Antitrust Law Daily Wrap Up, ADVERTISING—3d Cir.: Final settlement approval in Nutella deceptive marketing case affirmed, (Sep 29, 2014)

By Linda O’Brien, J.D., LL.M.

In a consolidated class action by consumers against a food manufacturer for allegedly deceptively marketing its Nutella chocolate hazelnut spread, a district court did not abuse its discretion in granting final approval to a settlement which provided that a portion of the class counsel’s fee award was to be paid from the class fund, the U.S. Court of Appeals in Philadelphia has ruled. Thus, the district court order approving the final settlement and imposing an appeal bond was affirmed (In re Nutella Marketing and Sales Practices Litigation, September 29, 2014, Rendell, M.).

Marnie Glover and other consumers filed two class action suits, alleging that Ferrero U.S.A. deceptively marketed, advertised, and sold the Nutella chocolate hazelnut spread as a healthy and nutritious food but omitted that the nutritional value was derived from other foods or beverages that were advertised along with Nutella, such as bread, fruit, or milk. The plaintiffs brought claims under the New Jersey Consumer Fraud Act (NJCFA).

The parties agreed to mediation which resulted in two settlements – a nationwide settlement and a separate settlement for California class members. The district court granted preliminary approval to the nationwide settlement in 2012. Under the settlement, Ferrero agreed to pay $2.5 million and to certain injunctive relief provisions. Ten class members objected to the award of attorney fees. The district court overruled the objections and granted final approval to the settlement and awarded class counsel attorney fees. The objectors appealed.

Attorney fee award. The appellate court found that the district court did not abuse its discretion in approving a settlement in which a portion of the class counsel’s fee award was to be paid from the class fund. According to the court, counsel who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney fee from the fund as a whole. Moreover, since the case was settled, any basis for a statutory fee had been discharged and only the class fund remained.

In rejecting the objector’s challenge to the amount of the fee award attributable to the injunctive relief, the appellate court found that the district court correctly focused on the value of the injunction to the class, instead of in terms of the cost to the defendant, when it reduced the fee request by more than 80 percent. The district court also acknowledged that the class did receive some value from the injunctive relief in the settlement since the relief addressed the harms alleged in the plaintiffs’ complaints. The appellate court noted that an exact figure was not required to evaluate the settlement’s non-monetary benefits for purposes of approving the settlement because “each class member’s recovery exceeds the value of the best possible recovery discounted by the risks of litigation.”

Appeal bond. The district court did not abuse its discretion in imposing an appeal bond on the appellant objectors. The Federal Rule of Appellate Procedure 7 authorized a district court to order an appellant to post a bond covering the costs of appeal. The appeal bond was appropriate because the objectors did not (1) respond in a meaningful way to contentions that their appeals were meritless or (2) represent that they were able to pay the costs of an appeal. Furthermore, the district court limited the appeal bond to the amount of administrative costs related to the settlement fund for a one-year period, which was collectively imposed on all ten appealing objectors, the appellate court noted.

The case is No. 12-3456.

Attorneys: Carl C. Beckwith (Beckwith, Scolnick & Wolf) for Marnie Glover. Keith E. Eggleton (Wilson, Sonsini, Goodrich & Rosati) and Steven A. Karg, I (Norris, McLaughlin & Marcus) for Ferrero U.S.A. Inc.

Companies: Ferrero U.S.A. Inc.

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