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Over 75% of claims made in $45.5M Altria e-cigarettes settlement found to be potential fraud; Judge OKs deal

SOUTHERN CALIFORNIA RECORD

Sunday, December 22, 2024

Over 75% of claims made in $45.5M Altria e-cigarettes settlement found to be potential fraud; Judge OKs deal

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U.S. District Judge William H. Orrick | cand.uscourts.gov

A federal judge has given a final OK to a $45.5 million settlement with Altria over allegations the tobacco firm misled consumers about the addictiveness of Juul e-cigarettes, despite evidence that more than 75% of the filed claims are invalid or fraudulent.

Judge William Orrick of the Northern District of California issued the approval on March 14. The plaintiffs in the class-action litigation alleged that the tobacco firm, through its involvement with the manufacture and marketing of the Juul e-cigarettes, misled the public about the addictiveness and safety risks of the product, with the intention of addicting minor users and others who had not previously used tobacco or e-cigarettes.

The final approval of the settlement comes on the heels of the final approval in September of last year of a $255 million settlement with Juul Labs, based on similar asserted claims. The settlement class includes anyone who purchased Juul products from a retail store or a website before Dec. 7, 2022.

According to Orrick’s order, more than 8.1 million claim forms have been received and filed by the Altria settlement administrator, Epiq Systems Inc., during the claims period.

“The analysis performed to date indicates that some of the claims are duplicative and that a substantial number of claims have one or more indicia of fraud, so the total number of valid claims will likely be significantly further reduced, with current estimates putting the number of valid claims around 2 million,” Orrick said in the order.

Despite the possibility that more than three out of four of the claims filed may be invalid, the judge said he found the proposed settlement “fair, reasonable and adequate.” The attorneys involved in the litigation are all highly experienced, and none of the facts indicates the possibility of collusion or self-dealing, he said.

One settlement class member objected to the possibility that Epiq Systems will seek up to $10 million in claims administration fees to deal with the fraud review. Orrick called the number of claims submitted astronomical, but he said any claims-administration costs above $6 million for the Altria and Juul litigation will require substantiation from the class counsel.

Ross Weiner, legal director at Certum Group, pointed to risks related to product class-action settlements in a 2023 post on the legal-services company’s website – and the role of feeder websites and social media platforms in increasing the volume of claims filings.

“There is a new insidious trend affecting consumer product class-action settlements: fraudulent claims on a heretofore unseen level,” Weiner said.

In two class actions in the past five years – one involving Godiva Chocolatier and another involving Celsius Holdings – the percentage of fraudulent claims approached 50%, he said. Some of the problems can be blamed on bad international actors and other high-tech fraudsters, according to Weiner.

The parties in the Altria case didn’t respond to requests for comments, but Matthew Monson, an insurance defense attorney, told the Southern California Record that claims lead generators have come to dominate the mass-tort industry.

“This idiocy is spreading to every area of the law,” Monsoon said. “I routinely receive improper text message solicitations from lead generators regarding every mass-tort action, but also for car-accident, workers’ compensation and premises liability cases.”

He emphasized that it is illegal in many states for attorneys to pay for such leads, which are often generated by online sources.

“The bigger problems are that the law firms are turning to hedge funds to finance the purchase of leads and that the lead-generating companies are themselves converting the leads to signed contracts before the law firm is ever involved,” Monsoon said.

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