Judge Rejects Offer to Settle ‘Vanilligate’ Suit : Music: Arista Records will have to do more than offer consumers a refund on future purchases to end Milli Vanilli class action.

A Chicago judge scuttled a proposed multimillion-dollar settlement to a class-action lawsuit against the lip-synching pop group Milli Vanilli on Monday, saying Arista Records and its parent corporation will have to do more than just offer consumers a refund on future purchases of compact discs, albums and cassettes.

Bertelsmann Music Group, Arista’s German-based parent corporation, had offered the duo’s 10 million fans between $1 and $3 in refunds on any purchase of Arista recordings as part of the settlement. The amount of the refund was to have depended on whether the customer had originally purchased a Milli Vanilli CD, tape, record or single.

Although attorneys for Milli Vanilli’s fans in the Chicago case had agreed to the settlement last week, the circuit judge presiding over the case decided it wasn’t fair to consumers.

The problem “with the settlement offer was that Arista would be making money off the very people they defrauded in the first place,” said Alan Mansfield, a San Diego attorney who filed a separate class action lawsuit against Milli Vanilli and has closely followed the Chicago case. “It’s inadequate and unacceptable.”

Milli Vanilli became the subject of more than 20 lawsuits across the country after it was discovered last year that its two performers--Rob Pilatus and Fabrice Morvan--hadn’t actually sung any of the recordings on the best-selling album “Girl You Know It’s True.”

The duo--featured on the album’s jacket--had simply mouthed the words on music videos and in concerts. They returned their 1990 Best New Artist Grammy after what some have called “Vanilligate” became public.

On Monday, Judge Thomas O’Brien’s rejection of the Arista settlement took some entertainment law experts by surprise.

“In most cases, judges do approve settlements,” said Lionel Sobel, a Loyola Law School professor and editor of the monthly Entertainment Law Reporter. “It’s up to the lawyer for the plaintiff to get the best deal that can be gotten. It’s very unusual for judges to decide that a better deal was available--let alone should have been gotten.”

Bertelsmann had estimated it would spend millions of dollars on refunds and had agreed to donate $225,000 to court-approved charities if the settlement was accepted.

Monday’s action was significant because some legal experts said a settlement in the Chicago case could resolve the more than 20 consumer fraud lawsuits filed against Milli Vanilli and its associates, including two in Los Angeles.

Some entertainment lawyers, including Sobel, think all of the litigation spawned by Milli Vanilli is silly.

“I didn’t think much of the (Chicago) case to begin with,” said Sobel. “People knew what they were buying. They (bought) the product they intended to buy because the product they intended to buy was a record with a certain sound on it. That is the sound they got.”

Pilatus and Morvan claimed at the time the scandal erupted that officials at New York-based Arista, BMG and Gallin Morey Associates talent agency purposely misrepresented them to the public.

Arista and BMG executives could not be reached for comment late Monday. Attorneys representing the two companies said previously that the firms did not mislead Milli Vanilli’s fans. The companies said they never created the impression the two men had actually sung on the album.

The Chicago judge has scheduled a Sept. 11 hearing in order to give both sides time to try and reach a new agreement.

Times correspondent Chuck Philips contributed to this article.