The Ninth Circuit Frosts the Lawyers in a Juvenile Cereal Lawsuit
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.”
Further, the court noted, the settlement granted the attorneys a “disproportionate distribution of the settlement” compared to the benefits provided to the class of plaintiffs. The$2 million to $15 ratio made that a pretty easy decision. The ruling is sure to improve the attentiveness of plaintiffs’ lawyers.
The fact that a lower court approved this lopsided settlement illustrates the problems that exist with federal judges who will rubber-stamp almost any settlement to get rid of a case on their docket, no matter how unfair and harebrained it is. This settlement in particular resulted in a “vaporous benefit” to consumers and was “flawed at its core,” according to the Ninth Circuit.
The court also found that the cy pres award violated Ninth Circuit rules. Cy press awards are made “where the proof of individual claims would be burdensome or distribution of damages costly.” However, it must qualify as “the next best distribution” to giving the funds directly to class members. So there must be a “driving nexus between the plaintiff class and the cy pres beneficiaries.” This proposed award to unnamed charities had nothing to do with the underlying lawsuit even though the plaintiffs’ lawyers amusingly claimed that donating food to charities related to the underlying class claims because the case was about “the nutritional value of food.” As the court concluded, that was “simply not true,” since the case against Kellogg made no claims that Frosted Mini-Wheats were “unhealthy or lacked nutritional value.” It was about supposed misrepresentation on just how much the cereal improved attentiveness.
These types of cy press awards have become a favorite vehicle for the tort bar to finance and award their favorite charities and advocacy groups. Cy press awards should be eliminated almost entirely. If the members of a class of plaintiffs who have supposedly been injured cannot be identified or their damages are so slight that the cost of notifying them of a settlement or providing them with damages far outweighs the injury, the courts should not approve a settlement of funds to organizations unrelated to the lawsuit. They should dismiss the case. Cy pres awards are constantly abused and should be very rarely, if ever, approved.
Dennis v. Kellogg Company exemplifies the type of wasteful class action lawsuits that are continually being filed against American businesses in what amounts to legally sanctioned extortion. No wonder we have the most expensive and wasteful tort system in the industrialized world. It imposes huge and unnecessary costs on the entrepreneurs both large and small (not to mention their shareholders) who are the backbone of our economy.
Who were the two ordinary citizens and what was their motivation to pursue this case? It had to cost in time and money. I like the court’s decision but I gotta think there is more to the story.
Nothing like ‘ordinary’ citizens and ‘more to the story’ to ratchet up a BS claim.
Would someone please explain to me how this is done. As the “beneficiary” (actually victim) of a couple of such suits, I had understood that I could opt out, but not change it.
For example, I have a couple of policies in Msss Mutual, and I was informed that I was the “beneficiary” of a class action lawsuit. Now, unless this has changed, policyholders in mutual companies are like stockholders. So the settlement took money from MY pocket and gave money to a bunch of lawyers for my supposed benefit!
By the way, when you are invited to get your 15 bucks or whatever, how often are the envelopes postage prepaid? These lawyers are clearly not interested in the benefits of the class they are representating. Judges should give each of these settlements close scruitiny. and start removing lawyers who act this way from the case and begin disbarment procedings.
Unless they can show their client deceived them, losing lawyer pays.
Yes, tort reform should be a priority of our new Republican administration.
Not so sure this decision will help fix an already-corrupt-to-the-core system. The parties will now simply rejig their settlement so that the class action plaintiff lawyers will get a little less money, and some or all of the cy pres payment to charities will go to members of the class instead.
For example, instead of getting $2,100 and hour, the lawyers will now only get $1,000 an hour. Instead of each class member getting a worthless $15 in damages, he or she will now get a worthless $30 in damages. And instead of the settlement encouraging more frivolous and wasteful class action suits, the new settlement will now…oh wait minute, I didn’t mean “instead”…the new settlement WILL encourage more frivolous and wasteful class action suits just like this one. End result: the system of class action “justice” is still corrupt to the core.
