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Walnut Claims Will Cost Diamond $2.6 Million

(CN) - Diamond Foods can pay $2.6 million to settle claims over the health benefits it attributes to its walnuts, a federal judge ruled.

In a March 2010 complaint, lead plaintiff Elliot Zeisel said Diamond printed "false and misleading" statements on the labels of its edible seeds.

"The omega-3 in walnuts can help you get the proper balance of fatty acids your body needs for promoting heart health," the labels allegedly read.

A month earlier, the U.S. Food and Drug Administration had written a letter to Diamond that called the walnuts "misbranded" and claimed violations of the Food, Drug and Cosmetic Act.

But Zeisel said Diamond still refused to remedy the labels.

Diamond attempted to dismiss the suit to no avail.

The Northern District of California gave preliminary approval to a settlement between the class and Diamond on Jan. 30.

That $2.6 million settlement became final Tuesday after the parties submitted supplemental briefing on the cy pres portion of the settlement, which in this case would be donated to the American Heart Association.

U.S. District Judge Jeffrey White also settled a motion for attorneys' fees, expense reimbursement and an incentive award.

"Zeisel's claims arose because he contended that the disputed labels were misleading as to the heart health benefits of the shelled walnut products," White said. "Although Zeisel's claims were premised on the allegedly false and misleading nature of the disputed labels, Zeisel repeatedly referenced the Federal Food, Drug and Cosmetic Act to support his alleged violations of California's UCL (Unfair Competition Law), CLRA (Consumers Legal Remedies Act), and FAL (False Advertising Law)."

More than 23,000 class members submitted claims as of Sept. 7, White said.

The claims period ends Oct. 26, and the judge added that an average of 1,000 new claims are filed each week.

Only one person has opted out of the settlement, White said.

Separate from the settlement, Diamond must pay $850,000 in fees and expenses to class counsel: Feinstein Doyle Payne & Kravec LLC, of Pittsburgh; the Law Offices of Janet Lindner Speilberg, of Los Angeles; and the Braun Law Group, of Los Angeles.

The $3,000 incentive award to Zeisel will be deducted from the settlement funds.

Zeisel, a psychoanalyst, allegedly had to forego two group sessions and six individual patients in the about 27 hours he spent on the case, the ruling states - or $3,900 in wages.

In addition to monetary relief, Diamond must change its labels and website.

"The parties reached the proposed settlement at time when they had a full and fair understanding of their cases and their opponents' case," the 10-page ruling states.

White called the settlement "fair, reasonable, and adequate."

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