1757797.1 

Alan E. Sash 

Lee S. Shalov 

MCLAUGHLIN & STERN LLP

260 Madison Ave. 

New York, NY 10016 

T: 646-278-4298 

F: 212-448-0066 

Angela Edwards 

LAW OFFICE OF ANGELA EDWARDS

72 Canterbury Circle 

East Longmeadow, MA 01028 

T: 413-525-3820 

Andrew N. Friedman 

COHEN MILSTEIN SELLERS & TOLL PLLC 

1100 New York Ave., N.W., Suite 500 West 

Washington, D.C. 20005 

T: 202-408-4600 

F: 202-408-4699 

Attorneys for Plaintiffs

on behalf of themselves and all others 

similarly situated.

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY 

-------------------------------------- X 

SUSAN SABOL, VALERIE DONE, and 

KATHLEEN KLODNER on behalf of 

themselves and all others similarly situated, 

Plaintiffs, 

-againstHYDROXATONE, LLC and ATLANTIC 

COAST MEDIA GROUP 

Defendants. 

:

:

:

:

:

:

CIVIL ACTION NO. 

2:11-cv-04586-SRC-MAS 

CLASS ACTION 

-------------------------------------- X 

PLAINTIFFS’ REPLY MEMORANDUM IN FURTHER SUPPORT OF 

PLAINTIFFS’ MOTION FOR FINAL APPROVAL 

OF THE PROPOSED AMENDED SETTLEMENT 

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TABLE OF CONTENTS 

Page 

I. INTRODUCTION .............................................................................................................. 1

II. CLASS REACTION TO THE SETTLEMENT ................................................................. 2 

A. The Margolis Objection and Parallel Litigation ..................................................... 3 

1. The Margolis Objection Completely Avoids Analysis of the 

Hurdles Faced By Her In Proving Liability on a Class Basis and 

Wildly Overstates Class Damages .............................................................. 6 

a. The Claims Asserted by Margolis Faced an Uphill Battle ............. 7

b. Margolis’ Damage Claims are Completely Baseless ...................... 9 

2. The Settlement Does Not Favor “Refund Claims” Over “IVR 

Claims” ..................................................................................................... 11 

3. Margolis Does Not Refute the Conclusion That Defendant ACMG 

is In Poor Financial Condition .................................................................. 12 

4. The Additional Insurance Coverage Reference by Margolis is 

Irrelevant ................................................................................................... 14 

5. The Settlement Release is Standard and Not Overbroad .......................... 16 

6. The Settlement Provides Strong Prospective Relief and By No 

Means Blesses Defendant’s Conduct ........................................................ 19 

B. The Lussier Objection ........................................................................................... 20

III. CONCLUSION ................................................................................................................. 21

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CASES

Agostino v. Quest Diagnostics Inc., 

256 F.R.D. 437 (D.N.J. 2009) ....................................................................................................7 

In re AremisSoft Corp. Sec. Litig., 

210 F.R.D. 109 (D.N.J. 2002) ..................................................................................................11 

In re AT & T Corp., 

455 F.3d 160 (3d Cir. 2006).......................................................................................................2 

Careccio v. BMW of N. Am. LLC,

No. 08–2619(KSH), 2010 U.S. Dist. LEXIS 42063, 2010 WL 1752347 (D.N.J. Apr. 

29, 2010) ..................................................................................................................................20 

In re Cendant Corp. Litig., 

264 F.3d 201 (3d Cir. 2001).....................................................................................................10, 21 

Central Bank of Denver N.A. v. First Interstate Bank of Denver N.A., 

511 U.S. 164 (1994) .................................................................................................................15 

In re Computron Software, Inc., 

6 F.Supp. 313 (D.N.J. 1998) ....................................................................................................11 

In re Conseco Life Ins. Co. LifeTrend Ins. Sales and Marketing Litig., 

270 F.R.D. 521 (N.D. Cal. 2010) ...............................................................................................8 

Dennis v. Saks & Co., 

20 Fed. R. Serv. 2d 994, at *4 (S.D.N.Y. July 10, 1975) ..........................................................9 

Dewey v. Volkswagen of Am., 

728 F.Supp.2d 546 (D.N.J.2010) .............................................................................................20 

Ehrheart v. Verizon Wireless, 

609 F.3d 590 (3d Cir. 2010).....................................................................................................18 

First State Orthopaedics v. Concentra, Inc., 

534 F.Supp.2d 500 (E.D.Pa.2007) .............................................................................................2 

In re Flag Telecom Holdings, Ltd. Sec. Litig., 

02-CV-3400 CM PED, 2010 WL 4537550 (S.D.N.Y. Nov. 8, 2010) .....................................14 

FTC v. Willms, 

Case No. 2-11-cv-828-MJP (W.D. Wash. Feb. 22, 2012) (Ex. 24 to Margolis 

Objection) ............................................................................................................................9, 20 

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In re General Motors Corp. Pick-Up Truck Fuel Tan Products Liab. Litig. 

55 F.3d 768 (3d Cir. 1995).........................................................................................................6 

Gennari v. Weichert Co. Realtors, 

148 N.J. 582 (N.J. 1997) ..........................................................................................................15 

Girsh v. Jepson, 

521 F.2d 153 (3d Cir.1975)................................................................................................12, 19 

Grimes v. Vitalink Comm. Corp., 

17 F.3d 1553 (3d Cir. 1994).....................................................................................................17 

In re Guidant Corp. Implantable Defibrillators Prods. Liability Litig., 

MDL No. 05-1708, 2008 WL 682714 (D.Minn. 2008) ...........................................................18 

Hall v. AT & T Mobility LLC,

No. 07–5325(JLL), 2010 U.S. Dist. LEXIS 109355, 2010 WL 4053547 (D.N.J. Oct. 

13, 2010) ..................................................................................................................................21 

In re Ikon Office Solutions, Inc., Sec. Litig., 

194 F.R.D. 166 (E.D. Pa. 2000) ...............................................................................................11 

Janus Capital Group v. First Derivative Traders, 

131 S.Ct. 2296 (2011) ..............................................................................................................15 

Joel A. v. Guiliani, 

218 F.2d 1232, 144 (2d Cir. 2000).............................................................................................6

Karvaly v. eBay, Inc., 

245 F.R.D. 71 (E.D.N.Y. 2007) ...............................................................................................19

Klein v. O’Neal, Inc., 

2009 WL 1174638 (N.D. Tex. Apr. 29, 2009) ........................................................................18 

In re Lucent Technologies, Inc., Secur. Litig., 

307 F.Supp.2d 633 (D.N.J. 2004) ............................................................................................12 

Maniscalco v. Brother Intern. Corp., 

709 F.3d 202 (3d Cir. 2013).......................................................................................................7 

Margolis v. Atlantic Coast Media Group LLC et al, 

2:11-cv-04355-SRC-CLW (D.N.J.) ................................................................................. passim 

McCoy v. Health Net, Inc., 

569 F. Supp. 2d 448 (D.N.J. 2008) ............................................................................................2

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Menagerie Prod. v. CitySearch, 

2009 WL 3770668 (C.D.Cal. Nov. 9, 2009) ..............................................................................8 

New Jersey Dept. Env't Prot. v. Gloucester Env't Mgmt. Serv., Inc., 

800 F.Supp. 1210 (D.N.J.1992) ...............................................................................................15

In re Newbridge Networks Securities Litig., 

No. 94-1678-LFO, 1998 U.S. Dist. LEXIS 23238 (D.D.C. Oct. 23, 1998) ............................11 

Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 

259 F.3d 154 (3d Cir. 2001).......................................................................................................7 

Nichols v. SmithKline Beecham Corp., 

CIV.A.00-6222, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005) ..................................................11 

In re Prudential Ins. Co. 

