Tossed Mini Wheats Deal Gets Another Whammy

PASADENA, Calif. (CN) - The 9th Circuit revisited a tossed settlement over Frosted Mini Wheats to fine-tune its tirade against excessive attorneys' fees.

Kellogg had offered the settlement to address complaints over a 2008 advertising campaign that said school-age children could improve their attentiveness by nearly 20 percent by eating Frosted Mini Wheats for breakfast.

The settlement would allow consumers to claim refunds up to $15 from a $2.75 million fund, and it contained a cy pres award of $5.5 million to unspecified charities that provide food to the poor. Kellogg also agreed to pay class counsel $2 million for 944.5 hours of work.

U.S. District Judge Irma Gonzalez approved the settlement in San Diego, despite objections filed by two class members, but the 9th Circuit rejected the settlement in July.

The court noted two reasons why it could not enter the settlement, labeling excessive attorneys' fees as the second factor.

"Not even the most highly sought after attorneys charge such rates to their clients," Judge Stephen Trott wrote in July, noting that the fees amounted to $2,100 an hour.

On Tuesday, the court withdrew its opinion and replaced it with another that slams the settlement as "a paper tiger."

Since the value of a cy pres award helps courts determine the appropriateness of attorneys' fees, the court noted the peculiarity of the $5.5 million figure.

"For example, if the alleged $5.5 million value of the product cy pres distribution turns out on close examination to be an illusion and is subtracted from the alleged $10.64 million value of the common fund, the dollar value of the settlement fund plummets to $5.14 million, and the $2 million attorneys' fees award becomes 38.9% of the total, which is clearly excessive under our guidelines," Trott wrote. "This possibility gives us an additional reason to be vigilant regarding the particulars of this class action settlement: is it all that it appears to be? Are the assigned numbers real, or not? This issue is particularly critical with a cy pres product settlement that has a tenuous relationship to the class allegedly damaged by the conduct in question. The issue of the valuation of this aspect of a settlement must be examined with great care to eliminate the possibility that it serves only the 'self-interests' of the attorneys and the parties, and not the class, by assigning a dollar number to the fund that is fictitious."

Class counsel has estimated the value of claims submitted to date at $800,000, but there is nothing to indicate how many class members submitted claims, according to the new ruling.

In another new section, the court says that the case is ripe in relation to the progress of the claims process.

Though both opinions trace the origins of the cy pres doctrine, the new ruling puts the explanation in a different section and adds a translation of the doctrine from its origins in the French language.

Several other sections from the original opinion are also simply moved around in the new opinion.

One new line in the September opinion states: "On the face of the settlement's language, 'charities that provide food for the indigent' may not serve a single person within the plaintiff class of purchasers of Frosted Mini-Wheats."

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