Kellogg will need to negotiate a new deal in a class action dispute over advertising claims for its Frosted Mini-Wheats cereal after a US federal appeals court rejected a $10.7m settlement.
The dispute relates to Kellogg’s now refuted claims that its Frosted Mini-Wheats cereal was scientifically proven to improve children’s cognitive functions several hours after breakfast.
Kellogg had reached a settlement worth $10.7m in 2010, but two members of the class action disputed parts of the deal.
They argued that $5.5m of the money set to go to charities through Kellogg products being distributed to the needy did not benefit members of the class action.
They also challenged ‘excessive’ attorney fees, which represented around 19% of the common fund.
Excessive attorney fees
Their claims were originally rejected by a district court in California, but the decision has been reversed on appeal.
Kellogg and the lawyers to the class action had hoped to finalise the settlement.
However, the appeal court concluded: “Class counsel and Kellogg ask us for the impossible — a verdict before the trial. They essentially say, ‘trust us. Uphold the settlement now, and we’ll tell you what it is later.’ But that is not how appellate review works.”
The court said that there were no assurances that the $5.5m worth of Kellogg goods for the needy would benefit the class action. It also said that proposed attorney fees were “impermissibly high”.
The appeal court therefore chose to reverse the district court’s initial decision.
Kellogg and lawyers to the class action will have to strike a new deal that benefits all members of the class action.
Kellogg previously rebutted its claims on Frosted Mini-Wheats that were made in 2008.
Orginally the company made marteting claims based on a commissioned clinical trial that found children aged 8-12 who eat Frosted Mini-Wheats were almost 20% more attentive than children who eat no breakfast.
Class action lawsuits were subsequently brought in both Ohio and California. The instigators of the complaints later joined forces and agreed to a settlement worth $10.7m with Kellogg in 2010.
The deal would have seen Kellogg pay $5 and $15 per cereal box from a fund of $2.75m to people who purchased Frosted Mini-Wheats. Kellogg had also agreed to give $5.5m to charities in food products to be distrubnuted to the needy and agreed to pay costs and stop making attentiveness claims for three years.
However two individuals that purchased the cereal disputed the settlement and were able to stop the settlement in the appeal court.