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L’Oreal Settlement of ‘Salon-Only’ Labels Nixed

(CN) - A settlement to claims that L'Oreal mislabels products as "salon-only" unfairly awards class counsel nearly $1 million in fees while leaving nothing for consumers, a federal judge ruled.

In July, U.S. District Judge John Bates preliminarily approved a settlement in a class action against L'Oreal for labeling its Matrix Biolage, Redken, Kerastase and Pureology products as "available only in salons," while nevertheless stocking them in Target, Kmart, and other non-salon retail stores.

Under the terms of the settlement, L'Oreal promised to remove the "salon only" label from all of its products sold in the U.S., pay class representatives up to $1,000 each, and pay up to $950,000 in attorneys' fees.

Bates declined to certify the class Wednesday, however, or give final approval of the class settlement, and denied plaintiffs' pending motion for attorneys' fees as moot.

"Overall, the arguments raised by plaintiffs to show that this settlement is fair are unconvincing, particularly when weighed against the indications of unfairness raised by the objectors," the opinion states. "Accordingly, the court finds that the settlement is not fair, reasonable, and adequate."

The settlement's only available relief to class members is injunctive, according to the ruling. While it preserves the right for individual class members to sue L'Oreal for damages, it releases the company from liability for all class-wide damages - effectively relieving L'Oreal from monetary liability for the "salon-only" labels, as individual damages per class member would be too small to warrant a lawsuit.

Supporters of the settlement claimed that the liability release is not unfair because there are no viable classwide damages claims. The original complaint sought monetary damages, but this claim was later dropped after finding that recovering damages on a classwide basis was not possible.

Bates was not convinced by this line of reasoning.

"In effect, the parties are asking this court to prejudge the merits of claims not before it; to conclude that those as-yet-unfiled claims are meritless; and hence to preclude those claims from ever being asserted, all without the putative claimants' participation," the 33-page opinion states. "But assuming even that would be appropriate, this case is not the proper vehicle. For on the record before the court, it is impossible to determine with any level of certainty that the class damages claims to be surrendered by class members are valueless."

Incentive awards to class representatives, plus the large attorneys' fees request, also support the impression that the settlement is unfair, Bates said.

"Moreover, the result achieved here could be characterized as worse than 'settling': counsel seeks to release class members' (originally asserted) class-wide damages claims for precisely nothing," the judge concluded (parentheses in original).

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