962 F.Supp. 450 (D.N.J. 1997) ..........................................................................................18, 19 

In re Prudential Ins. Co. of Am., 

MDL 1061, 1999 WL 496491 (D.N.J. May 6, 1999) ..............................................................17 

In re Prudential Ins. Co. of America Sales Practices Litig., 

148 F.3d 283 (3d Cir. 1998).................................................................................................6, 18 

In re Remeron End-Payor Antitrust Litig., 

No. 02-2007, 2005 WL 2230314 (D.N.J. Sept. 13, 2005) .........................................................2 

In re Rent-Way Sec. Litig.,

305 F. Supp. 2d 491 (W.D. Pa. 2003) ......................................................................................10 

In re Rite Aid Corp. Sec. Litig., 

396 F.3d 294 (3d Cir. 2001).......................................................................................................2 

In re Safety Components, Inc. Securities Litig., 

166 F. Supp. 2d 72 (D.N.J. 20001) ..........................................................................................14 

Sandler Assocs., L.P. v. Bellsouth Corp., 

818 F.Supp.695 (D.Del.1993) aff’d, 26 F.3d 123 (3d Cir. 1994) ............................................17 

Securities and Exchange Commission v. Teo, 

2011 U.S. Dist. LEXIS 103413 (D.N.J. Sept. 12, 2011) .........................................................19 

Seifer v. Topsy's Itern., Inc., 

70 F.R.D. 622 (D.Kan. 1976)...................................................................................................14 

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Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 

552 U.S. 148 (2008) .................................................................................................................15 

Stull v. Baker, 

410 F. Supp. 1326 (S.D.N.Y. 1976) ...........................................................................................8 

Stull v. Pool, 

63 F.R.D. 702 (S.D.N.Y. 1974) .................................................................................................9 

Sullivan v. DB Investments, Inc., 

667 F.3d 273 (3d Cir. 2011) cert. denied, 132 S. Ct. 1876, 182 L. Ed. 2d 646 (U.S. 

2012) reh'g denied, 132 S. Ct. 2451, 182 L. Ed. 2d 1076 (U.S. 2012) ..............................17, 18 

Susman v. Lincoln Am. Corp., 

561 F.2d 86 (7th Cir. 1977), cert. denied, 445 U.S. 942 (1980) ................................................8 

Sweet v. Bermingham, 

65 F.R.D. 551 (S.D.N.Y. 1975) .................................................................................................8 

In re Vioxx Prods. Liability Litig., 

574 F.Supp.2d 606 (E.D. La. 2008) .........................................................................................18 

In re Warfarin Antitrust Litig., 

391 F.3d 516 (3rd Cir. 2004) ...................................................................................................21 

Willson v. New York Life Ins. Co., 

No. 94-127804, 1995 N.Y. Misc. LEXIS 652 (N.Y. Sup. Ct. Nov. 8, 1995) ....................18, 19 

Zylstra v. Safeway Stores, Inc., 

578 F.2d 102 (5th Cir. 1978) .....................................................................................................8 

STATUTES

11 U.S.C. § 101(32) .......................................................................................................................13 

OTHER AUTHORITIES

Black’s Law Dictionary (9th Ed. 2009) .........................................................................................13 

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I. INTRODUCTION 

 After a hard-fought mediation, Class Counsel were able to settle on terms beneficial to 

members of the Class all claims related to the alleged deceptive marketing of Hydroxatone riskfree trials. After preliminary approval of the Settlement, direct notice was sent to approximately 

2.6 million Class members. Out of that number a virtually incalculably minute number of 

persons (two) objected to the Settlement and tens of thousands of Hydroxatone customers have 

made claims to share in the settlement proceeds. 

 The sole detailed objection to the Settlement is from counsel in a parallel litigation 

against Defendants brought by the wife of one of the attorneys attempting to represent the Class. 

Margolis Counsel’s efforts to derail this settlement have existed since they were told about the 

mediation and invited by Class Counsel to join in the settlement back in August, 2012. Since 

that time Margolis counsel have embarked on a multi-pronged effort to attack the settlement, to 

somehow re-jigger their case in a desperate attempt to manufacture a separate class, and to 

manipulate facts about their sole plaintiff’s standing to assert those claims. Margolis Counsel’s 

flagrant tactics have continued in the form of this objection. The Margolis Objection makes 

explicit and implicit factual and legal conclusions about the litigation, the settlement and the 

settlement process itself which, at best, have “questionable” evidentiary support. Recognizing 

Margolis Counsel’s true motivation here, this Court should dismiss Margolis Counsel’s frivolous 

objections. 

 As noted below and in Class Counsel’s Memorandum in Support of Plaintiffs' Motion for 

Final Approval of the Proposed Amended Settlement, the Margolis Objection is wholly without 

merit. The Settlement herein was reached through arms-length negotiations and, if approved, 

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will provide significant benefits to the Class. Class Counsel, therefore, respectfully request that 

the Settlement be approved as fair, reasonable and adequate. 

II. CLASS REACTION TO THE SETTLEMENT 

 As noted above, of the nearly 2.6 million notices that were disseminated there have been 

a mere two objections1

. That works out to an infinitesimal objection rate of approximately one 

objection for every 1.3 million potential class members and weighs heavily in favor of approval 

of the settlement. In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 305 (3d Cir. 2001) (two 

objections out of a class of 300,000 called a “rare phenomenon” that weighted in favor of 

approval); In re AT & T Corp., 455 F.3d 160, 170 (3d Cir. 2006) (eight objections out of over 

one million potential class members weighed in favor of approval). Further, as described in detail 

below, the only detailed objection comes from counsel in a parallel litigation – a party with a 

clear financial interest in this litigation. In addition, although the date for submission of class 

claims has not yet occurred, over 36,000 claims have already been received by the 

Administrator.2

 

 1

 The Settlement Administrator also received two additional communications that 

included the words “object” or “objection” but upon examination were not actual objections. In 

addition, there were only 2,227 exclusions requested. While the incredibly small percentage of 

exclusions (0.094%) is itself dispositive (See McCoy v. Health Net, Inc., 569 F. Supp. 2d 448, 

459 (D.N.J. 2008) (1,700 opt-outs from potential class of 2.6 million, representing .066%, 

“qualifies for the presumption of fairness” in the Third Circuit) (citing In re Warfarin Sodium);

see also First State Orthopaedics v. Concentra, Inc., 534 F.Supp.2d 500, 516 (E.D.Pa.2007) 

(finding presumption of fairness met when “only 0.16% of the class opted out or objected to the 

settlement”); In re Remeron End-Payor Antitrust Litig., No. 02-2007, 2005 WL 2230314, at *16 

(D.N.J. Sept. 13, 2005) (finding that 70 opt-outs and 8 objections from class of 850,000 qualified 

for presumption of fairness)) it bears noting that many of the exclusions received appeared to be 

the product of persons that were either not Class Members, had received refunds, or who said 

they like the Hydroxatone products they received. 

