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In re Sinus Buster Products Consumer Litigation

United States District Court, E.D. New York

November 10, 2014

IN RE: SINUS BUSTER PRODUCTS CONSUMER LITIGATION

FARUQI & FARUQI, LLP, Co-Lead Interim Class Counsel New York, New York, Antonio Vozzolo, Esq. Courtney Maccarone, Esq., Of Counsel

BURSOR & FISHER, P.A. Co-Lead Interim Class Counsel Seventh Avenue New York, NY, Scott A. Bursor, Esq., Joseph I. Marchese, Esq., Of Counsel.

Jeffrey N. Levy, Esq., Of Counsel TASHLIK GOLDWIN CRANDELL LEVY LLP Great Neck, NY, Attorney for the Defendant Hi-Tech Pharmacal, Inc.

MEMORANDUM OF DECISION AND ORDER

ARTHUR D. SPATT, District Judge.

This case arose out of a putative consolidated class action filed against the Defendants Wayne Perry ("Perry"), Dynova Laboratories, Inc. ("Dynova"), SiCap Industries, LLC ("SiCap"), and Hi-Tech Pharmacal, Inc. ("Hi-Tech") (collectively, the "Defendants") in connection with their marketing and sale of a line of Sinus Buster products, which are over-thecounter nasal sprays.

On December 16, 2013, following six months of arms-length negotiations, Faruqi & Faruqi, LLP ("Faruqi & Faruqi") and Bursor & Fisher, P.A. ("Bursor & Fisher") (collectively, the "Settlement Class Counsel") and counsel for Hi-Tech reached a proposed settlement. The settlement provides the proposed class, among other things, (i) a full monetary refund of the actual purchase price of the Sinus Buster products that they purchased or, in the alternative, $5.00 per Sinus Buster product purchased up to two Sinus Buster products ($10.00 in total); (ii) certain remedial measures; (iii) attorneys' fees, costs and expenses in the amount of $250, 000 that are independent of the common fund established for settlement; and (iv) an incentive award of $2, 500 for each of the named Plaintiffs.

Presently before the Court are two motions. First, the Plaintiffs seek a final order, which certifies a settlement class and approves the class settlement. Second, the Settlement Class Counsel seek an order awarding attorneys' fees, costs and expenses, and incentive fee awards. For the reasons set forth below, both motions are granted in their entirety.

I. BACKGROUND

A. Underlying Facts

Although the parties' familiarity with the underlying facts and procedural history of the case is assumed, a brief review is in order.

This case arose out of allegations that the Defendants engaged in unfair and deceptive marketing practices in connection with their line of Sinus Buster products. Sinus Buster products are a line of drugs containing Capsaicin, an ingredient in hot cayenne peppers, which Defendants claim also treats, among other things, sinus congestion. (Consolidated Compl. at ¶ 3.) The Defendant Hi-Tech is a Delaware Corporation, which acquired Sinus Buster products that it continues to market and sell. ( Id. at ¶ 13.) The Defendant SiCap is a limited liability company, which designed and developed Sinus Buster products. ( Id. at ¶ 14.) The Defendant Perry is the creator and developer of the Sinus Buster products, and was, until 2010, the founder and CEO of Defendant SiCap. ( Id. at ¶ 12.) The Defendant Dynova Laboratories is a Delaware Corporation, which, in 2008, acquired SiCap and its line of Sinus Buster products. ( Id. at ¶ 15.)

On May 15, 2012 and June 8, 2012, respectively, David Delre ("Delre") (Case No. 12-CV-2429). and Mathew Harrison ("Harrison") (Case No. 12-CV-2897), both of whom were consumers that purchased Sinus Buster products for personal use, commenced separate putative class actions against the Defendants.

On December 17, 2012, the Court granted the Delre and Harrison's (collectively, the "Plaintiffs'") motion pursuant to Fed.R.Civ.P. 42(a)(2) and 23(g) to consolidate their actions and to appoint Faruqi & Faruqi and Bursor & Fisher as co-lead interim class counsel. (See Dkt. No. 54.)

On January 9, 2013, the Plaintiffs filed a consolidated putative class action complaint, which asserted claims against the Defendants for violation of (i) the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et. seq., (ii) for unjust enrichment, (iii) common law fraud, (iv) breach of express warranty, (v) breach of implied warranties of fitness and merchantability, (vi) the New Jersey Consumer Fraud Act, N.J.S.A. § 58:8-1, et seq., (vii) the Minnesota private attorney general statute, Minn. Stat. § 8.31, et seq., (viii) and the consumer fraud statutes of the fifty states. ( Id. at ¶ 9.) The thrust of these claims is that the Defendants misled consumers into believing that Sinus Buster products were approved by the FDA and that the Defendants mischaracterized the products as "homeopathic" solely to avoid FDA regulations. ( Id. at ¶ 8-9.)