The only decision the Ninth Circuit could have reached in this case that would have advanced the cause of justice would have been vacating the settlement, dismissing the complaint with prejudice, disbarring the class action plaintiffs’ attorneys, and throwing them all in jail.
THAT decision might have gotten their attention and resulted in fewer ridiculous class action cases being filed in the future. Unfortunately, I doubt the Ninth Circuit’s actual decision will have that beneficial effect.
The victims often get nothing. The way it works is this, having been a plaintiff-against-my-will in a couple of these extortion deals.
The settlement has three parts:
1. A couple of representative people, who work with the lawyers, get a bit of money.
2. The huge sum of money is set a aside for the rest. The clsss is notified, but it isn’t necessarily made too easy for them to collect.
3. The lawyers get a percentage of (2), giving them a huge amount of money for hurting the people they are suing for (as the price of the service may now go up).
There ought to be continual and strict rules relating the money the lawyers get to the ACTUAL benefit to the average class member. Otherwise, it should be dismissed, with rejudice, and maybe the lawyers made to pay a huge fine (YES!).
Yes, the federal courts, and most others, will go along with most anything that helps to clear their docket. Yes, the plaintiffs’ bar should be taken out and shot and their wives and children sold into slavery. But, what this is really about and the core problem is that a big US corporation was willing to put up many millions of dollars to avoid facing twelve morons with drivers’ licenses. Likewise, most any government or wealthy individual will settle rather than face a jury.
Anybody been in a jury panel lately? Did you look around you? Would you want to be associated with most of those people? Once upon a time the jury panels were composed of registered voters and in some places may still be, but the 2008 election provides graphic evidence that at least 52% of the voters are either parasites or idiots. But it gets worse; in most states just about any contact with the government gets you on the list of potential jurors so you get the real dregs of humanity thrown in. Defense and plaintiffs’ attornies are really good at keeping anybody smarter than a sack of hammers off of juries. The only thing that keeps them from putting 12 amoebas in the jury box is they only have limited challenges.
It is going to take a lot more than tort reform in the form of limits on fees and punitive damages and the like. Twelve morons with drivers’ licenses are not the peers of a doctor accused with malpractice or a manufacturer accused of some form of negligence. In many cases neither the lawyers or the judges have anything like enough subject matter expertise to make informed decisions about either the law or the facts and bringing in expert witnesses just makes it a contest of which party can bring in the most persuasive liar. There needs to be some sort of court master system for cases that require complex factual determinations. That said, I’ve appeared before enough Administrative Law Judges and Labor Arbitrators who are supposed to be experts and at least have some credentials to know that they’re often no smarter than a sack of hammers either. Until we get it sorted out, winning or settling a lawsuit will continue to be the next best thing to winning the lottery or getting a disability retirement.
Back in the day when you were able to make a living with one person working, it was easier to have a working class Jury.
Today, I can categorecally state that a stint on Jury Duty would literally Bankrupt me. I cannot afford the financial burdon that would be placed on me.
If the courts would impose a system whereby all financial obligations were tolled during a person’s tenure on a Jury Pool you’d see a definate uptick in the Quality of Jurors.
In most places jury duty and witness pay is obscenely low if there is any pay at all. Most governments will pay an employee’s salary if they are on jury duty but, frankly, public employees aren’t the best group in the World for holding anyone accountable. Some states require employers to grant unpaid leave for a jury summons, so at least you have a job to return to, but that doesn’t give you any pay or benefits while you’re on jury duty and doesn’t help the self-employed at all. It is a system that goes back to when everybody was a farmer and it simply doesn’t work any more.
Another plank in the much needed tort reform in this country. In addition to “loser pays” rules, jury members should be chosen without their incomes being known to the attorneys of either side, but once chose, proven incomes should be factored into the losers settlement, paid to the jurors who can prove loss of income.
It’s got to be losing lawyer pays, or it won’t work.
