California federal judge Irma E. Gonzalez approved The Kellogg Company’s revised $4 million class action lawsuit settlement concerning alleged false advertising of the cognitive benefits of its Frosted Mini-Wheats cereal. Previously, the Ninth Circuit rejected a $10 million settlement deal.
The prior settlement would have provided $5.5 million in food to charities that feed the indigent, but it was denied in July 2012 based on the cy pres doctrine governing the distribution of unclaimed funds. Cy pres requires an “as near as possible” connection between the settlement beneficiaries and the claims at issue.
Judge Gonzalez indicated that certain facets of the modified settlement “give the court pause” and pointed out that the decline in value from the original settlement did not significantly alter the $2 million in attorneys’ fees that the Ninth Circuit deemed excessive, but the settlement amount allocated to the class was reduced from $8.5 million to approximately $2 million.
The FTC also filed an action against Kellogg and in April 2009, Kellogg agreed to end its ad campaign and cease making unsupported claims about the cognitive benefits of its cereals. Kellogg’s claimed that kids’ attentiveness improved by nearly 20% after eating a bowl of Frosted Mini-Wheats® cereal for breakfast, but the U.S. Federal Trade Commission (FTC) disagreed. Specifically, the FTC found that:
In truth and in fact, eating a bowl of Kellogg’s® Frosted Mini-Wheats® cereal for breakfast is not clinically shown to improve kids’ attentiveness by nearly 20%. In the clinical study referred to in respondent’s advertisements, for example, only about half the kids who ate Frosted Mini-Wheats® cereal showed any improvement after three hours as compared to their pre-breakfast baseline. In addition, overall, only one in seven kids who ate the cereal improved their attentiveness by 18% or more, and only about one in nine improved by 20% or more.
The revised deal approved by Judge Gonzalez will equally distribute the balance of class funds to the Consumers Union, Consumer Watchdog and the Center for Science in the Public Interest.