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California Hammered in Spat With Intelligender

(CN) - After opting out of a class-action settlement over an allegedly falsely advertised gender-prediction test, California is not eligible for restitution, the 9th Circuit ruled Friday.

Julie Gram led a nationwide class in 2010 against IntelliGender LLC, maker of the IntelliGender Prediction Test.

She claimed that the company's promise of 90 percent accuracy in predicting a fetus' gender through urine violated California's unfair-competition and false-advertising laws.

IntelliGender settled the claims in 2012, agreeing to change its advertising and pay $10 to each person who had purchased the test between November 2006 and January 2011 and received an inaccurate result.

That same year, the San Diego City Attorney filed similar claims against IntelliGender, seeking an injunction against its allegedly false advertising and unfair practices, as well as $30 in restitution for every individual who purchased the test, regardless of its accuracy.

IntelliGender moved for its own injunction against the state's entire action, arguing that it would interfere with the class-action settlement.

U.S. District Judge Audrey Collins in Los Angeles ruled for the state, and did so again when IntelliGender shot back with a request for a pared-down injunction against only the state's restitution claims.

Noting that the case "sits squarely at the intersection of the Class Action Fairness Act and a sovereign's right to bring an enforcement action to protect its citizens from unscrupulous, fraudulent, or harmful business practices," a unanimous appellate panel partly reversed Friday.

In refusing to enjoin the entire action, the court noted that California's case against the company was "designed to vindicate broader governmental interests" other than securing restitution for its citizens.

That said, when IntelliGender complied with the Class Action Fairness Act by noticing the state of the proposed settlement with the Gram class, the state "chose not to participate in the settlement approval process," according to the ruling.

"The state cannot now obtain a duplicate recovery in the form of restitution on behalf of those individual citizens who are bound by the bargained for restitution in the CAFA class settlement," Judge Kim McLane Wardlaw wrote for the three-judge appellate panel.

"If the state wished to secure compensation for those class members, it had an opportunity to do so by intervening after receiving notice of the proposed settlement," she wrote. "This is the method CAFA established for states to seek equitable compensation for class members. The state chose not to use its authority, and the settlement was approved. Compensation is res judicata."

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