Any small business owner or self-employed person, to include professionals like physicians and accountants, would be put out of business if they were picked for a six week jury trial. Consequently that group as well as others with responsibilities which cannot easily be postponed or reassigned (i.e., most of corporate management) will move heaven and earth to avoid being selected. We are then left with retirees, government and union employees whose contracts require the employer to pay full wages while the employee is serving on jury duty, and the unemployed. To fear that this cross section of the population might come into the case with a natural hostility to business enterprise is entirely justified in my experience.
Anybody been in a jury panel lately? Did you look around you? Would you want to be associated with most of those people?
I’ve been on two juries in the last ten years, both for one-week cases as none of us was compensated for our time, one was traffic (drunk driving), the other a small civil suit (traffic accident). In both cases I want to say that the twelve individuals involved, from all walks of life around the city, took it all very seriously and did an excellent job with the small tasks at hand, and I would trust either group with much more serious decisions.
HOWEVER, it may be that for longer, more serious trials you get MUCH LESS QUALIFIED jurors! I understand the dynamics there, and it’s not pretty. Still, my own experience has been rather positive, as above.
I was in a jury pool last year. At one point, the question was asked, “Have you ever been convicted of a misdemeanor felony?” As I heard the other members of the pool answer the question, I found myself wondering: “Am I am allowed to live in this county? Is there a DUI conviction required to move here, and someone didn’t tell me?”
“…..most any government or wealthy individual will settle rather than face a jury.”
Can’t the defendant ask for a Court trial, rather than a trial by jury?
Why not make a simple change. The use of a jury should be at the DEFENDANT’s (sp?) discretion only. That’s whom juries are supposed to protect.
After reading this whole article, I still don’t see what, if any, substantial damages were suffered by the plaintiffs? As far as I can tell, if you ate the cereal, the worst that could happen to you is that you had a big breakfast. Whether or not the claims about being more attentive in school are true really didn’t cause any physical harm to anyone, right? So really, what were the damages here?
Even if it was faulty advertising, did anyone die or did anyone become crippled from eating this cereal? If I were the original judge on this case, I would have used summary judgement to not only throw this case out of court for not showing any substantial damages to anyone, but I also would have forced the plaintiffs to pay all of the court costs and legal fees for the defendents because of this frivolous law suit. If more judges did that, you would probably see the number of frivolous law suits decline dramatically.
Class action cases have morphed more into a device for punishing corporate bad behavior than a mechanism for compensating victims. Some judges are OK with this and will approve a settlement as long as it inflicts some pain on the defendant. IMHO a limited practice in this area is justified because the scoundrels are forever coming up with schemes to deceive or take advantage of somebody that are not quite illegal and cannot be punished other than through a tort process. But as always seems to be the case, when there is easy money to be made all limits are thrown by the wayside and absurd cases like the above are brought and settled successfully. If the judges would do their job to see that legal doctrines don’t exceed their intended reach we might not see so much of this.
I definitely agree with ArtChance that lawyers have made the jury selection process so corrupt that when a jury actually renders a verdict based on real evidence, it is a fluke. I live in the Old South and am a retired “NASA rocket scientist” (really), so you can guess how many times I have been selected to be on a jury. My last call to report for jury duty was about 1 year ago, and once again I was one of only 6 persons not selected to be on a jury out of over 100 called that week.
Over the last 40 years, I have been called to Jury Duty at least a dozen times, but have never been selected to actually be on a jury. As soon as the lawyers call me to stand up and give my name and occupation, I see both sides make a notation next to my name when I tell them I have advanced degrees in physics and chemistry. Of course I am never selected to be on a jury, while most of those who are selected have never finished high school; in fact, some selected are virtually illiterate, and some can’t even speak or understand English fluently.
So I sit there in the jury pool room for an entire week, and soon get to know the few other potential jurors who are also never selected; they are always highly educated persons (usually engineers) who also have never been selected.
Once I mentioned to the Court Clerk that I have always lived my life based on the “scientific method”, which means I make decisions based solely on experimental evidence, and she said I should never say that if I ever wanted to be on a jury.
This has been my experience, too. I’m an engineer and I’ve lost count of how many times I’ve been called but did not survive voir dire. Only once did I actually make it to a jury and that was in a Federal court.