2

 See Declaration of Jill Fukunaga, at ¶ 6, attached as Exhibit 1. 

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A. The Margolis Objection and Parallel Litigation 

 The Margolis Objection is made on behalf of the wife of Ronald Margolis, one of 

plaintiff’s counsel in Margolis v. Atlantic Coast Media Group LLC et al, 2:11-cv-04355-SRCCLW (D.N.J.), a similar putative class action filed around the same time as the instant case and 

whose claims would be extinguished by the approval of the instant settlement. The Margolis 

Objection is an odd combination of invective, hyperbole, and manufactured facts. But the Court 

need look no further than certain underlying facts to determinate this Objector’s true motivation. 

When it appeared that Class Counsel had settled this Action in August, 2012, they reached out to 

Margolis’ Counsel to see if they were interested in joining class counsel in the Settlement in 

order to maximize the limited resources of the Defendant for the benefit of the Class. After it 

became clear that Margolis Counsel was motivated mostly by its goal of securing payment of 

their attorneys’ fees, Margolis Counsel rebuffed Counsel’s efforts to bring them into the 

Settlement. Since that date, as the Court is aware, Margolis Counsel has engaged in a scorched 

earth battle to attack the proposed Settlement and commandeer the litigation from Class Counsel. 

Moreover, as described below, Margolis Counsel has changed its approach to its own case to try 

to create a distinction between its case and the Sabol litigation to somehow carve out a 

“different” class from the one to be settled in this litigation. 

 The June 16, 2013 Margolis Objection is merely a continuation of Margolis’ Counsel’s 

desperate attempt to derail a legitimate settlement for its own financial benefit and thus should be 

given little deference. 

 The Margolis Objection makes six basic arguments that will be discussed in turn below: 

(1) the benefits made to the class are far smaller than actual Class damages; (2) the settlement 

improperly gives preferential treatment to a small group of class members by making a cash 

award only to the Sabol “refund” class members; (3) that defendants are able to withstand a 

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greater judgment, and that two additional defendants, Thomas Shipley and Marketing Architects 

are paying nothing in exchange for their release; (4) that Class Counsel disregarded additional 

insurance coverage; (5); the settlement release is overbroad because it releases claims based on a 

separate factual predicate, and which are currently pending in the parallel Margolis v. Atlantic 

Coast Media Group litigation; and (6) the Settlement does not deter future deceptive conduct. 

Margolis Objection 1-2. 

 While the Margolis Objection lists a litany of deficiencies in the Settlement, at bottom, 

the Objection is based on two flawed premises. First, the over-arching implication of the 

Objection is that seasoned Class Counsel somehow “colluded” with Defendants in order to 

prematurely dismiss the litigation on favorable terms to Defendants. Of course, nothing could be 

further from the truth. As noted in their Opening Brief, Class Counsel -- some of who have 

practiced in this field for decades -- made an informed decision based on the merits of the claims 

and the financial strength of the main Defendant to get the best amount for the Class under the 

circumstances. Any doubt that this was not a hard fought and arms-length Settlement is belied by 

the mediator – retired Judge Stephen Orlofsky – who has opined that these negotiations were by 

the book. See Orlofsky Decl., attached as Exhibit 2. 

 Second, the Margolis Objection is also based on the fundamentally flawed premise that 

the “refund class” (purportedly the Sabol class members) and the “IVR class” (purportedly the 

Margolis class members) are two independent classes. They are not. – The so-called “Margolis

Class” is subsumed by the Sabol class and a quick review of the chronology of the Margolis

litigation makes it apparent this artificial distinction was concocted by Margolis Counsel for the 

purpose of avoiding the confines of the instant Settlement. 

 When first filed in July, 2011, the Margolis complaint alleged that defendants Atlantic 

Coast Media Group LLC and Hydroxatone LLC deceived class members by stating that the 

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Hydroxatone products were “free trials” or “risk-free trials,” yet were anything but free. 

Nowhere did the original complaint limit the Class claims to any one of Defendants’ manner of 

dissemination of the deceptive statements. The putative class definition included in the initial 

complaint was all persons "who: (a) Participated in a free trial of any product from the 

Defendants, for payment of only shipping and handling; (b) provided a credit card or debit card 

number; and (c) Were billed on that card by Defendants more than shipping and handling, 

without subsequent written authorization to do so." (Margolis Complaint, ECF No. 1, ¶26).3 It 

was only after learning that Class Counsel was having fruitful settlement negotiations with 

counsel for the Defendants, that Margolis counsel amended their Complaint to focus exclusively 

on the part of the Class that received these allegedly deceptive statements via an automatic 

interactive voice response system (“IVR”). The putative class described in the Margolis First 

Amended Complaint was reconfigured to include only customers who “[p]articipated through an 

IVR system in a free trial . . .” (2:11-cv-04355 ECF No. 59 ¶ 54) Most amazingly, is that, as 

Margolis’ own exhibits indicate, despite allegations to the contrary in her First Amended 

Complaint Ms. Margolis did not purchase her Hydroxatone products via the IVR system – 

she did so through a live agent at a telemarketing call center. See Exhibit 25 to Margolis 

Objection at 2 (“Ms. Margolis heard a radio advertisement for Hydrolyze in 2010 and placed an 

order through a live agent telemarketing call center.”). 

 The Sabol complaints have always recognized that there may have been deception in 

Hydroxatone/Atlantic Coast Media’s marketing of the products through all means of their 

dissemination. See Class Action Complaint, ECF No. 1 at ¶¶ 8, 15, 21, 23-35; SAC, ECF No. 

 3

 Interestingly, in describing the “nature of the case” in the initial complaint, Margolis 

Counsel did not even mention IVR as a medium through which Hydroxatone was sold: 

"Defendants sell a line of skin care products directly to consumers on television, radio, print 

media and over the internet." (Margolis Complaint, Pg. 1-2). In fact the initial complaint makes 

no reference to IVR whatsoever. 

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65 at ¶¶ 2, 23, 43, 52-56, 68-77. However, for strategy purposes (as described in more detail 

below), Class Counsel have always focused on the simple and straightforward claim that the true 

wrongdoing by Defendants was their failure to live up to their contractual promises to cancel 

future shipments and to return unwanted products – for any reason –to those persons who were 

dissatisfied. In other words, a person that received Hydroxatone products via any marketing 

method (i.e. internet, live phone sales or IVR )– who was dissatisfied with their receipt of 

product for any reason (e.g. they thought they had been deceived about whether the products 

were truly “free” or they simply didn’t like the products received), was entitled to a refund of the 

price paid for that product(s). That alleged breach by Defendants covers everyone that 

purchased Hydroxatone products through the “risk free” offers. Thus, the claims of those 

consumers that assert they were deceived by the IVR process are logically part of the Sabol 

Class. 

