Cy pres: Ninth Circuit tosses breakfast deal

by Walter Olson on July 24, 2012

A three-judge panel of the Ninth Circuit led by Judge Stephen Trott has rejected a settlement between class action lawyers and Kellogg over allegedly misleading promotion of its Frosted Mini-Wheats cereal. The settlement involved a smallish refund offer for the class of consumers, an unrelated food giveaway (so-called cy pres relief, given to beneficiaries other than the class initially wronged), and $2 million to the plaintiff’s lawyers, or roughly $2,100 an hour. [Hans von Spakowsky/PJ Media, Ted Frank/PoL, ABA Journal]

{ 3 comments }

1 Allan 07.24.12 at 10:20 am

Again, a silly suit. But, arguably, Kellogs was in the wrong. They profited from false advertising.

How can we make sure that companies do not profit based upon malfeasance? Class actions are one way to go, but it is a sledgehammer approach. I am not sure there is a better way.

2 another guy named Dan 07.24.12 at 12:02 pm

I can see a limited role for cy pres in class action, but it should be the lead plaintiff’s burden of prof to demonstrated that it is the most equitable way to distribute damages. For instance, take the hypothetical where Megabooks Online is found to have overcharged 10,000,000 people $0.17 each. Yes the total ammount is high enough that it equitably should be paid, but the benefit to any single plaintiff is too low to be worth collecting. Giving the paintiffs the option of not claiming their damaages and instead having the resiual amount paid to a national literacy charity (in cash, not rock bottom remnants credited at cover price) would likely be acceptable.

3 AMcA 07.25.12 at 12:17 pm

My all time favorite: here in Crook County, IL back in the 90s there was a class action in which Illinois Bell had been caught red-handed using an accounting method that allocated it an extra fraction of a penny per pay phone call. Apparently consumers (who put whole quarters, not fractions of pennies, into pay phones) were harmed.

But all was made better when the lawyers pocketed a big chunk of change. Consumers won a resounding accounting method change.

Comments on this entry are closed.