the settlement rejected in In re Baby Products Antitrust Lit., 708 F.3d 163, 

169-70 (3d Cir. 2013). There, class counsel negotiated a settlement structure that ultimately resulted 

in a potential allocation of $14 million in fees and expenses to class counsel, $18.5 million to cy pres

(less administrative expenses), and only $3 million to the class. Id. at 169-170. The district court 

failed to consider the disproportion between the $14 million and the $3 million the class received 

1 Those class members without proof of purchase are entitled to $3 per product, up to a maximum of 4 

bottles or $12. Settlement Agreement ¶ 17(c). Those class members with proof of purchase are entitled to $5 

per product, up to a maximum of 10 bottles or $50. Settlement ¶ 17(b). If claims do not reach $2 million, 

claims will be doubled (for claimants with no proof of purchase) or tripled (for claimants with proof of 

purchase). Settlement ¶ 17(d)(i) & (d)(ii). As this Court recognized at the fairness hearing, consumers do not 

typically maintain receipts for such low amounts. The vast majority of such claims will likely include class

members without proof of purchase. Assuming 19,000 of the claimants have no proof of purchase and 

submit the maximum $12 claim ($228,000) and the remaining 1,000 claimants with proof of purchase submit 

an unlikely $20 claim ($20,000), and those claims are then doubled ($456,000) and tripled ($60,000), 

respectively, claims would total $516,000. If payments to class members remain less than $2 million, 

defendants will remit the difference to the third-party Orthopaedic Research and Education Foundation, 

bringing total payments to $2 million. Settlement ¶ 17(d)(iii). Accordingly, based on claims received, it is likely 

that the class will actually receive $500,000 and $1.5 million will go to cy pres.

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under the settlement’s claims process; the settlement approval was reversed because “class counsel, 

and not their client, [were] the foremost beneficiaries of the settlement.” Id. at 179. Here too, the 

primary beneficiaries are class counsel, who will receive nine times what the class will actually 

receive.

To justify the disproportionate fee request, class counsel asserts that the Court should take 

into account the alleged estimated value of the injunctive relief, i.e., temporary labeling changes. At 

the fairness hearing, the Court requested additional information regarding the length of time 

required to determine the actual value of such labeling changes. In Plaintiffs’ Supplemental Memo, 

plaintiffs argue that the actual economic impact of the changes cannot be measured and the 

delay/cost of any such study outweighs the benefit, that the actual value is irrelevant because the

injunctive relief satisfies a social goal, and that the injunctive relief need not be valued for an award 

of attorneys’ fees. See Pls. Supp. Memo (Dkt. 137) at 1-2, 7. Plaintiffs’ arguments are both factually 

and legally untenable.

As an initial matter, plaintiffs’ argument that the economic benefit cannot be measured after

the labeling changes are actually implemented undermines any possibility that such changes could be 

accurately estimated prior to such implementation. Further, any social value that future labeling 

changes may provide is not relevant because the court must analyze the benefit to class members—the 

clients of class counsel—and not to future customers for purposes of awarding attorneys’ fees. See 

Synfuel Techs. Inc v. DHL Express (USA), Inc., 463 F.3d 646, 654 (7th Cir. 2006) (“The fairness of the 

settlement must be evaluated primarily based on how it compensates class members for these past 

injuries.”) Finally, courts have rejected the notion that the value of the injunctive relief need not be 

determined; the value of the class benefit is critical for purposes of awarding attorneys’ fees. See In re 

Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 943-44 (9th Cir. 2011) (reversing and remanding 

after district court failed to make comparison between attorney award and value of injunctive relief

to class).

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ARGUMENT

I. The Injunctive Relief is Not a Class Benefit and Its Purported Value Cannot be 

Accurately Ascertained.