1. The Margolis Objection Completely Avoids Analysis of the Hurdles 

Faced By Her In Proving Liability on a Class Basis and Wildly Overstates 

Class Damages 

 In deciding the fairness of a proposed settlement, the court must “. . . guard against 

demanding too large a settlement based on its view of the merits of the litigation; after all, 

settlement is a compromise, a yielding of the highest hopes in exchange for certainty and 

resolution.’” In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d 283, 316-17 

(3d Cir. 1998) (quoting In re General Motors Corp. Pick-Up Truck Fuel Tan Products Liab. 

Litig. 55 F.3d 768 (3d Cir. 1995)) While the Margolis Objection expresses its highest hopes for a 

larger recovery with stringent prospective relief, defendant’s hopes just as surely contain less 

stringent terms and a smaller recovery. “[A] settlement agreement achieved through good-faith, 

non-collusive negotiation does not have to be perfect, just reasonable, adequate, and fair.” Joel 

A. v. Guiliani, 218 F.2d 1232, 144 (2d Cir. 2000). As noted above, while there is no separate 

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“Margolis Class,” the Margolis Objection completely overlooks the practical roadblocks to 

proving her claims on a class-wide basis and wildly overstates the damages incurred by the IVR 

purchasers. 

a. The Claims Asserted by Margolis Faced an Uphill Battle 

 Unlike the straightforward claims that were alleged in the Sabol complaints related to the 

failure to return funds or honor cancellation requests, the Margolis action took a more legally 

daunting tack. Margolis counsel alleged that Defendants’ engaged in a fraudulent scheme to 

induce customers to sign up for free trials on IVR and that, as a result, class members “believe[d] 

they were receiving a ‘free’ product in return for the payment of only shipping and processing.” 

Margolis Brief in Opposition to Motion to Dismiss at p. 1 (2:11-cv-04355, ECF No. 78 Feb. 2, 

2013). Thus, the Margolis claims, by definition , put defendants’ statements – and the Class 

Members’ reliance thereon – front and center. Where proof of reliance or causation is required, 

class certification is, at best, problematic See e.g. Newton v. Merrill Lynch, Pierce, Fenner & 

Smith, Inc., 259 F.3d 154, 190 (3d Cir. 2001) (class certification inappropriate for fraud claims 

because the action failed to satisfy predominance and superiority requirements); Agostino v. 

Quest Diagnostics Inc., 256 F.R.D. 437, 468-69 (D.N.J. 2009) (analyzing various issues that 

make class-wide disposition of fraud claims problematic or impossible). It would also have been 

incredibly difficult for Margolis to get a national class certified for any claim. Class Counsel 

recognized that few federal courts now permit application of one state law to a class of 

nationwide consumers simply by virtue of the fraud emanating from a company in one state. 

That was confirmed by the Third Circuit’s recent decision in Maniscalco v. Brother Intern. 

Corp., 709 F.3d 202 (3d Cir. 2013), where the court found that New Jersey was not the state with 

the most significant relationship to the South Carolina consumer’s claims, even though the 

company’s principal place of business and headquarters was in New Jersey. Thus, it was highly 

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unlikely that the Margolis claims of deception could have been certified on a nationwide basis. 

In light of the fact that the sole plaintiff in Margolis was from Ohio, at best, Margolis could 

likely have only certified an Ohio class.4

 Moreover, because Ms. Margolis did not purchase her Hydroxatone products via IVR, 

she could not even represent any so-called “IVR Class.”5

 And, it goes without saying, that even, 

arguendo, if there were any IVR Class, Margolis’ counsel could never be selected as counsel for 

the Class for the simple reason that Ms. Margolis is the wife of one of the named counsel, 

Ronald Margolis. As a result, counsel and/or the plaintiff would have been disqualified. It is well 

established that when close family members are named plaintiffs, attorneys seeking to represent 

them on behalf of a class are subject to presumptive disqualification. See Zylstra v. Safeway 

Stores, Inc., 578 F.2d 102, 103 (5th Cir. 1978) (attorneys who were partners or spouses of named 

plaintiffs or who were themselves members of the class should be subject to a per se rule of 

disqualification and should not be permitted to serve as counsel for the class.); Susman v. Lincoln 

Am. Corp., 561 F.2d 86, 95 (7th Cir. 1977) (plaintiffs were inadequate to act as class 

representatives in case where representative plaintiff's attorney was his brother), cert. denied,

445 U.S. 942 (1980); Stull v. Baker, 410 F. Supp. 1326, 1337 (S.D.N.Y. 1976) (plaintiff had 

 4

 As noted in Plaintiffs’ Memorandum In Support of the Settlement, even plaintiffs in 

Sabol faced this hurdle, although the Sabol claims, which were based more on failure of 

Defendants to adhere to their contractual terms about returning/cancellation, stood a far better 

chance of securing the certification of a national class. Plaintiffs’ Mem. at p.21; See also e.g. In 

re Conseco Life Ins. Co. LifeTrend Ins. Sales and Marketing Litig., 270 F.R.D. 521, 529 (N.D. 

Cal. 2010) (breach of contract claims more suitable for national class certification than many 

other state law claims); Menagerie Prod. v. CitySearch, 2009 WL 3770668 (C.D.Cal. Nov. 9, 

2009) (same). 

5

 Ironically, according to Defendant’s documentation, one of the class representatives, 

Susan Sabol, made her Hydroxatone purchase through an IVR system. See Exhibit 25 to 

Margolis Objection at 2 “Susan Sabol . . .called a phone number that was advertised on a 

television commercial and placed her order through an IVR system.”). 

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conflict of interest where he was the uncle and law partner of his attorney)); Sweet v. 

Bermingham, 65 F.R.D. 551, 552 (S.D.N.Y. 1975) (plaintiff's husband was partner in class 

counsel's law firm); Stull v. Pool, 63 F.R.D. 702, 704 (S.D.N.Y. 1974) (wife of attorney as 

named plaintiff); Dennis v. Saks & Co., 20 Fed. R. Serv. 2d 994, at *4 (S.D.N.Y. July 10, 1975) 

(disqualifying named plaintiff who was wife of an attorney at the firm representing her). 

 The Margolis Objection’s reliance on FTC v. Willms, Case No. 2-11-cv-828-MJP (W.D. 

Wash. Feb. 22, 2012) (Ex. 24 to Margolis Objection) and the declaration of an expert in that case 

for the proposition that the Margolis claims were a virtual “slam dunk” is equally perplexing. 

Class Counsel does not take issue with Margolis’ contention that the IVR marketing was 

deceptive. Indeed, even in the original Complaint in this litigation, Class Counsel asserted that 

all forms of Hydroxatone’s “free trial” marketing were deceptive. Class Action Complaint, ECF 

No. 1, ¶ 2 ("This action seeks relief on behalf of the Class . . . declaring that Hydroxatone's 

advertising of a risk free trial and/or 30-day money back guarantee is deceptive and misleading . 

