Vibram, the maker of the strange-looking FiveFingers running shoes, has agreed to settle a class action lawsuit relating to certain health claims about their shoes. Vibram will pay a total of $3.75 million to fund the settlement. If the settlement is approved, approximately 25% of this will go to the plaintiff’s attorneys, and the rest will be available for refunds to customers. Any leftover amount from the settlement will be donated to the American Heart Association for research relating to the health benefits of running. While $3.75 million may seem like a huge amount of money, the structure of the settlement may provide some advantages to Vibram.
Potential For Positive Publicity
While there is generally agreement that FiveFingers commits certain crimes against fashion, there is no agreement that Vibram did anything wrong with respect to their health claims. FiveFingers are an interesting product because, the people who use them and believe in them are not going to suddenly reject the product as a result of this settlement. In fact, I have read strong defense for the company by users of FiveFingers in the comments sections of a number of articles. The believers defend Vibram and Five Fingers, claim that the lawsuit is silly, and declare that they will not seek to collect on the settlement. Vibram is unlikely to lose many customers as a result of this settlement.
Additionally, there have been a bunch of articles written about the settlement. This is essentially free publicity for Vibram. It’s no secret that the minimalist running shoe trend has been in a decline recently, and free publicity cannot hurt at this point. News feeds are now going to be filled with stories about the settlement. Even if the stories take a negative tone, they are unlikely to discourage the fans of the product, and may encourage a strong defense by the fans.
Control Of The Message
The settlement has another advantage for Vibram and that is they get to have some control over the message. Sure, some people will assume they are admitting guilt by settling, but both Vibram and the court have clearly stated that Vibram decided to settle for business reasons, and Vibram continues to deny the allegations against it. A court filing read: “Vibram expressly denied and continues to deny any wrongdoing alleged in the Actions, and neither admits nor concedes any actual or potential fault, wrongdoing or liability.”
Additionally, although Vibram has to now remove certain health claims from its marketing, it likely already removed such claims. The door is also open for Vibram to conduct further studies, if it wishes, to demonstrate health claims. Also, as I mentioned earlier, any amount of the settlement that is not claimed by class members will be donated to the American Red Cross for research into the benefits of running (while I can’t know for sure, I think it is very likely that a significant portion of the settlement will go unclaimed and end up being donated). Although I am speculating, I would not be surprised if Vibram maintains some involvement in any such research.
The Settlement Could Have Been Worse
Although $3.75 million is a lot of money, the settlement could have been much worse. In 2011, Reebok agreed to pay $25 million and provide consumer refunds relating to health claims about its shoes in a settlement with the FTC. In 2012, Skechers settled with the FTC for $40 million. When compared with the Reebok and Skechers settlements, Vibram got a bargain. The settlement puts an end to the lawsuit, puts a cap on Vibram’s own legal expenses, and eliminates the risk of a much higher jury verdict.
In business litigation, it is important to consider all possible outcomes of continued litigation and settlement. By agreeing to settle, Vibram can take advantage of the publicity, it can exert some control of the message, and it can end the dispute for a reasonable and manageable amount of money. This is exactly how a company can turn a superficial loss into a win.