The proposed injunctive relief—temporary labeling changes—is not a class benefit because 

it will only benefit future purchasers of the Glucosamine products. Seventh Circuit law makes clear 

that such relief is not a compensable benefit that justifies attorneys’ fees: “It is future customers who 

are not plaintiffs in this suit who will reap most of the benefit from these changes. The class 

complaint sought [money damages]. The fairness of the settlement must be evaluated primarily 

based on how it compensates class members for these past injuries.” Synfuel, 463 F.3d at 654; 

Crawford v. Equifax Payment Servs., 201 F.3d 877, 880 (7th Cir. 2000) (defendant’s injunctive

agreement not to use abusive debt collection letter is a “gain” of “nothing” for class members).

Even if the injunctive relief could be considered a class benefit, however, plaintiffs’ 

purported valuation is unsupported and implausible. The practice of inventing fictive valuations of 

inestimable injunctive relief is a recurring, well-chronicled and particularly pestilent problem of class 

action settlement proceedings. E.g., In re Oracle Secs. Litig., 132 F.R.D. 538, 544-45 (N.D. Cal. 1990)

(opinion of Walker, J.) (referring to injunctive relief “expert valued at some fictitious figure” coupled 

with “arrangements to pay plaintiffs’ lawyers their fees” to be the “classic manifestation” of the 

class-action agency problem). Recognizing the problem, the Ninth Circuit limited the inclusion of 

injunctive relief for purposes of awarding fees:

Precisely because the value of injunctive relief is difficult to quantify, its value is also 

easily manipulable by overreaching lawyers seeking to increase the value assigned to a 

common fund. We hold, therefore, that only in the unusual instance where the value 

to individual class members of benefits deriving from injunctive relief can be 

accurately ascertained may courts include such relief as part of the value of a 

common fund for purposes of applying the percentage method of determining fees. 

Staton v. Boeing, 327 F.3d 938, 974 (9th Cir. 2003) (emphasis added). In this case, plaintiffs provided 

specific valuations of the injunctive relief in support of final approval. See Pls. Memo in Support of 

Final Approval (Dkt. 121) at 20. But when pressed by the Court on how to ascertain the actual value 

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of the labeling changes, Plaintiffs now argue that it would be unfeasible, likely because the actual 

value would reflect the fallacy of the fictive estimations.

Plaintiffs previously asserted that based on estimations of purported expert economist Dr. 

Keith Reutter, the injunctive relief is valued at “$21.7 million to current Class Members” and “$46.2 

million to all consumers” for a 30-month period. See Dkt. 120 at 7; Dkt. 121 at 44. Plaintiffs 

described the purported expert’s methodology:

Dr. Reutter concluded that consumers who were previously enticed by the rebuilds 

cartilage message will no longer be misled by those representations and therefore will

refrain from buying the Covered Products, resulting in a reduction in the sales 

volume for the products. Relying upon these contemporaneous documents, it is Dr. 

Reutter’s opinion that the removal of these key marketing messages will result in a 

drop in demand and also result in consumer savings, both to current Class Members 

who are repeat purchasers and future consumers, as a result of a 10% reduction in 

the pricing of Osteo Bi-Flex and the other Covered Products. See generally Reutter 

Report, ¶¶ 9-12.

Pls. Memo in Support of Final Approval (Dkt. 121) at 20. In their Supplemental Memo, however, 

plaintiffs explain that the actual economic impact of the label changes cannot be ascertained because 

it would require assessment of “confounding economic factors” including “data from various thirdparty sources such as defendants’ competitors and retailers (including their sales, advertising and 

marketing spending)” and it is unlikely that competing manufacturers or retail outlets would provide 

such information. Pls. Supp. Memo (Dkt. 137) at 1-2.

Plaintiffs’ Supplemental Memo demonstrates that the value of the injunctive relief was not—

and cannot—be accurately ascertained: if competitor or retailer data (that is unavailable) is required 

to accurately assess the economic impact after implementing the label changes, such unavailable data 

was necessary but not included in the original estimation. Accordingly, even if the injunctive relief 

was a class benefit (which it is not), the value of such relief cannot be accurately ascertained and thus 

should be excluded for purposes of awarding attorneys’ fees.

