By Jonathan Stempel
NEW YORK (Reuters) - Honest Co will set up a $7.35 million fund to compensate shoppers who said the website co-founded by actress Jessica Alba fraudulently labeled dozens of home and personal care products as natural, plant-based or chemical-free.
The fund is part of Honest's second settlement this month of proposed class action litigation, which was filed on Friday in federal court in Manhattan and requires a judge's approval.
Shoppers accused Honest of marketing bubble bath, children's toothpaste, floor cleaners, laundry detergent, soap and other items with superlatives such as "no harsh chemicals (ever!)" even though they contained synthetic and toxic ingredients.
Under the accord, shoppers would receive a $2.50 payment or credit per eligible product, up to a maximum of 10 without proof of purchase and with no maximum if they have such proof.
The company also agreed to change its product labeling, a step it has already begun.
Honest denied wrongdoing, and in a statement said it settled to limit the cost and distraction of litigation.
"This settlement in no way changes the fact that our marketing practices are entirely appropriate and we will continue to market products as 'natural,'" Honest said.
Alba was not named as a defendant.
On June 5, Honest reached a $1.55 million settlement of claims it sold laundry detergent, dish soap and surface cleaners containing a skin irritant it had pledged to avoid.
The plaintiffs' lawyers had disclosed the existence of the latest settlement, but not its terms, on June 12.
They could receive up to $2.45 million drawn from the settlement fund to cover fees and costs, court papers show.
The case is In re: Honest Marketing Litigation, U.S. District Court, Southern District of New York, No. 16-01125.
(Reporting by Jonathan Stempel in New York; Editing by Jonathan Oatis)