My observations were that besides engineers, the unwelcome also include scientists, mathemeticians, retired military, retired police, and lawyers. OTOH, they seem to love teachers.
Add Doctors and Nurses to that. Anyone, in fact, who lives in a reality-based world. It’s much harder to manipulate them. The can tell the difference between pee and rain.
Someone enlighten me here….so is it illegal to “forget” prior employment that might identify you as, well, intelligent? Is it OK to state that you once taught English in Taiwan but not mention that you built rockets in the 20 years since? If that’s the case, why don’t more educated people do this?
I beleive you need to give your current occupation. I wouldn’t fool around. But if you are retired, say that.
I can confirm this as well. I know many engineers; and though some have been called to jury duty, none of them have actually served on a jury.
What lawyers are afraid of are people who bring their own relevant, practical education and experience in to the jury room. They know that other jurors with less education and experience may be tempted to follow the reasoning of such learned people instead of the flim flammary reasoning they have presented.
This is an indictment of the jury system. We no longer have a jury of peers. This sort of thing just about guarantees a jury of the ignorant.
My Dad did get in once, but he doesn’t dress the part. AND it a case involving statistics!
Same here. Been called twice and as soon as I said I was an engineer I was out the door.
You should see what happens when you list your occupation as “attorney”.
I have been called to jury duty many times. I have never been on a jury. As soon as the lawyers hear “software engineer,” it is all over. If they found out about my law review articles, I might get put on the permanent do not call list.
When I was in college (that was a while ago) Tort was defined thusly:
A party fails to act in a manner prescribed by law, and Damage occurs.
Today Tort is defined a little differently:
Damage, Real or Perceved, occurs and someone, preferably someone with deep pockets, will pay!
Thank you! Common law is based on DAMAGES.
‘Victimless crime’ or cy pres awards are meant to fund the GSE criminal networks.
And yes, losing lawyers must pay. Introduce RISK to these theives.
The lawyers should lose THEIR children and savings, and the judge in jail for the damage he causes.
I note that much of authority class ‘captital’ seems to be tied up in tax-free (-evading) instruments; for example, unions are a tax-exempt corporation, non-profits are money laundries. Risk avoidance.
I veer somewhat OT because I’ve found the true 1%.
Another article about the shooter delved into the fact that 1 to 2% of the population are either schizophrenic or sociopaths without empathy.
The important point is that they can be very high-functioning.
I propose that our system increasingly incentivizes ‘legal’ crime-
thus we are increasingly ruled by the insane.
(Another commenter made a quietly chilling comment about high-schooler and their daily ‘typical teenage cocktail’ of psych meds. I had no idea this was so prevalent. Then consider that shrinks dispense the stuff freely to our ruling class. Go Big Pharma- the FDA and DEA are PAID to make it expensive)
Hmmm,
if you need standing to bring a suit – then any “victim” who would get the 5$ per box AFTER the settlement could bring a suit to throw it out. I wonder if they could sue the plaintiff attorneys for fraud (for the hourly rate charged)?
I think any big company should settle (makes the most fiscal sense) then one of the “victims” backed by corporate money brings a suit to throw it out. Be cheaper. I also think any “victim” who brings this type of awesome suit should be rewarded from the proposed attorney fees.
Tort reform NOW!
This is a perfect example of the enormous costs both financially and socially of doing business privately or otherwise in America. Political correctness is the most dangerous trend of “thinking” in America.
Why haven’t the lawyers in this case (who cut this unfair deal and pushed it past the court) been sanctioned? It was their deal. If it was unfair, then these lawyers violated their oaths to represent their clients instead of themselves.
The reason we have these problems is due to both idiot judges who shouldn’t be on the bench and criminal lawyers who should be disbarred the first time they serve their own interests in court rather than their clients. After all, that’s the weakest point in an advocacy system and we should have no tolerance for it.
