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Last summer in the Legal Pulse post The Ninth Circuit Rains on Plaintiffs’ Attorneys’ Class Action Pay Day, Washington Legal Foundation K.K.Legett Fellow Lauren Murphree described the U.S. Court of Appeals for the Ninth Circuit’s rejection of a class action settlement in Dennis v. Kellogg Co.

Mr. Dennis and countless other fans of Frosted Mini-Wheats claimed Kellogg’s labeling statements had unlawfully misled them. The parties ended up settling, and the district court approved the settlement. The Ninth Circuit sent the parties back to the drawing board and back to the Southern District of California. On May 3, the presiding trial judge gave preliminary approval to the new settlement.

The Ninth Circuit was understandably troubled by several aspects of the original settlement, including a $5.5 million cy pres award aimed at feeding the indigent (which was “laudable” but had “little to do with the purposes of the underlying lawsuit”) and an attorneys’ fee that came out to $2,100 an hour.

The recipients of the new settlement agreement’s smaller cy pres distribution of $4 million are three “consumer” groups: Center for Science in the Public Interest, Consumer Watchdog, and Consumers Union (Nice of the court to hand over a slush fund of cash which could fund more food labeling lawsuits, and create jobs for lawyers and court staff, likely in California). The amount of money available for allegedly harmed plaintiffs went down from $2.75 million to “$2-2.5 million.” The amount of attorneys’ fees remarkably stayed the same.

District Judge Gonzalez had some questions about these new terms. She wondered:

  1. How did mere identification of proper cy pres recipients result in such a severe drop in the value of the class’s claims?
  2. How is it that the value to the class dropped approximately 75%, while requested attorneys’ fees appear nearly constant?

Excellent questions both, but they did not forestall Judge Gonzalez from giving preliminary approval to the settlement. She did, though, order the parties to “fully address these concerns in their final approval briefing and at the final approval hearing.”