Can a breakfast of Kellogg's Frosted Mini-Wheats cereal help children with their attentiveness in school?
The Battle Creek, Mich.-based cereal maker made such marketing claims just a few years ago. That led to a class action alleging false advertising, a legal settlement, and now, a federal appeals court ruling setting aside the settlement.
"Does your child need to pay more attention in school?" one Kellogg's advertisement said. "A recent clinical study showed that a whole grain and fiber-filled breakfast of Frosted Mini-Wheats® helps improve children's attentiveness by nearly 20%."
In another ad, Kellogg explained that it had commissioned the research, which involved cognitive tests on children 8 to 12 years old who either had a breakfast of Frosted Mini-Wheats cereal or just water. A few hours after breakfast, those who had eaten the cereal had attentiveness levels that were 18 percent to 20 percent higher than the control group, the study claimed.
Consumer advocates found the claims difficult to digest. They charged that the research was not scientifically valid and thus Kellogg was engaged in false advertising. Two groups filed class actions under Ohio and California laws, asserting violations of consumer protections and "unjust enrichment." Whether or not the research was defensible, Kellogg's fairly quickly agreed to settlement discussions in 2010.
The cereal maker agreed to set aside $2.75 million for consumers who had actually purchased Frosted Mini-Wheats during the relevant period and had made claims as part of the class action. Under the settlement, such consumers could get as much as $15 each.
Kellogg also agreed to provide any unclaimed funds and some $5.5 million worth of Kellogg food items to charities that feed the indigent. In the class action realm, this is known as a "cy press" distribution, from a French phrase meaning "as near as possible."
Kellogg agreed not to make claims that Frosted Mini-Wheats could improve school attentiveness by 20 percent, but it would still be allowed to make a claim such as that "clinical studies have shown that kids who eat a filling breakfast like Frosted Mini-Wheats have an 11 percent better attentiveness in school than kids who skip breakfast."
And, of course, there would be attorneys' fees for the plaintiffs' lawyers, in the neighborhood of $2 million.
The total $10.6 million settlement was on its way to approval by both the cereal maker and the class action lawyers. But some members of the class filed objections to the size of the attonerys' fees and to the cy press distributions to food charities, which they argued were too remote from the interests of class members (Frosted Mini-Wheats purchasers) and not sufficiently related to the class action's false advertising claims.
A federal district court rejected the objectors' arguments, but in a Sept. 4 decision in Dennis v. Kellogg Co., a three-judge panel of the U.S. Court of Appeals for the 9th Circuit, in San Francisco, unanimously threw out the settlement.
"The cy pres awards in the settlement here are ... divorced from the concerns embodied in consumer protection laws" such as the Ohio and California statutes, the appeals court said. While it was a "noble goal" to donate to charities feeding the indigent, such groups have "little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved," the court said.
"The gravamen of this lawsuit is that Kellogg advertised that its cereal did improve attentiveness," the court added. "Those alleged misrepresentations are what provided the plaintiffs with a cause of action under the [state consumer laws], not the nutritional value of Frosted Mini-Wheats. Thus, appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising."
The court said the whole settlement would have to be renogotiated.