‘Healthy’ Coconut Oil Suit Settles for $1.85M

Manatt, Phelps & Phillips, LLP

Manatt, Phelps & Phillips, LLP

To settle a false advertising class action over its “healthy” claims for coconut oil, Nature’s Way has agreed to a $1.85 million settlement deal.

California resident Sherry Hunter filed suit in 2016. Although she relied on claims that Nature’s Way’s coconut oil was “Ideal for exercise and weight loss programs,” “non-hydrogenated; no trans fat,” “For cooking, can be used in place of butter, margarine, shortening or other cooking oils” and that it has a “Variety of Healthy Uses,” the products are inherently unhealthy, she alleged.

The parties engaged in two years of litigation, extensive motion practice, discovery and mediation before reaching an agreement featuring both injunctive relief and a $1.85 million nonreversionary common fund.

All persons in the United States who purchased products bearing at least one of the challenged label claims for personal or household use are eligible for a payment from the settlement fund. The estimated “hundreds of thousands” of class members who purchased Extra Virgin Coconut Oil will receive between $3 and $6, and those who purchased Liquid Coconut Cooking Oil will receive between $3.50 and $6.

No class size limit was set for class members with proof of purchase, but payment was capped at three products for class members without receipts. If a surplus arises in the common fund, the excess funds will be further distributed to class members on a pro rata basis, up to a maximum of 50 percent of the retail value of the products. If a surplus still remains, it will be paid to a third party cy pres.

The costs of class notice and administration, a $7,500 incentive award for Hunter and class counsel fees of $610,500, along with expenses, will be paid from the settlement fund.

In addition, Nature’s Way agreed to prospective relief. During the litigation, the defendant removed the challenged claims from its label. As part of the settlement agreement, the company also promised that for a five-year period, it will not use the following phrases in print, on its website, on coconut oil product labels or packaging, in its sales pitches, or in public statements: “Healthy,” “Ideal for Exercise and Weight Loss Programs,” “Recommendation: Take 1 tablespoon (14 g) up to 4 times daily” and “Non-hydrogenated, no trans fat” unless the statement is made with the disclosures required by the Food and Drug Administration.

To read the memorandum in support of preliminary approval of settlement in Hunter v. Nature’s Way Products, LLC, click here.

Why it matters: In the plaintiff’s motion for preliminary approval of the settlement agreement, Hunter argued that the $1.85 million common fund represented “a significant recovery” for the class, which is estimated to consist of “at least hundreds of thousands of individual consumers.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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