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Ninth Circuit Rejects Attorney Fees in Kellogg Case

July 26, 2012 | Posted in : Fee Jurisprudence

A recent NLJ story, “Ninth Circuit Rejects Mini-Wheat Settlement of Attorney Fees, Cy Pres Award,” reports that a federal appeals court has rejected a class action settlement over alleged false advertising of a breakfast cereal, ruling that a plan to contribute some of the payout to charity bore no relation to the case and that the plaintiffs attorneys’ fee award was excessively generous. 

The U.S. Court of Appeals for the Ninth Circuit on July 13 reversed the trial judge who’d approved the settlement between Kellogg Co. and a nationwide class of consumers who alleged false advertising of its Frosted Mini-Wheats cereal.  Citing its 2011 decision in In re Bluethooth Headsets Litigation, the three-judge panel ruled that the settlement did not survive the heightened scrutiny that should be applied to class action settlements.

The ruling in Dennis v. Kellogg Co. (pdf) was the latest in which the Ninth Circuit has struck down a class action settlement based on excessive attorney fees or fear of collusion between counsel who crafted the deal.  “There is a lot of case law on attorney fees out there: Bluetooth, and now this case, are certainly adding to that body of case law,” said plaintiffs counsel Timothy Blood, managing partner of Blood, Hurst & O’Reardon in San Diego.

The court cited its Bluetooth decision in finding the fee request unreasonable, particularly given the number of hours and amount of money spent by plaintiffs counsel in light of what class members would receive.  “The settlement yields little for the plaintiff class,” wrote Senior Judge Stephen Trott.  “In comparison, the $2 million award is extremely generous to counsel – even if we were to accept their assertion that the value of the common fund is $10.64 million.

Had the case been litigated on an hourly basis, the fees would have totaled $459,203, Trott wrote, so a $2 million fee award would translate to $2,100 per hour.  “Not even the most highly sought after attorneys charge such rates to their clients,” he wrote.