September 20, 2023
A recent Law 360 story by Ryan Harroff, “Kraft-Heinz Shareholder Class Counsel Gets $90M in Fees”, reports that an Illinois federal judge awarded $90 million in fees to class counsel for the Kraft Heinz Co. investors who accused the company and a Brazilian private equity firm of hiding the snack food maker's cost-cutting measures after a merger to cover up a $15.4 billion goodwill impairment.
U.S. District Judge Jorge L. Alonso said in his order that the investor class' counsel from Kessler Topaz Meltzer & Check LLP, Bernstein Litowitz Berger & Grossmann LLP and other firms worked with "skill, perseverance, and diligent advocacy" to secure the $450 million total settlement that their clients agreed to with Kraft Heinz and 3G Capital Partners, the private equity firm that guided the 2015 merger between H.J. Heinz Co. and Kraft Foods Group Inc. According to Judge Alonso's order, class counsel will also receive $2.6 million to cover litigation expenses on top of its 20% cut of the settlement fund.
The settlement is believed to be one of the largest pretrial securities deals in history and is the largest deal of its kind in the Seventh Circuit. Judge Alonso gave his preliminary approval to the agreement in May and issued final approval in a minute order Sept. 12.
Investors first filed suit in 2019, alleging Kraft Heinz engaged in shady accounting practices and cost-saving strategies that harmed its own supply chain, lost it customers and made potential new investors too nervous to buy in to the company, all while publicly stating it was saving money because of "synergies" from the 2015 merger.
3G Capital — which according to the suit owned 24% of Kraft Heinz and installed seven of its own partners as the new company's senior executives or board members — had directed Kraft Heinz's actions and overseen its belt-tightening moves, the investors had said. Those cost-cutting measures lost shareholders a net $12.6 billion after the resulting supply chain and customer issues caused the company to write down the value of its own brands by $15.4 billion, they alleged.
Attorneys for the shareholders had asked the court in August for the $90 million they have now been awarded, estimating that their firms had collectively spent over 112,000 hours working on behalf of their clients to get the settlement on the books. Judge Alonso also noted the substantial time investment in his order granting their request.