. . ."). But the fact that a government agency (the “FTC”) succeeded into entry of a stipulated

permanent injunction with a Company enjoining negative option features and defendants from 

misrepresenting the meaning of “free” or “risk free” hardly means the Margolis claims – or the 

Sabol claims for that matter – would have been successful in this litigation. As noted above and 

in Plaintiffs’ Memorandum in Support of Settlement, there are substantial hurdles to succeeding 

on the merits and in certifying a class, all of which entered into Class Counsel’s decision to enter 

into the Class settlement. 

b. Margolis’ Damage Claims are Completely Baseless 

 The Margolis Claim as to the size of Class-wide damages, is not only far-fetched, but is 

directly refuted by the very documents they cite in support thereof. According to the Margolis 

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Objection, the IVR claims alone are valued at $300 million.6 While that conclusion is dubious 

based solely on the fact that just a month ago, and based on the same evidence, Margolis 

Counsel claimed that damages for the IVR claims was in excess of $200 million7 See Letter to 

Judge Hammer, from Margolis Counsel, June 5, 2013 (ECF No. 96). Margolis reaches this figure 

by applying yearly net sales by ACMG with the percentage of sales made via IVR, both figures 

purportedly supplied by Defendants. See Margolis Objection at pp. 11-12; Ex. 12. The problem 

with that analysis is obvious: while the percentage of yearly IVR sales is accurately cited from 

Defendants’ document, application of that number to the “Total Net Sales” is improper. As 

Margolis concedes, the only sales at issue in both the Margolis and Sabol cases was the amount 

of money charged to members of the Class for Risk-Free trial products (minus credits or 

refunds). As Defendant’s document indicates, that number was approximately $164 million, 

Thus, applying the same IVR purchase percentages to those sales yields an “all-in” number for 

the IVR sales of approximately $83 million through 2011. See Chart attached as Exhibit 3. And, 

of course, that number assumes that everyone who purchased through IVR was deceived and/or 

was not satisfied with their product purchases – a showing that Margolis counsel could never 

make on a class-wide basis. 

 Thus, even if the $ 83 million represented an accurate depiction of overall damages to the 

IVR purchasers, the Settlement value of $7 million in benefits to the Class makes this settlement 

eminently reasonable. See In re Cendant Corp. Litig., 264 F.3d 201, 14` (3d Cir. 2001) (typical 

 6

 Class Counsel will avoid speculating the basis for Margolis’ statement that the 

“Refund” Claims are worth only $10 million. Margolis Objection at 1; see also In re Rent-Way 

Sec. Litig., 305 F. Supp. 2d 491, 508-09 (W.D. Pa. 2003) (no need to speculate as to a specific 

possible maximum recovery when any best case scenario is dimmed by the fact that the chances 

of collecting any such damages are slim). 

7

 Notably, the Margolis insurance “expert” also states in his report that the Margolis 

“class” was billed over $200 million. See Margolis Objection, Ex. 1 at p. 7. 

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recoveries in complex class actions range from 1.6% to 14%); see also Nichols v. SmithKline 

Beecham Corp., CIV.A.00-6222, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005) (settlement between 

9.3% and 13.9% of maximum possible recovery was reasonable); In re Ikon Office Solutions, 

Inc., Sec. Litig., 194 F.R.D. 166, 183-84 (E.D. Pa. 2000) (settlement in the range of 5.2% to 

8.7% of maximum possible recovery was reasonable given the attendant risks and costs of 

continued litigation). Notably, the true percentage is within the range of reasonableness (6 to 

12%) cited by Margolis Counsel. Margolis Objection at 14 (citing In re Newbridge Networks 

Securities Litig., No. 94-1678-LFO, 1998 U.S. Dist. LEXIS 23238 (D.D.C. Oct. 23, 1998) 

2. The Settlement Does Not Favor “Refund Claims” Over “IVR Claims” 

 As noted above, there are not two classes –Class Members who purchased products using 

the IVR system always had the ability to ask for their money back and/or to request that future 

shipments of product be cancelled. Thus, those that purchased free trial Hydroxatone products 

by any method are part of the Class. What the settlement allocation reasonably does is allocate 

cash (or their choice of products) to those people who made free-trial Hydroxatone purchases 

and who’s requests to return or cancel went unheeded by the Company (Group 1) and allocate 

free products to those that never made such a request (Group 2).8

 This allocation plan recognizes 

the commonsense fact that the cancellation/refund claims had a greater chance of success than a 

claim asserting that a person was deceived by defendants’ conduct. See e.g. In re AremisSoft 

Corp. Sec. Litig., 210 F.R.D. 109, 126 (D.N.J. 2002) (“A plan of allocation that reimburses class 

members based on the type and extent of their injuries is generally reasonable.”) (citing In re 

 8

 While Margolis takes umbrage with the phrase “whiles supplies last,” to describe the 

product benefits (Margolis Objection at 1, 13, 14 & 20), that provision does not mean that there 

is an artificial limitation on products (other than as limited by $4 million cap), but rather is 

included in the event that one or more products in the Group 1 or Group 2 lists are unavailable. 

In that case, another product would be substituted. 

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Computron Software, Inc., 6 F.Supp. 313, 321 (D.N.J. 1998)); see also In re Ikon, 194 F.R.D. 

166, 183-84. 

 And it is simply wrong to assert, as Margolis does, that those who purchased free trial 

products via IVR are relegated to only products as part of the Settlement. Margolis Objection at 

20-21. Anyone – including those that purchased via IVR -- who attempted to cancel or sought a 

refund who did not receive one can receive cash in the Settlement. In fact, according to her 

counsel, Ms. Margolis, herself, called up and asked for, but was not granted, a refund of her 

purchases. See Margolis Class Action Complaint and Demand for Jury Trial, (no. 2:11-cv04355, ECF No. 1, at § 22). Contrary then to Ms. Margolis’ objection, she may put in a claim 

form for cash relief under the settlement.9

 And, as is evident from the stream-lined claim form, 

it is relatively easy for Class Members like Ms. Margolis to claim Group 1 benefits. The claim 

requires the Claimant to state the amount they paid that was more than shipping and processing 

and the approximate date they initially ordered risk free trial offer, but does not require detailed 

information regarding the date she attempted to make a return or cancel. Thus, there is a 

relatively low bar for purported IVR purchasers like Ms. Margolis to share in the Cash Fund.10

3. Margolis Does Not Refute the Conclusion That Defendant ACMG is In 

Poor Financial Condition 

Under well-settled law, one of the many factors relevant to the reasonableness of a 

settlement is whether a defendant would be able to withstand a greater judgment. Girsh v. 

Jepson, 521 F.2d 153 (3d Cir.1975) (listing settlement approval factors); see also In re Lucent 

 9

 In her Affidavit, Ms. Margolis even says she wants money back rather than product 

shipment. See Affidavit of Lisa Margolis, ¶ 9, attached to Margolis Objection as Ex. 9. 