Thereafter discovery commenced, and the parties produced documents and responded to written discovery requests and interrogatories. (See generally Dkt. Nos. 59-85.) During this period, the Plaintiffs allege that they reviewed "thousands of documents" which were produced by Hi-Tech. (See Vozzolo Decl. at ¶ 43.)

On January 25, 2013, the Defendant Dynova filed a voluntary Chapter 7 bankruptcy petition in the District of New Jersey (13-cv-11415). As a result, this Court issued an automatic stay with respect to all litigation involving Dynova. (Dkt. No. 60.) The Plaintiffs sought relief from the automatic stay in the bankruptcy action, which was denied by a bankruptcy court in the District of New Jersey. (Vozzolo Decl. at ¶¶ 40-43.) However, the trustee in the bankruptcy action turned over approximately 44, 000 pages of documents to the Plaintiffs related to their claims against the Defendants. (Id.)

B. Terms of the Settlement

On June 19, 2013, Settlement Class Counsel and counsel for Hi-Tech initiated settlement discussions with respect to the remaining litigation without the Defendant Dynova. ( Id. at ¶ 44.) On December 16, 2013, after six-months of arms-length negotiations under the guidance of Magistrate Judge Tomlinson, Hi-Tek and Settlement Class Counsel agreed on the terms of a settlement. (Id.)

The proposed settlement resolves the claims of individuals in the United States who purchased Sinus Buster products on or after March 7, 2012 and before February 20, 2014. (Revised Preliminary Approval Order at ¶ 7, Dkt. No. 95.) Pursuant to the settlement agreement, Hi-Tech will offer a full monetary refund for any Settlement Class members who submit a valid claim form along with proof of purchase. (Settlement Agreement at ¶ 64, Dkt. No. 88, Ex. 1.) For those without documentation of the purchase price, Hi-Tech will offer claimants $5.00 per Sinus Buster Product for up two Sinus Buster Products. (Id.)

The proposed settlement also directs Hi-Tech to undertake certain remedial measures in connection with its marketing of Sinus Buster productions. In particular within one year of the effective date of the settlement agreement, Hi-Tech is required to, among other things: (1) "discontinue the marketing and sale of Sinus Buster Mild, Cold Buster, and Headache Buster Products"; (2) add certain language to the packaging of Sinus Buster products and Hi-Tech's consumer facing website; and (3) prepare Sinus Buster products "in accordance with traditional homeopathic practices and/or methods." ( Id. at ¶ 63.)

The Defendants Perry, Dynova, and Sicap Industries, LLC (who has not appeared in this case) are not parties to the settlement agreement. However, pursuant to the agreement, the Plaintiffs will execute a stipulation of dismissal with Perry and file a notice of voluntary dismissal of their claims against Sicap. ( Id. at ¶ 31.) Perry and Hi-Tech will execute a stipulation of dismissal with respect to their cross-claims against each other. (Id.) If the settlement agreement is approved, Dynova, who is not referenced in the settlement agreement, will remain a Defendant in this action pending the outcome of its separate bankruptcy action pursuant to the terms of the automatic stay. (See Notice of Bankruptcy Filing and Automatic Stay, Dkt. No. 60.)

On February 4, 2014, the Court issued an order which preliminarily approved the settlement agreement and, among other things, provisionally certified a nationwide settlement class, approved the procedure and forms of notice, set a June 6, 2014 deadline for submitting objections to the settlement, and set a July 17, 2014 deadline for submitting claim forms to obtain relief under the settlement. (Revised Preliminary Approval Order at ¶¶ 7, 15, 17, Dkt. No. 95.)

Prior to the June 6, 2014 deadline, no potential class member objected to or opted out of the settlement. (Notice of Non-opposition to Mot. For Final Approval, Dkt. No. 101.) On June 27, 2014 the Court held a hearing on the motion for final approval of the class action settlement, during which no objectors appeared. At the hearing, Settlement Class Counsel represented that as of June 27, 2014, 2, 900 individuals had submitted claims to obtain relief under the settlement. (Fairness Hearing Tr: 5:14-6:13.) The Court is not aware of how many individuals ultimately submitted claim forms to obtain relief under the settlement prior to the July 17, 2014 deadline.

