Dial Complete antibacterial soap.

A federal judge shot down concerns raised by the U.S. Department of Justice over a $7.4 million class action settlement involving Dial soap after concluding that “plaintiffs' counsel have served the class well.”

The DOJ filed a statement of interest in the case earlier this month, insisting that the settlement provided “virtually worthless” injunctive relief and an excessive $3.8 million in fees to the plaintiffs' attorneys. The filing was among several that the DOJ has made in the past year in class action settlements an effort to challenge what it considers abuses under the Class Action Fairness Act.

In the Dial case, attorneys general from a dozen states, including Arizona, Florida and Texas, filed a brief supporting the DOJ's opposition to the settlement.

After a hearing Wednesday, which featured lawyers from both the DOJ and the Arizona attorney general's office, U.S. District Judge Steven McAuliffe, in New Hampshire, approved the settlement.

“All in all, plaintiffs' counsel have served the class well,” the judge wrote. Among other things, he wrote, they “recovered the full price premium loss for all timely class claimants, policed the marketplace with respect to the challenged claim, and price premium charged, and have done so in a case that suffered from (in the court's view) not only obvious merits weaknesses and burden of proof difficulties, but potentially fatal legal weaknesses as well, had it gone to trial.”

Lead plaintiffs' counsel Lucy Karl, of Shaheen & Gordon in New Hampshire, said in a statement: “After many years of hard-fought litigation, we're pleased with the settlement that we were able to obtain for the class.”

In court filings, however, she expressed more pointed accusations that ideological agendas, not legal theories, drove the objections of the DOJ and attorneys general.

“We cannot ignore that politics have entered our courtrooms and our judicial selection process,” she wrote in a May 23 response. “Political agendas become litigation agendas. To some agenda-driven interlopers, plaintiffs' class action attorneys are seen, at best, as anti-business scoundrels seeking to profit at the expense of the putative class and providing little to no social value.”

Dial attorney Robert Miller, of Sheehan Phinney in New Hampshire, did not respond to requests for comment.

Spokespeople with the DOJ and the Arizona attorney general's office, which filed the brief, also did not respond.

The DOJ has stepped into several other class action settlements. In a case against Lenny & Larry's, for instance, government lawyers criticized a $3.5 million settlement for giving $1.1 million in attorney fees to plaintiffs' attorneys. This month, a federal judge in Illinois granted final approval to the deal, after the lawyers made several changes.

The latest settlement resolves a class action alleging that Dial overstated the ability of its “Dial Complete” hand soap to kill germs. The settlement provided $2.32 million in cash to compensate consumers and injunctive relief that required Dial to change the ingredients and labeling of its product. The DOJ, in its statement of interest, raised concerns that the injunctive relief was “virtually worthless” because Dial had already changed its ingredients and the U.S. Food and Drug Administration banned triclosan in 2016. Government lawyers also questioned the attorney fees, particularly the $1.9 million based on that injunctive relief.

Attorneys general, in their May 14 brief, mirrored those concerns, calling the settlement “fatally imbalanced.”

“It is important for the court to step in here, exercise its independent duty on behalf of consumer class members (who face substantial disadvantages in the class action settlement approval process), and reject the proposed settlement,” they wrote.

But lawyers on both sides of the case fired back at the governments' opposition.

“The regulators' position is that plaintiffs' attorneys should not be paid for their work because Dial changed some of its business and marketing practices during the course of the litigation,” Karl wrote in her response. “But Dial's changes did not happen in a vacuum. The decision to bring about these changes was due in significant part to the force of this litigation.”

Karl noted that the FDA had not banned triclosan at the time of the case's filing in 2011 and that no government regulators had brought an enforcement action against Dial.

“In the absence of executive enforcement, who polices consumer deceptive practices business claims, where individual damages may be pennies but the aggregate in the millions?” she wrote. “With the forces of deregulation becoming stronger in the executive and legislative branches, it is plaintiffs' attorneys who are incentivized to take the financial risks of prosecuting class actions that protect the public from deceptive corporate conduct.”

She then considered an alternative motive behind the opposition: “One must consider whether that ideological opposition is what is really driving the regulators' tardy opposition to the settlement, especially when one considers that not one consumer objected to the settlement,” she wrote in a footnote.

Dial's lawyers, which also include Kirkland & Ellis partner Eugene Assaf in New York and partners Edwin U and Patrick Haney in Washington, D.C., also challenged the concerns of the DOJ and attorneys general, stating that the fees were up to the judge's discretion. Dial defended the injunctive relief and added that “neither the DOJ nor the state AGs apparently recognize that the settlement allows purchasers to receive cash in hand amounting to all or virtually all of their best case recovery at trial.”

In his final order, McAuliffe called the case “somewhat unusual” because it compensated class members for the premium prices they paid, for up to $8.10 each, even though some did not have receipts. (In 2017, the U.S. Court of Appeals for the First Circuit refused to take up Dial's interlocutory appeal of class certification in the case, based in part on the inability to ascertain class members without receipts, but Circuit Judge William Kayatta, in a dissent, warned his colleagues that doing so would result in “further mischief” that could challenge the constitutional rights of defendants.)

McAuliffe agreed that the injunctive relief “is probably illusory” given the FDA's ban, but forcing Dial to drop the claim that its product “Kills 99% of Germs” is of “significant value to the class,” he wrote. Moreover, although the actual value estimate of the injunctive relief was “not well grounded,” he wrote, he was “not inclined to disrupt the negotiated settlement in this aged litigation” to come up with a better one. That's particularly true since class members also would receive cash under the deal.

“Quibbling about the fee properly awarded for the injunctive relief obtained will not, in this case, result in more being paid to already fully compensated class members,” he wrote.