10 Per the terms of the Settlement Agreement, Defendants may review any claim and 

object to its payment if it does not meet the terms of the Settlement (e.g. if the claimant is not a 

valid Class Member or received a complete refund), but Class Counsel also had a right to contest 

such objection. Settlement Agreement. § 6.9. 

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Technologies, Inc., Secur. Litig., 307 F.Supp.2d 633, 646-647 (D.N.J. 2004) (fact that defendants 

would be unable to withstand full judgment supported settlement). Armed with a purported 

“expert” report, Margolis tries to argue that this factor has not been met in this case. Yet the 

converse is true. As the Margolis Objection reluctantly acknowledges, ACMG presented audited 

financial statements for years 2009-2012 and the financial statements confirm that ACMG’s 

financial condition has not been strong. In fact, the 2011 financial statements show a net loss to 

the company of over $8 million in 2011 cash and cash equivalents of only $ 1.7 million, and an 

adjusted net worth of a negative $2.49 million. Similarly, the 2012 audited financial statements 

indicated that the company continued to operate at a net loss11 

 And the letter exhibit from the financial consultant, Robert Greenwald, in the Margolis 

Objection does nothing to refute any of this. As noted by Mr. Greenwald, he has started with a 

flawed premise (no doubt given to him by Margolis counsel) that he was hired to determine 

ACMG’s claim of “insolvency.” See Exhibit 2 to Margolis objection. “Insolvency,” however 

has a very deliberate meaning in the legal and financial world – it means “[t]he condition of 

being unable to pay debts as they fall due or in the usual course of business.” Black’s Law 

Dictionary (9th Ed. 2009). Under the Bankruptcy laws, of which “solvency” is a critical 

element, “insolvent” means “financial condition such that the sum of [an]entity’s debts is greater 

than all of such entity’s property, at a fair valuation.” 11 U.S.C. § 101(32). Insolvency has never 

been a requirement to show that a defendant is unable to withstand a greater judgment. 

 Neither Class Counsel nor Defense Counsel in this Litigation have ever made the 

statement that ACMG was “insolvent.” What Class Counsel has said – and which is unrefuted – 

 11 Defendant’s financial statements were produced to Class Counsel and Margolis 

Counsel on a confidential basis and are subject to a Protective Order. Class Counsel only refers 

to the 2011 figures because Margolis Counsel chose to attach these financial statements to its 

Objection. 

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is that ACMG’s , financial condition cast doubt on its ability to withstand a judgment for the full 

value of Plaintiff’s claims. See Opening Brief at 23. There is simply no requirement that a 

defendant be “insolvent” to support this factor. See e.g. In re Safety Components, Inc. Securities 

Litig., 166 F. Supp. 2d 72, 91-92 (D.N.J. 20001) (Defendants who had recently emerged from 

bankruptcy "presumably will operate in a very cash poor state for a considerable period of time" 

and thus were unlikely to be able to withstand a greater judgment); Seifer v. Topsy's Itern., Inc., 

70 F.R.D. 622, 630 (D.Kan. 1976) (approving securities settlement and accepting showing by 

parties that company was in poor financial condition and would be unable to pay a full 

judgment). Thus, Margolis’ statements about the conclusions of his consultant are a red 

herring.12

4. The Additional Insurance Coverage Reference by Margolis is Irrelevant 

 In inflammatory language, dripping with conjecture, the Margolis objection takes issue 

with Class Counsel’s inability to, or purported ignorance of, additional insurance policies 

totaling up to $13 million. . Putting aside what was actually (or not) said by Class Counsel to 

Margolis counsel, the existence of other insurance policies to potentially cover the claims made 

in the Litigation is hardly dispositive of whether the settlement is fair, reasonable and adequate. 

The bottom line is the existence of insurance amounts is only as relevant as the strength of one’s 

case on liability and damages. Where claims made are not colorable or the damage expectations 

are not realistic, all the insurance in the world is meaningless – insurance carriers are not known 

for giving up their policies simply because someone has filed claims against their insureds. See 

In re Flag Telecom Holdings, Ltd. Sec. Litig., 02-CV-3400 CM PED, 2010 WL 4537550, at *9-

 12 Moreover, Mr. Greenwald never opined that there was anything inherently wrong with 

the financial information supplied by ACMG, rather that it was “...not adequate from a financial 

standpoint, to accept the claim of insolvency.” See Ex. 2 at p. 1. 

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10 (S.D.N.Y. Nov. 8, 2010) ($24.4 million settlement approved where $250 million D & O 

policy existed, but there were serious complications and disagreements about coverage). 

 Here, Margolis notes the existence of two ACMG Directors & officers (“D&O”) policies 

for officers/directors of ACMG totaling $10 million which might cover Thomas Shipley. Their 

mere existence, however, does not mean that the Class has any “right” to them. In addition to 

the huge hurdles faced in succeeding on the Margolis claims noted above, to succeed on claims 

against the individual Shipley, Margolis would have had to prove at trial that it was Shipley – 

and not merely the corporate entity ACMG – that committed fraud and was unjustly enriched by 

the allegedly deceptive conduct. Fraud under New Jersey law requires proof that: “(1) a 

material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the 

defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance 

thereupon by the other person; and (5) resulting damages.” Gennari v. Weichert Co. Realtors, 

148 N.J. 582, 610 (N.J. 1997).Where there are not even allegations in the Margolis complaint 

that Defendant Shipley personally made any statements to members of the Class, a finding of 

personal liability would have been problematic. Cf. Janus Capital Group v. First Derivative 

Traders, 131 S.Ct. 2296, 2202-03 (2011) (rule for false statement liability is that the “maker” of 

a statement is the one states it, no liability for those who prepare statements); see also Central 

Bank of Denver N.A. v. First Interstate Bank of Denver N.A., 511 U.S. 164 (1994); Stoneridge 

Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008). Absent such proof, to 

recover anything from Shipley would have required a showing that the ACMG entity itself was a 

“sham” which existed to avoid the personal liability of Shipley and other officers. See New 

Jersey Dept. Env't Prot. v. Gloucester Env't Mgmt. Serv., Inc., 800 F.Supp. 1210, 1219 n. 9 

(D.N.J.1992) (noting that in order to pierce the corporate veil, evidence must be presented to 

show that the corporation is a “sham” which existed to avoid personal liability of the officers.) 

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 The Margolis Objection also cites a $3 million insurance policy purportedly covering 

Marketing Architects. However, the claims against them are even more tenuous. Marketing 

Architects was a consultant to Hydroxatone and ACMG and was never named in advertisements 

to members of the Class. Moreover, the agreement between Marketing Architects and ACMG 

states that Marketing Architects was relying on the information given to it by 

Hydroxatone/ACMG. See Advertising Agreement, attached as Ex. 4, at Ex. A ¶ 5 

(Hydroxatone/ACMG ". . . represents and warrants that . . . it will provide factual and truthful 

information on the advertised products and services and that creative approved by Advertiser 

will comply with all applicable laws and regulations . . .") . These factors made the claims 

against it Marketing Architects extremely weak. 