Plaintiffs’ reliance on In re Mexico Money Transfer Litigation, 267 F.3d 743 (7th Cir. 2001) is 

misplaced. See Pls. Supp. Memo (Dkt. 137) at 5-6. Plaintiffs argue that in Mexico Money, it was 

sufficient for the Seventh Circuit to “project out” the injunctive relief in evaluating the potential 

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benefits. See id. at 5. In Mexico Money, the court determined that the class benefit was valued between 

$40 million and $60 million (the amount of the $400 million issued coupons estimated to be 

redeemed). 267 F.3d at 748. The Seventh Circuit concluded that the $40 to $60 million settlement 

value (plus whatever value the injunctive relief may have added) was not too low because the class’s 

claims had “only nuisance value.” Id. at 748-49. The Seventh Circuit did not attempt to value the 

injunctive relief because it was not necessary to reach its conclusion. Id.

More important, the Seventh Circuit’s holdings in Synfuel and Mexico Money do not allow what 

plaintiffs are requesting here: that a district court utilize an inaccurate valuation of injunctive relief

(that does not compensate class members’ past injuries) to justify a low-value settlement where class 

counsel is paid nine times what the class will receive.

II. Class Counsel Cannot be Compensated for Any Purported Social Value of the 

Labeling Changes.

Plaintiffs argue that the label changes accomplish a social goal that can be assigned “great 

value” in determining the fairness of the settlement and awarding attorneys’ fees. Pls. Supp. Memo 

(Dkt. 137) at 4. While plaintiffs devote pages to justifying why labeling changes matter, id. at 2-4, 

noticeably absent from their Memo is any authority suggesting that attorneys’ fees should be 

awarded based on accomplishment of a “social good.” That is because class counsel is not an 

attorney general representing the public at large. Class counsel have clients: they represent the class 

members. Class counsel should be compensated for results achieved for their clients:

Plaintiffs attorneys don’t get paid simply for working; they get paid for obtaining 

results. Because it is the class relief that is both a necessary and a sufficient 

condition to an award of attorney’s fees, it follows that an attorney’s fees award can 

only be ‘attributable to,’ or the consequence of, the class relief, not the attorney’s 

hard work.

In re HP Inkjet Printer Litigation, 716 F.3d 1173, 1182 (9th Cir. 2013) (emphasis added). Class 

members are not indifferent to whether their attorneys (class counsel) have achieved results valuable 

to the class or results that are merely socially valuable. Cf. Baby Prods., 708 F.3d at 178 (“Class 

members are not indifferent to whether funds are distributed to them or to cy pres recipients, and 

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class counsel should not be either.”). Because class counsel is paid for results achieved for the class, 

class counsel cannot justify a $4.5 million fee award that is nine times the $500,000 actual class benefit 

based on purported “social value” of the injunctive relief.

III. Class Counsel Cannot be Awarded Attorneys’ Fees for Injunctive Relief that is Not 

Valued.

Plaintiffs contend that it is not necessary to determine the value of the injunctive relief 

because they can merely be awarded their lodestar. See Pls. Supp. Memo (Dkt. 137) at 7. Plaintiffs 

argue that under In re Bluetooth Headset Products Liab. Litig., 654 F. 3d 935, 941 (9th Cir. 2011), lodestar 

is appropriate in cases where the relief is primarily injunctive. Pls. Supp. Memo (Dkt. 137) at 7. 

Plaintiffs’ argument contradicts the key holding of Bluetooth. The Bluetooth court reversed the 

settlement approval because the district court had failed to compare the attorney award with the 

value of settlement benefit to class. 654 F.3d at 943. The value of the class benefit under the 

settlement is a critical component in analyzing whether the fee award is disproportionate. Bluetooth, 

654 F.3d at 943; In re General Motors Corp. Pick-up Truck Fuel Tank Prods. Liability Litig., 55 F.3d 768, 

822 (3d Cir. 1995) (“At the very least, the district court on remand needs to make some reasonable 

assessment of the settlement’s value and determine the precise percentage represented by the 

attorneys’ fees.”); cf. Dennis v. Kellogg Co., 697 F.3d 858, 868 (9th Cir. 2012) (instructing that 

settlement valuation “must be examined with great care to eliminate the possibility that it serves only 

the ‘self interests’ of the attorneys and the parties, and not the class, by assigning a dollar number to 

the fund that is fictitious”).

