Posted Jul 17, 2012 02:08 pm CDT
A federal appeals court has refused to approve a settlement involving charitable donations in a class-action suit that alleged Kellogg Co. made false advertising claims about Frosted Mini-Wheats.
The San Francisco-based 9th U.S. Circuit Court of Appeals rejected the deal because of high attorney fees and cy pres provisions calling in part for food donations to feed the needy, report the Los Angeles Times, Thomson Reuters News & Insight, the National Law Journal and How Appealing. The food and other charitable donations don’t have a sufficient nexus to the lawsuit’s false advertising claims, the 9th Circuit found.
Attorney fees amount to $2,100 an hour, according to the unanimous panel opinion (PDF) by Judge Stephen Trott. “Not even the most highly sought after attorneys charge such rates to their clients,” he wrote.
A lawyer for the plaintiffs, Timothy Blood of San Diego, told the NLJ he believes the decision is “the narrowest reading of the cy pres doctrine of any appellate-level case in the country.”
The NLJ outlines the terms of the proposed settlement. Kellogg would stop making claims that a breakfast of Frosted Mini-Wheats helps improve children’s attentiveness by nearly 20 percent. The cereal maker would also create a $2.75 million fund for class members and donate $5.5 million in food to unnamed charities that feed the poor. Class members would receive $5 from the fund for each future box of cereal they buy, with a cap of $15. Unclaimed money would also go to charities that are chosen by the parties and approved by the court.
“The settlement provides no assurance that the charities to whom the money and food will be distributed will bear any nexus to the plaintiff class or to their false advertising claims and therefore violates our well-established standards governing cy pres awards,” Trott said. Charitable donations should go to consumer protection groups battling false advertising, according to the opinion
“The only relationship between this lawsuit and feeding the indigent is that they both involve food in some way,” Trott wrote.
The case is Dennis v. Kellogg Co.