Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal: Final approval of settlement granted in class action against Kellogg’s cereal advertising, (Sep 13, 2013)

By Edward L. Puzzo, J.D.

The federal district court in San Diego has given its final approval to the settlement of a class action brought against Kellogg regarding advertising claims made for one of its cereal products (Dennis v. Kellogg Co., September 10, 2013, Gonzalez, I.).

A class of consumers alleged that Kellogg had made false and unsubstantiated representations in advertising and labeling its Frosted Mini-Wheats cereal, by claiming that the cereal was scientifically proven to improve children’s cognitive functions for several hours after breakfast.

The parties reached a settlement agreement, approved by this court on April 5, 2011. The Ninth U.S. Court of Appeals reversed the final settlement approval order on September 4, 2012 and remanded the case, finding that a cy pres award, requiring Kellogg to distribute $5.5 million in food products to charities providing food to the indigent, made as part of the initial settlement, had little or nothing to do with the purposes of the underlying lawsuit or class of plaintiffs. Upon remand, the parties negotiated a revised settlement, preliminarily approved by this court on May 3, 2013.

Under the revised settlement, Kellogg would establish a $4 million fund for distribution to class members, with any remaining balance to be distributed, pursuant to the cy pres doctrine, among Consumers Union, the Consumer Watchdog, and the Center for Science in the Public Interest, and Kellogg would refrain from making the challenged representations in advertising for three years. With attorney fees of up to 25% and $550,000 in notice and administration costs taken out, the class would receive approximately $2-2.5 million.

The court reviewed the revised settlement and gave final approval to it.

Value of settlement. The settlement called for a settlement fund of $4 million, resulting in individual payouts to claimants of $5 to $45. The court considered this a favorable result given the challenges plaintiffs would face should litigation continue, and would avoid the extreme result possibilities of complete versus no recovery, the court continued.

Experienced counsel. Class counsel had decades of experience litigating class actions, understanding the strengths and weaknesses of this case, and their endorsement of the settlement weighed in favor of final approval, the court continued.

Reaction of class. The court noted a positive reaction of the class to the proposed settlement, with only six objections raised. The court overruled all six objections.

No suggestion of collusion. The court noted that in its preliminary approval of the settlement, it was skeptical of the fee request. The court was concerned that the combined attorneys’ fee request and claims administration costs appeared unchanged from the last settlement, notwithstanding a significant drop in total value to the class. However, the court was now satisfied that the unchanged total amount reflected the increased cost of expanded claims notice administration rather than static fees. Noting that the attorney fee request was approximately half of that in the initial settlement, the court found that no aspect of the settlement suggested collusion.

The court also granted final certification of the class, approved class counsel’s fees and expenses, and approved incentive awards to class representatives.

The case is No. 09-CV-1786-IEG (WMC).

Attorneys: Andrew S. Friedman (Bonnett, Fairbourn, Friedman & Balint, PC) for Harry Dennis. Brent Caslin (Jenner & Block, LLP) for Kellogg Company.

Companies: Kellogg Company

Cases: Advertising StateUnfairTradePractices CaliforniaNews