(CN) - The 3rd Circuit rejected the $24 million settlement of a class action lawsuit over the largest pet food recall to date.
A New Jersey federal court consolidated more than 100 class actions over adulterated pet food and treats, and approved a $24 million settlement in 2008. Some pet owners also won $8 million by certain pet food manufacturers or their insurers through reimbursement claims programs.
The Philadelphia-based federal appeals court said it only took issue with one aspect of the settlement, but that issue was enough to vacate the settlement and remand back to the lower court.
Some members of the class objected to the settlement on several grounds, including that the $250,000 allocated for purchase claims was inadequate, rendering the settlement unfair and unreasonable.
"Objectors pointed out that no sales information for the recalled food had been presented to the court and that there was no information in the record that would allow the court to evaluate whether $250,000 was a reasonable settlement for the purchase claims," the 62-page ruling states.
The federal court approved the allocation because the recall involved a defined number of products manufactured over roughly four months and because many pet owners already received compensation outside of the settlement.
In the 3rd Circuit's majority opinion, Judge Anthony Scirica wrote that the refunds did not necessarily make the $250,000 allocation fair and adequate.
"Under this set of facts - where funds available for some claims are capped while others are not - the settling parties should have provided the court with more detailed information about why they settled on the $250,000 cap," Scirica wrote.
The court ordered the settling parties to either produce relevant information, or explain why it cannot make such production, on remand.
In a separate opinion, Joseph Weis concurred with his colleagues' findings, but added that he would have also directed the lower court to reconsider attorneys' fees - $7.44 million, or 31% of the settlement - and how to dispose of any remaining funds on remand.
After administration of the settlement and payment of all valid claims, the settlement agreement provides for any funds remaining to be distributed to animal welfare groups in the United States and Canada. Weis said the funds should instead go to the government because such awards should only be applied in charitable actions.
"There are no individuals whose wishes need be considered and there is no intent to benefit charitable purposes that can be attributed to the class members or the lawyers who established the fund," Weis wrote. "Distribution to the class members who have not received complete compensation should be considered first. If such payments are not feasible or are unduly difficult, the fund should escheat to the government."
More than 60 million packages of pet food were recalled in connection to contaminated ingredients from China that ChemNutra and Wilbur Ellis supplied to multiple pet food manufacturers.
The pet food and treats were adulterated with melamine and cyanuric acid, a deadly combination for small animals.
Menu Foods, an Ontario-based pet food manufacturer, announced a recall of dozens of brands of wet pet food in March 2007 after the food was linked to the deaths of several cats and dogs. Four other pet food manufacturers - Hill's Pet Nutrition, Nestle Purina Pet Care Company, Del Monte Pet Products and Sunshine Mills - followed suit. By the end of 2007, about 180 brands of pet food and treats produced by twelve different manufacturers were recalled.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.