 Finally, as a practical matter, even had Class Counsel pressed claims against Marketing 

Architects that would have been unlikely to increase any class recovery because Marketing 

Architects had a contractual indemnification agreement with Hydroxatone/ACMG. Id. at Ex.A, ¶ 

8. Thus, any claims pursued against it would ultimately become Hydroxatone/ACMG’s burden. 

5. The Settlement Release is Standard and Not Overbroad 

 As noted in detail above, both the Sabol and Margolis litigation was based on the same 

factual predicates – namely, that Hydroxatone/ACM G had a deceptive and wrongful scheme by 

which Defendants could wrangle funds from Class Members for purported “free trials.” 

Margolis Counsel chose to litigate the more problematic issue of overall deception to the Class 

and limited its class to only the IVR deception, Class Counsel approached the litigation via the 

best methodology to achieve a significant benefit for the Class. Class Counsel sought to avoid 

the problems of proving who was truly deceived by seeking compensation for those that were 

definitively harmed – those that may have been deceived (or not), and were denied cancellation 

and/or rights, as guaranteed by contract. And Class Counsel did not limit the Class to those who 

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purchased pursuant to the IVR. Thus, Margolis’ assertions to the contrary, it is clear that the 

two actions did not derive from two separate factual predicates. Margolis Objection at 2.13 

It is equally clear that everyone in the Class, whether they were deceived or not by 

defendants’ marketing (via IVR or other) will receive compensation. Indeed, many class 

members that ordered via IVR (as Ms. Margolis asserts she did) will be entitled to the cash 

benefits by virtue of their unsuccessful attempt to return their products. 

 Given this, it is entirely appropriate to release the claims asserted in both the Sabol and 

Margolis cases. The Third Circuit has made clear that “releases may include all claims, 

including unpleaded claims, that arise out of the same conduct alleged in the case. In re 

Prudential Ins. Co. of Am., MDL 1061, 1999 WL 496491 (D.N.J. May 6, 1999) (citing Grimes v. 

Vitalink Comm. Corp., 17 F.3d 1553, 1562-64 (3d Cir. 1994) & Sandler Assocs., L.P. v. 

Bellsouth Corp., 818 F.Supp.695, 704-05 (D.Del.1993) aff’d, 26 F.3d 123 (3d Cir. 1994). 

 Courts have recognized that settling parties have a legitimate interest in seeking “’global 

peace’ by obtaining releases from all those who might wish to assert claims, meritorious or not.” 

Sullivan v. DB Investments, Inc., 667 F.3d 273, 310-12 (3d Cir. 2011) cert. denied, 132 S. Ct. 

1876, 182 L. Ed. 2d 646 (U.S. 2012) reh'g denied, 132 S. Ct. 2451, 182 L. Ed. 2d 1076 (U.S. 

2012). Settling defendants have a legitimate interest in putting to rest “non-viable claims” that 

other plaintiffs might bring. Id. (approving a global settlement releasing potential damage claims 

in all fifty states). Here, the prospect of “global peace” was a driving factor in Defendant’s 

willingness to settle Plaintiffs’ claims, despite the fact that defense counsel did not believe those 

claims were particularly meritorious. Again, Courts have approved such a motivation in reaching 

 13 Of course in her Motion to Consolidate, Margolis complained that her litigation and the 

Sabol litigation were nearly identical because, “the two complaints identify common 

defendants...involve the same negative-option delayed billing scheme; and share common 

causes of action.” Margolis Motion to Consolidate at 9. 

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class settlements. Id. (“From a practical standpoint . . . achieving global peace is a valid, and 

valuable, incentive to class action settlements.”); see also Klein v. O’Neal, Inc., 2009 WL 

1174638, at *3 (N.D. Tex. Apr. 29, 2009) (“In a class action settlement setting, defendants seek 

and pay for global peace – i.e., the resolution of as many claims as possible.”); In re Vioxx 

Prods. Liability Litig., 574 F.Supp.2d 606, 613 (E.D. La. 2008) (quoting In re Guidant Corp. 

Implantable Defibrillators Prods. Liability Litig., MDL No. 05-1708, 2008 WL 682714, at *3 

(D.Minn. 2008) (noting that the parties “contemplated a global settlement covering Plaintiffs 

from both the MDL, Plaintiffs whose cases were filed outside the MDL in state court 

proceedings, and potential Plaintiffs who had no yet filed their cases.”). 

 Allowing only narrow releases, as the Margolis Objection apparently proposes, would 

undermine “the strong presumption in favor of voluntary settlement agreements.” Sullivan v. DB 

Investments, Inc., 667 F.3d 273, 311 (3d Cir. 2011) (citing Ehrheart v. Verizon Wireless, 609 

F.3d 590, 594 (3d Cir. 2010). Requiring that settlements only release claims based on identical 

legal theories would also be impossible to execute in practice. Id. (“[R]equiring a class to assert 

uniform or identical questions of law or fact . . . ‘would seriously undermine the possibility for 

settling any large, multi-district class action.’”) (citing Prudential 261 F.3d at 367). 

 Finally, the inclusion of Marketing Architects in the release was entirely appropriate. It is 

common to release consultants and agents of defendants. See e.g. In re Prudential 962 F.Supp. 

450, 559 (D.N.J. 1997) (citing Willson v. New York Life Ins. Co., No. 94-127804, 1995 N.Y. 

Misc. LEXIS 652 (N.Y. Sup. Ct. Nov. 8, 1995)). To do otherwise would make it nearly 

impossible to achieve settlements. More importantly, the release of Marketing Architect was an 

important factor in reaching the Settlement because of the indemnification agreement existing 

between Marketing Architects and Hydroxatone / ACMG. The case law is clear that the release 

of third parties that the settling party would be responsible to indemnify is entirely appropriate in 

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circumstances such as these. See e.g. In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 

F. Supp. 450, 558-59 (D.N.J. 1997) aff'd sub nom, In re Prudential Ins. Co. Am. Sales Practice 

Litig. Agent Actions, 148 F.3d 283 (3d Cir. 1998) and enforcement granted sub nom.(“A 

settlement with Prudential alone would lack finality because if dissatisfied policyholders sued 

Prudential agents, the agents would likely turn to Prudential for indemnity or contribution.”) 

(citing Willson v. New York Life Insurance Co., No. 94-127804,. 1995 N.Y. Misc. LEXIS 652, at 

*71 (N.Y. Sup. Ct. Nov. 8, 1995.)14

6. The Settlement Provides Strong Prospective Relief and By No Means 

Blesses Defendant’s Conduct 

 The Margolis Objection claims that “the settlement fails one of the essential purposes of 

the Consumer Fraud Act under which the claims were brought – it does not deter the deceptive 

conduct.” Margolis Objection at 2. While providing deterrence is not a requirement under the 

Girsh factor test, Class Counsel submits that payment of significant cash and products (whether 

from insurance or otherwise) coupled with injunctive relief fosters deterrence.15

 14 The Margolis Objection’s reference to Karvaly v. eBay, Inc., 245 F.R.D. 71 (E.D.N.Y. 

2007) is misguided. First, in Karvaly, the central issue was that the release defined a class very 

broadly, but only gave relief to a smaller subclass, and gave the rest of the class nothing (the 

“injunctive relief,” which supposedly was a benefit to the entire class, which amounted to 

disclosure language on the website, was already added before the settlement even was reached as 

the result of an agreement with state attorneys generals that were investigating defendants). Id. at 

81-83. In the instant case, all members of the Class will receive benefits. 

