A recent Law 360 story by Emily Field, “9th Circ. Strikes Down $7M Atty Fees in ConAgra Label Deal,” reports that the Ninth Circuit overturned a judge's approval of a class action settlement with ConAgra Food Inc. over its labeling on oil products, saying the parties crammed into the deal "a squadron of red flags" including attorney fees of nearly $7 million that are much larger than what consumers were awarded. The panel in a published opinion said the agreement includes a number of questionable provisions and "reeks of collusion," particularly the attorney fee award of $6.85 million that is seven times higher than what class members received.
ConAgra and class counsel contended the deal could be worth more than $100 million, but ultimately, ConAgra paid out less than $8 million, with just $1 million going to the class. Large counsel fees comparative to the payout for class members raises the possibility that counsel colluded with the defendant to lower class compensation in exchange for a larger fee, the panel said. A defendant would go along with this kind of conspiracy because it only cares about how much it's paying in total, not how it's divided up, they added.
The panel said district courts must scrutinize attorney fee award arrangements when deciding whether a class action settlement is fair, following revisions to the Federal Rules for Civil Procedure that introduced the requirement in 2018. Specifically, that requirement also applies to settlements that were reached after a class was certified, the panel held for the first time. "[A] post-class certification settlement only ensures that the parties litigated aggressively to arrive at an adequate total fund size; it does not, however, address the inherent incentives that tempt class counsel to elevate his or her own interest over those of the class members," the panel said.
The panel's decision reverses the 2019 approval of the deal and sends the case back to California federal court. In the suit, the buyers alleged ConAgra mislabeled its Wesson oil products as "100% natural" even though they contain genetically modified ingredients.
The deal also included a stipulation that ConAgra not advertise the Wesson brand of essential oils as "100% natural" anymore, which was supposedly worth tens of millions of dollars but now appears worthless since ConAgra no longer owns the brand, the panel said. "That is like George Lucas promising no more mediocre and schlocky Star Wars sequels shortly after selling the franchise to Disney. Such a promise would be illusory," the panel wrote in their opinion.
Objector and University of Chicago law professor M. Todd Henderson brought the appeal last year, arguing the lower court did not take into account the deal's value to the class when it granted the fees. The panel also found other red flags in the settlement, such as a "clear sailing arrangement" under which ConAgra agreed not to challenge the class counsel fees. "A clear sailing provision signals the potential that a defendant agreed to pay class counsel excessive fees in exchange for counsel accepting a lower amount for the class members," the panel said.