A recent NLJ story, “Ninth Circuit Rewrites Rejection of Kellogg’s Settlement, but Result is the Same,” reports that a federal appeals court that struck down a consumer class action settlement based in part on “impermissibly high” attorney fees has withdrawn its opinion, issuing a revised version that nevertheless denied the fee request.

The settlement, reached last year, resolved claims that Kellogg Co. misled a nationwide class of consumers into believing that children who ate its Frosted Mini-Wheats cereal for breakfast improved their attentiveness by 20 percent.  The settlement, valued by the parties at $10.64 million, included a $2.75 million fund to provide class members with $5 to $15 off future cereal purchases.  It provided at least another $5.5 million in donations under the cy pres doctrine, which allows donations to charities of money unclaimed from legal settlements.

In both opinions, the Ninth Circuit questioned the $5.5 million figure given for the cy pres, since it was unclear how the food donation was being valued.  Senior Judge Stephen Trott wrote: “Not only does the settlement fail to identify the cy pres recipients of the unclaimed money and food, but it is unacceptably vague and possibly misleading in other areas as well.”  In the revised opinion, he added: “This deficiency raises in turn serious issues about the alleged dollar value of the product cy pres award, an important number used to measure the appropriateness of attorneys’ fees.”  Subtracting the $5.5 million in food donations from the total settlement, the court conclude that the $2 million fee award would represent 38.9 percent of the settlement fund.

In its original opinion, the Ninth Circuit called such an award “extremely generous” given the number of hours and amount of money spent by plaintiffs’ counsel – going as far as calculating a billing rate of $2,100 per hour.  In his petition for rehearing, Timothy Blood of Blood, Hurst & O’Reardon in San Diego, the lead plaintiffs’ attorney, disputed the $2,100 figure, which he said was an average that excluded additional billings for work spent seeking final approval of the settlement, the appeal and hours spent handling the claims process.

He also argued the Ninth Circuit did not have to analyze law firm billings to determine whether the attorney fee request was reasonable, particularly when basing it on a settlement amount different from the one that was approved.  “Attorneys’ fees in a class action suit cannot be evaluated in a vacuum, but he panel nonetheless did so,” wrote Blood.  “Having vacated and remanded the panel should have left it to the parties to litigate or renegotiate a settlement, including attorneys’ fee provisions.”

NALFA also reported on this case in, “Ninth Circuit Rejects Attorney Fees in Kellogg Case”