(CN)- The proposed settlement of a class action against Kellogg Company for falsely advertising that Frosted Mini Wheats improve kids’ attention in school is light on details and improperly awards attorneys $2 million, or $2,100 per hour, the 9th Circuit ruled Friday.
“Not even the most highly sought after attorneys charge such rates to their clients,” wrote Judge Stephen Trott in a unanimous ruling vacating the $10.6 million deal.
Kellogg agreed to settle after being hit with one class action in California and threatened with another in Ohio. The plaintiffs argued that the company made misleading and scientifically suspect assertions in a 2008 advertising campaign that said school-age children could improve their attentiveness by nearly 20 percent by eating Frosted Mini Wheats for breakfast. Kellogg eventually agreed to refund class members between $5 and $15 each (out of a fund of $2.75 million), and to pay more than $5 million to unspecified charities that provide food to the poor. The company also agreed to pay the plaintiffs’ attorneys $2 million for 944.5 hours of work on the case.
Presiding U.S. District Judge Irma Gonzalez approved the settlement in San Diego, despite objections filed by two class members.
Finding the $5 million cy pres award vague and the attorney fees excessive, the federal appeal court in Pasadena rejected the settlement and remanded the action.
“At oral argument, Kellogg’s counsel frequently asserted that donating food to charities who feed the indigent relates to the underlying class claims because this case is about ‘the nutritional value of food,'” Trott wrote. “With respect, that is simply not true, and saying it repeatedly does not make it so. The complaint nowhere alleged that the cereal was unhealthy or lacked nutritional value. And no law allows a consumer to sue a company for selling cereal that does not improve attentiveness. The gravamen of this lawsuit is that Kellogg advertised that its cereal did improve attentiveness.”
The money should go to charities “dedicated to protecting consumers from, or redressing injuries caused by, false advertising,” according to the panel.
Noting that, had the plaintiffs’ attorneys charged on an hourly basis, the fees would have come to $459,000, rather than $2 million, the panel found the award “extremely generous to counsel.”
“Class counsel and Kellogg ask us for the impossible – a verdict before the trial,” Trott wrote “They essentially say, ‘Just trust us.Uphold the settlement now, and we’ll tell you what it is later.’ But that is not how appellate review works. 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. Moreover, the attorneys’ fees are impermissibly high considering what the defective settlement provides the class. The District Court’s contrary conclusions were an abuse of discretion.”