Of course, I know all of this is a worthless exercise as we have a Supreme court that likes to make up words and twist everything it can find to back asinine opinions that are beyond jokes. Maybe the lawyers in this case can appeal to the SCOTASS and say they were just collecting a “tax”. Benedict Roberts likes the all-inclusive, unlimited power of taxation – the new definition of “taxation” that he made up.
I worked as a legal secretary in a suite with a couple of lawyers whose specialty was class action. They spent their time searching every company they could to find some little thing, however tiny, that the company wasn’t doing correctly so that they could file a lawsuit. One I remember was against Supercuts because the company didn’t put some bit of information on paystubs. Can’t remember what.
And, in the end, as was always the case, the plaintiffs got a buck twenty nine while the lawyers got the millions. It was NEVER about seeking justice for damage to the plaintiffs. Class action is strictly a money machine for the lawyers.
A personal injury trial lawyer I worked for often say that being a lawyer was a license to steal. And he always smiled when he said it.
Fall Burton – correct. This puts a big chill on starting a business.
progressoverpeace – The majority of JUDGES WERE LAWYERS BEFORE THEY BECAME JUDGES
Smaller crop, same ethanol production? John Maday, Managing Editor, Drovers CattleNetwork July 20, 2012
http://www.cattlenetwork.com/cattle-news/Smaller-crop-same-ethanol-production-163095506.html
$2,100 per hour for this juvenile lawsuit: “Not even the most highly sought after attorneys charge such rates to their clients.”
But they do, I know I’ve seen numbers like that for one of the big cases recently with the big-name lawyers, and that was not even on contingency.
But to be fair, that was (I think) a multi-billion dollar case, not something about breakfast cereal.
And of course any lawyers fees much above $500/hr means they are inaccessible to normal citizens generally making more like $50/hr themselves, not to mention the way most lawyers pad their hours being no more honest (!!!!) in those regards than average hourly workers.
I’ve served in jury pools numerous times, over the years, but only once did I get summoned onto a jury. It lasted almost 7 weeks. In contrast to the other comments here (in terms of jury selection seeming to be biased to keep engineers or intelligent people off of juries) the majority of people on my jury were reasonably intelligent individuals. They did tend to be employed by large corporations, some flavor of the government, or with spouses who provided some support. I have worked in various fields, and in between I fill in the time by writing, and I was in one of those spells when this happened. My wife had a steady job, so we had an income while this was going on. I’m not a college graduate, but I read a lot, and was just starting vol. 3 of Robert Caro’s Johnson biography when the trial started…carried the damn thing with me for about 6 weeks, and read it during sidebars and recesses.
One of the fascinating parts of the jury deliberation (it was a lawsuit involving a client suing an insurance company he felt had screwed the pooch re his homeowner’s insurance; we found in his favor) was when one of the individuals, who it strikes me was some sort of engineer, expressed the opinion that he would have considerably less objection to the plaintiff’s winning the case if this had been a class action suit. He was the first person I’d ever met (and to date the only one) who thought class action suits were good for something. I expressed my opinion that they were good for lawyers making money, and nothing else, and the expression on his face told me that he’d never heard that opinion before. Where he’d been before, I have no idea…
My understanding is that when they set up one of these charities that the corporation is supposed to donate to, they put a crony in charge of it, and he collects a massive salary for not a lot of work, and then shuts the thing down after a year or two.
And my favorite class action suit of all time was about 7-8 years ago. I was temping in offices at the time in L.A. and the job was at an accounting firm downtown. We were there to go through this accounting firm’s expense accounts and find all instances in which the client was billed for travel (specifically airfare), because a class action suit had been brought on behalf of these clients (virtually all of them enormous corporations) because the accounting firm had been charging its clients for airfare, without ever crediting them for frequent flier miles. Apparently if you’re a big enough corporation, and you pay to have your accountants come out to Kansas City from LA, you sometimes have to do this several times in a year, and the premise of the suit was that they should have gotten some sort of break on the fares because of this. So one enormous corporation was being sued by a bunch of others, and you can bet that there were lawyers all over the thing, collecting money. I couldn’t decide which side to root for.