Second, the scope of the release in Karvaly was drastically broader than the release in the 

Amended Settlement Agreement. The release in Karvaly included all present and future claims 

against defendants under any of the statutes or common law theories referenced in the complaint, 

and applied to practically all customers. 

15 The sole Third Circuit authority cited in the Margolis Objection for the proposition that 

settlements must deter conduct, Securities and Exchange Commission v. Teo, 2011 U.S. Dist. 

LEXIS 103413, at &14 (D.N.J. Sept. 11, 2011) only serves to show that one purpose of 

disgorgement is to deter deceptive conduct. Teo does not stand for the proposition that 

disgorgement is a requirement for a settlement to be adequate. 

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 Moreover, the Settlement Agreement does, in fact, include strong prospective relief and 

does not “bless” Defendant’s prior business practices. Among other things, the Settlement 

requires Defendants to disclose the terms of their risk-free trial and auto-shipment programs – 

the crux of both the Sabol and Margolis cases – in a “clear and conspicuous manner prior to 

getting the customer’s final acceptance to the offer.” The Settlement also provides that 

Defendants will provide a simple mechanism on its websites to effectuate a cancellation of an 

Auto-shipment program and will send email confirmations of such cancellation their autoshipment programs, within 10 days of cancellation, to those customers that provide an email 

address. 16 These are all meaningful forms of prospective relief that address core issues in the 

Sabol and Margolis litigation.17 

B. The Lussier Objection 

 Mr. Lussier’s first objection to the Settlement is that his potential benefit of $100 is 

inadequate to make him whole for all he spent on Hydroxatone products. Class Counsel 

sympathizes with Mr. Lussier’s concerns, but in the final analysis, the desire for a settlement to 

be “better” is not a valid objection and should not stand in the way of final settlement approval. 

Careccio v. BMW of N. Am. LLC, No. 08–2619(KSH), 2010 U.S. Dist. LEXIS 42063, at *17, 

2010 WL 1752347 (D.N.J. Apr. 29, 2010) (“[F]ull compensation is not a prerequisite for a fair 

settlement.”) Dewey v. Volkswagen of Am., 728 F.Supp.2d 546, 579 (D.N.J.2010) 

(“[C]omplaining that the settlement should be ‘better’... is not a valid objection.”) (internal 

 16 As discussed infra, it is irrelevant that in a non-class action, the FTC arguably was able 

to get greater injunctive benefits in its stipulated permanent injunction. See Margolis Objection 

at 2,3,8-10,21,24, 25 (citing FTC v. Willms, Case No. 2-11-cv-828-MJP (W.D. Wash. Feb. 22, 

2012) (Ex. 24 to Margolis Objection)). 

17 Should Defendants not abide by such prospective relief, Class Counsel can seek to 

enforce the terms of the Settlement, after written notice and Defendants’ failure to cure their 

breach. Settlement Agreement, §4(c)(i). 

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quotation marks and citation omitted). Objections based solely on the amount of the award lack 

merit. See Hall v. AT & T Mobility LLC, No. 07–5325(JLL), 2010 U.S. Dist. LEXIS 109355, at 

*30, 2010 WL 4053547 (D.N.J. Oct. 13, 2010) (“[T]he fact that the []Objectors would prefer that 

all Class Members receive greater cash benefits ... has no bearing on whether the terms of the 

Settlement Agreement itself are fair and reasonable.”). 

 As for Mr. Lussier’s objection to the proposed award of attorneys’ fees in this case, Class 

Counsel respectfully submits that their fee request is reasonable and that even if they are 

awarded the requested fees, they will receive far less than their lodestar incurred. Class Counsel 

has already extensively briefed the issue of the reasonableness of the fee request in their 

Memorandum in Support of Plaintiffs’ Motion for An Award of Attorneys’ Fees, 

Reimbursement of Expenses, and Participation Awards, filed with the court on May 31, 2013 

(ECF No. 93). 

 Finally, Mr. Lussier’s conclusion that Hydroxatone’s actions constitute criminal activities 

is beyond the scope of this civil litigation. As such, Class Counsel has no opinion or argument 

on the matter. 

III. CONCLUSION 

 A presumption of fairness exists where a settlement has been negotiated at arm’s length, 

discovery was sufficient, the settlement proponents are experienced in similar matters, and there 

are few objectors. In re Warfarin Antitrust Litig., 391 F.3d 516, 535 (3rd Cir. 2004) (citing In re 

Cendant Corp. Litig., 264 F.3d 201, 232 n. 18 (3d Cir. 2001). Here, as the Court is aware, the 

settling parties negotiated the settlement in an intense face-to-face mediation presided over by 

the Honorable Stephen M. Orlofsky (Ret.). Judge Orlofsky has submitted a declaration affirming 

that the settlement was the result of a hard fought mediation and that the settlement was the 

result of compromise, not collusion. Further, counsel for Defendants and Class Counsel have 

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substantial experience in class actions generally and class action concerning consumer protection 

claims specifically. There were only two true objectors, or one for every 1.3 million class 

members. For these and all the reasons detailed above, the objections to the Settlement should 

be overruled and the Settlement should be finally approved. 

Dated: July 9, 2013 

 Respectfully submitted, 

By /s/ Alan Sash 

Alan Sash 

Lee S. Shalov 

260 Madison Ave. 

New York, NY 

McLAUGHLIN & STERN LLP 

Tel: (646) 278-4298 

Fax: (212) 448-0066 

Andrew N. Friedman 

COHEN MILSTEIN SELLERS & TOLL PLLC 

1100 New York Avenue, N.W., Suite 500 West 

Washington, DC 20005-3964 

Tel: (202) 408-4600 

Fax: (202 408-4699 

Angela Edwards 

LAW OFFICES OF ANGELA EDWARDS 

72 Canterbury Circle 

East Longmeadow, MA 01028 

(413) 525-3820 

Plaintiffs’ Class Counsel 

Case 2:11-cv-04586-KM-MAH Document 117 Filed 07/09/13 Page 28 of 29 PageID: 2525
23 

1757797.1 

CERTIFICATE OF SERVICE 

 I hereby certify that on this date, a true and correct copy of the attached Plaintiffs’ Reply 

Memorandum in Further Support of Plaintiffs’ Motion for Final Approval of the Proposed 

Amended Settlement was served upon Defendants’ counsel via ECF. 

 _/s/ Alan Sash____________ 

 Alan E. Sash 

Dated: July 9, 2013 

Case 2:11-cv-04586-KM-MAH Document 117 Filed 07/09/13 Page 29 of 29 PageID: 2526