In awarding attorneys’ fees, the Seventh Circuit requires the court to award “the market 

price for legal services, in light of the risk of nonpayment and the normal rate of compensation in 

the market at the time.” In re Synthroid Mktg. Litig., 264 F.3d 712, 718 (7th Cir. 2001). If the court 

opts to apply a lodestar method, the Seventh Circuit has instructed that “[a]fter establishing the 

lodestar and multiplier, the judge may find it useful to compare the percentage of the fund to 

contingent arrangements negotiated in other cases of the same type.” Harman v. Lyphomed, Inc., 945 

F.2d 969, 974 (7th Cir. 1991). A percentage-of-recovery cross-check ensures that class counsel do 

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not receive a disproportionate distribution of the settlement. “Just as the lodestar method can 

‘confirm that a percentage of recovery amount does not award counsel an exorbitant hourly rate,’ 

the percentage-of-recovery method can likewise ‘be used to assure that counsel’s fee does not dwarf 

class recovery.’” Bluetooth., 654 F.3d at 945 (9th Cir. 2011) (quoting In re GMC Pick-Up, 55 F.3d at 

821 n.40). See also Hensley v. Eckerhart, 461 U.S. 424, 434-37 (1983) (lodestar-based fee awards should 

be calibrated downward where the degree of success is relatively small).

The degree of success is the actual benefit received by the class because of class counsel’s 

efforts, not some hypothetical benefit. Reynolds v. Beneficial Nat. Bank, 288 F.3d 277, 286 (7th Cir. 

2002) (“class counsel’s compensation must be proportioned to the incremental benefits they confer on 

the class” (emphasis in original)); cf. In re Aqua Dots Products Liability Litigation, 654 F.3d 748 (7th Cir. 

2011) (holding that class representatives who permit class counsel to bring class litigation to benefit 

themselves, rather than their putative class clients, cannot meet adequacy requirements). Put simply, 

“courts need to consider the level of direct benefit provided to the class in calculating attorneys’ 

fees.” Baby Prods., 708 F.3d at 180 n.14 (emphasis added). The reason for the need for an award 

proportionate to the actual recovery of the class is to appropriately incentivize class counsel. If class

counsel’s fees are determined simply for working, then class counsel will have no incentive to ensure 

that they have “adequately prioritize[d] direct benefit to the class” in the settlement. Id. at 178-79.

CONCLUSION

The Court should deny approval of the settlement because the foremost beneficiaries are 

class counsel who would consume 70% of the constructive common fund. The class counsel fee 

award cannot be justified by the injunctive relief because the injunctive relief does not provide a 

benefit to class members and because the injunctive relief cannot be accurately ascertained.

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Dated: November 15, 2013. /s/ Melissa A. Holyoak

Melissa A. Holyoak, (DC Bar No. 487759)

CENTER FOR CLASS ACTION FAIRNESS

1718 M Street NW, No. 236

Washington, DC 20036

Phone: (573) 823-5377

Email: melissaholyoak@gmail.com

Attorneys for Theodore H. Frank

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CERTIFICATE OF SERVICE

The undersigned certifies she electronically filed the foregoing Response to Plaintiffs’ 

Supplemental Memo via the ECF system for the Northern District of Illinois, thus effecting service 

on all attorneys registered for electronic filing. Additionally she caused to be served via First-Class 

mail a copy of this Motion to Unseal and Memo in Support upon the following:

Peggy Thomas

Simone Thomas

2109 N.W. 12th Avenue

Ft. Lauderdale, FL 33311

Hon. James B. Zagel

United States District Court for the Northern District of Illinois

Everett McKinley Dirksen United States Courthouse

Chambers 2588

219 South Dearborn Street

Chicago, IL 60604

Dated: November 15, 2013.

/s/ Melissa A. Holyoak

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