$10.5M settlement in Dr. Phil diet plan suit

updated 12:18 p.m. ET Sept. 26, 2006

LOS ANGELES - Unhappy customers who sued "Dr. Phil" McGraw over his now discontinued Shape Up! diet plan have reached a $10.5 million settlement agreement with the TV psychologist, an attorney for the plaintiffs said.

The lawsuit, filed in 2004 on behalf of three disappointed consumers, claimed McGraw defrauded fans with his yearlong venture into the diet supplement business, making false statements about the pills. McGraw has denied the allegations and admitted no wrongdoing or misrepresentation in the settlement.

Henry H. Rossbacher, an attorney for the plaintiffs, said thousands of eligible customers nationwide will be able to choose either replacement products or a small cash reward as part of the settlement. It wasn't immediately clear how much each person could receive.

Rossbacher said a fund would be set up with $6 million in Nutrilite vitamins and $4.5 million in cash.

Insurance will cover the costs of the settlement and McGraw will have no personal obligation to contribute to the fund, Rossbacher said.

Attempts to leave a phone message at the office of McGraw's lawyer, Gregory Phillips, were unsuccessful early Tuesday.

McGraw, 56, jumped into the lucrative weight-loss market in mid-2003 with a campaign that included advice books, a prime-time special with Katie Couric on obesity and dieting, and his Shape Up! with Dr. Phil McGraw products.

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Shape Up! shakes, bars and multivitamins made by Irving, Texas-based CSA Nutraceuticals were sold in supermarkets, Target, Wal-Mart and elsewhere. The plan called for 22 pills daily at $120 a month.

CSA Nutraceuticals agreed to stop making the supplements in early 2004 as it faced a Federal Trade Commission investigation into false-advertising concerns.

According to the label, the pills "contain scientifically researched levels of ingredients that can help you change your behavior to take control of your weight."

The original three plaintiffs sought class action status for the lawsuit last year. Rossbacher said consumers who can establish by affidavit or proof of purchase that they bought Shape Up! supplements before July 1 may be eligible for the settlement's benefits.

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