Hold onto your hats: On July 13, the Ninth Circuit Court of Appeals issued a great decision. That’s right, the legendary Ninth — one of the nation’s most-overturned appeals courts — has for once rendered a decision well within the legal mainstream. And it was a decision that saved Frosted Mini-Wheats!
In Dennis v. Kellogg Company, the three-judge panel came down hard against settlements of foolish class action lawsuits. These lawsuits against American businesses provide nothing of value other than excessive fees for extortionate lawyers.
The Kellogg Company was the target of a class action lawsuit filed by California resident Harry Dennis over its marketing campaign for Frosted Mini-Wheats. Dennis claimed that Kellogg’s advertising, which said that clinical studies showed that a breakfast of Frosted Mini-Wheats helped improve children’s attentiveness by 20 percent, was “false advertising.” (As the father of three, I have no doubt that eating any breakfast will help improve children’s attentiveness over skipping breakfast—especially if it is “frosted” with sugar!)
Kellogg decided to settle the silly case for its nuisance value, agreeing to:
- pay the ambulance-chasing (or, in this case, cereal-chasing) attorneys $2.4 million in fees and “costs”;
- set up a $2.75 million fund for consumers “injured” by the ad campaign, from which they could receive $5 per box of Frosted Mini-Wheats purchased, up to a maximum of $15;
- provide $5.5 million “worth” of Kellogg food products to unidentified charities feeding the indigent, what is called a cy pres award in legal terminology.
Kellogg also agreed to refrain for three years from claiming that its cereal improved attentiveness by 20 percent, though it would be allowed to claim that clinical studies “have shown that kids who eat a filling breakfast like Frosted Mini-Wheats have an 11% better attentiveness in school than kids who skip breakfast.” So this entire lawsuit, worth more than $10 million, including $2 million in attorneys’ fees, was based on a dispute over a possible nine percent differential in improved attentiveness of 8-12 year olds.
Two ordinary citizens among the affected class (consumers of Mini-Wheats) objected to the settlement. They argued that the attorneys’ fees were excessive and that the cy pres award was improper because “the only relationship between this lawsuit and feeding the indigent is that they both involve food in some way.”
Fortunately, the Ninth Circuit panel agreed with the objectors. When Judge Stephen Trott threw out the proposed settlement, he pointed out that the $2 million award of attorneys fees would have resulted in the lawyers earning an outrageous $2,100 per hour for this juvenile lawsuit: “Not even the most highly sought after attorneys charge such rates to their clients.”