II. DISCUSSION

A. As to Whether the Court Should Certify the Proposed Settlement Class

1. Legal Standard

Prior to approving a settlement, the Court should determine whether the proposed settlement class meets the requirements of Federal Rule of Civil Procedure ("Fed. R. Civ. P.") 23. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 2248, 138 L.Ed.2d 689 (1997)

Rule 23(a) requires that all class actions satisfy the following requirements: "(1) numerosity (a class [so large] that joinder of all members is impracticable'); (2) commonality (questions of law or fact common to the class'); (3) typicality (named parties' claims or defenses are typical... of the class'); and (4) adequacy of representation (representatives will fairly and adequately protect the interests of the class')." Id.

Where, as here, a party seeks to certify a class under Rule 23(b)(3), a party must also show that (1) "[c]ommon questions... predominate over any questions affecting only individual members'" ("predominance requirement"); and (2) class resolution must be "superior to other available methods for the fair and efficient adjudication of the controversy." Id. This rule is designed to "achieve economies of time, effort, and expense, and promote... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." Yang v. Focus Media Holding Ltd., No. 11 CIV. 9051 (CM), 2014 WL 4401280, at *13 (S.D.N.Y. Sept. 4, 2014)

2. Rule 23(a) Requirements

a. Numerosity

"Numerosity is presumed at a level of 40 members." Consol. Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995). Here, the proposed settlement class includes thousands of consumers nationwide who purchased Sinus Buster products between March 7, 2012 and February 20, 2014. Therefore, the proposed class satisfies the "numerosity requirement."

b. Commonality

The proposed class also meets the "commonality requirement." A court may find a common issue of law or fact if plaintiffs "identify some unifying thread among the members' claims." Dupler v. Costco Wholesale Corp., 249 F.R.D. 29, 37 (E.D.N.Y. 2008) (internal quotation marks and citations omitted). Notably, a common issue of law can be found even though there exists "some factual variation among class members' specific grievances." Id. (internal quotation marks and citations omitted). Further, "[e]ven a single common legal or factual question will suffice." Lizondro-Garcia v. Kefi LLC, 300 F.R.D. 169, 175 (S.D.N.Y. 2014) (internal quotation marks and citations omitted).

Here, the Plaintiffs allege numerous common questions, including, among others: (a) whether the Sinus Buster products were effective for their advertised purpose; (b) whether the Defendants advertised or marketed the Sinus Buster Products in a way that was false or misleading; and (c) whether the Defendants concealed from the Plaintiffs and other members of the proposed settlement class that the Sinus Buster products did not conform to their stated representations. Accordingly, the commonality requirement is satisfied here. See, e.g, In re Giant Interactive Grp., Inc. Sec. Litig., 279 F.R.D. 151, 158 (S.D.N.Y. 2011) (finding that a proposed settlement class action against the defendants for misrepresentations in a prospectus satisfied the "commonality" and "typicality" requirements because "each class member's claim arises from the same course of events and each class member must make similar legal arguments to prove the defendants' liability.")

c. Typicality

"Typicality... is satisfied when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." Kelen v. World Fin. Network Nat. Bank, No. 12-CV-5024 (VSB), 2014 WL 3893081, at *5 (S.D.N.Y. July 28, 2014) (citing Marisol A. v. Giuliani, 126 F.3d 372, 376 (2d Cir. 1997)). The requirement is intended to "ensure[] that maintenance of a class action is economical and that the named plaintiff's claims and the class claims are so interrelated that the interest of the class members will be fairly and adequately protected in their absence." Id. (internal quotation marks and citations omitted).

Here, the Plaintiffs and the proposed class members' claims arise out of the same representations made by the Defendants about their Sinus Buster products. As such, the Court finds that the proposed settlement class satisfies the typicality requirement. See, e.g., id. (finding that "typicality" requirement was satisfied based, in part, on "[t]he allegations put forth in support of the named Plaintiffs' position are the exact same that the other putative class members would rely on to establish inadequate disclosures under the contract"); Yang v. Focus Media Holding Ltd., No. 11 CIV. 9051 CM GWG, 2014 WL 4401280, at *12 (S.D.N.Y. Sept. 4, 2014) (finding that "typicality" requirement was satisfied, in part, because "[a]ll Class Members purchased ADSs during the Class ...


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