Weeks v. Kellogg Co.
| Decision Date | 23 November 2011 |
| Docket Number | Case No. CV 09-08102 (MMM) (RZx) |
| Court | U.S. District Court — Central District of California |
| Parties | MICHELLE WEEKS, KATIE DINTELMAN and MARIA SANDOVAL, each individually and on behalf of all others similarly situated, Plaintiffs, v. KELLOGG COMPANY, a Delaware corporation; KELLOGG USA, INC., a Michigan corporation; KELLOGG SALES COMPANY, a Delaware corporation, and DOES 1 through 100, inclusive, Defendants. |
On November 5, 2009, plaintiffs1 filed an action against defendants Kellogg Company, Kellogg USA, Inc., and Kellogg Sales Company (collectively "Kellogg").2 Plaintiffs filed a firstamended complaint on December 9, 2009,3 a second amended complaint on May 6, 2010,4 a third amended complaint on October 14, 2010,5 and a fourth amended complaint on May 20, 2011.6 The fourth amended complaint alleges that defendants have made, and continue to make, false and misleading statements in advertising and packaging Kellogg's Rice Krispies and Cocoa Krispies ("the Krispies cereals"). Specifically, plaintiffs contend that the Krispies cereal labels and Kellogg's website state, without the support of clinical studies, that consuming small amounts of the cereal will improve children's health and immune systems.7
Plaintiffs' fourth amended complaint pleads three causes of action: (1) unfair business practices in violation of California Business and Professions Code § 17200 et seq., (2) false and misleading advertising in violation of California Business and Professions Code § 17500 et seq., and (3) fraudulent and intentional misrepresentation in violation of California Civil Code § 1750 et seq.8 It seeks injunctive relief, actual damages, restitution, punitive damages, prejudgmentinterest, attorneys' fees, and costs.
On August 10, 2010, plaintiffs filed a motion for class certification,9 which defendant opposed.10 The court had no opportunity to decide whether a class should be certified because, on November 17, 2010, the parties files a notice of settlement.11 On May 9, 2011, the court issued an order preliminarily approving the parties' proposed settlement, and directing that notice of the proposed settlement be given to class members.12 On July 18, 2011, the parties filed a motion seeking final approval of the settlement,13 and a motion seeking an award of attorneys' fees, expenses, and incentive awards.14 Two class members objected to the proposed settlement and fee application.15
On August 29, 2011, the court conducted a fairness hearing, at which it circulated a tentative order certifying the settlement class and generally approving the terms of the settlement the parties had reached. The court, however, expressed concerns regarding the parties' proposed distribution of cy pres funds, and stated that it was unable finally to approve the settlement withthese provisions included.16 The court's tentative order also set forth its reasoning for reducing the proposed attorney's fees award to $879,237, and the award of costs to $19,418.64. After meeting and conferring, the parties agreed to amend the settlement to address the court's concerns.
On September 12, 2011, the parties filed an amended stipulation of settlement.17 One of the objectors filed a response to the amended stipulation on September 19, 2011,18 to which plaintiffs responded on September 26, 2011.19
Defendants are leading manufacturers of breakfast cereals, which include Rice Krispies, a toasted rice cereal, and Cocoa Krispies, a chocolate-flavored, sweetened rice cereal.20 Plaintiffs contend that, from approximately June 1, 2009, through March 1, 2010, Kellogg labeled the Krispies cereals as follows: "Now helps support your child's immunity;" "25% Daily Value of Antioxidants & Nutrients Vitamins A, B, C & E;"21 "Helping to support your family's immunity;" "Kellogg's Cocoa Krispies has been improved to include antioxidants and nutrients that yourfamily needs to help them stay healthy;" and "Enjoy this wholesome breakfast and help keep your family healthy"22 (collectively the "immunity claims"). As part of Kellogg's marketing campaign, similar claims appeared on the internet.23 Plaintiffs maintain that "[d]efendants' advertising of the Krispies cereals . . . conveys a single, consistent false and misleading message to consumers: that Defendants' Krispies cereals will boost a family's immune systems . . . and keep a family healthy."24 They suggest that defendants purposefully employed this advertising campaign in the wake of the H1N1 flu epidemic and peoples' "ever-increasing health concerns."25
Plaintiffs contend that the immunity claims are false, deceptive, and misleading because they are unsupported by competent and reliable scientific evidence.26 They assert, for example, that Kellogg has not conducted clinical trials or studies that support the claims.27 Plaintiffs contend that Kellogg's false representations induced class members collectively to spend millions of dollars in reliance on the claims, believing that consumption of the Krispies cereals would have the tangible benefit of supporting immune systems.28 They claim that "[d]efendants have sold hundreds of thousands of units or more of Cocoa Krispies and Rice Krispies based upon [d]efendant's false promises."29
On December 17, 2009, the Oregon Attorney General announced an agreement with Kellogg to "stop shipping cereal boxes with immunity language by January 15, [to] destroy morethan 2 million units of packaging with the immunity claims, and [to] cease making such health claims unless [Kellogg] provide[d] the Oregon Department of Justice with advance notice and competent reliable scientific evidence."30 Additionally, on June 3, 2010, the Federal Trade Commission ordered Kellogg to stop making unsubstantiated or misleading claims about the health benefits of any food it produces, markets or sells in response to "dubious health claims made by Kellogg regarding the ability of Rice Krispies cereal to boost children's immunity."31
Prior to participating in mediation, plaintiffs served requests for production of documents and receive thousands of pages of documents including, for example, sales information.32 Kellogg served interrogatories, document production requests, and deposed plaintiffs Weeks and Sandoval on October 8 and 14, 2010, respectively.33 Plaintiffs deposed Kellogg's persons most knowledgeable on June 2 and 3, 2010.34
On July 28, 2010, while the parties were still conducting discovery and plaintiffs were drafting a motion for class certification, the parties engaged in a day-long mediation before the Honorable Edward A. Panelli in San Francisco, California.35 Although a settlement was notreached, it led to what plaintiffs describe as extensive "hard-fought" settlement negotiations over the next six months.36 Ultimately, the parties were able to agree on the terms of a settlement agreement, a release, class notice, and a claims submission program.37 They filed a Stipulation of Settlement on January 10, 2010.38 After the court's hearing, the parties filed an Amended Stipulation that altered certain of the original stipulation's terms.39
The parties state that they purposefully did not negotiate attorneys' fees and reimbursement of expenses until after agreement was reached on the substantive terms of the settlement.40
The proposed settlement class includes 42 The Settlement Class Period is defined as "the period from June 1, 2009[,] to March 1, 2010, the dates between which packaging for Rice Krispies and Cocoa Krispies . . . contained the immunity statements appeared on store shelves."43
Under the terms of the settlement, Kellogg will establish an interest-bearing cash"Settlement Fund" of $2.5 million to reimburse class members $5 per box of Krispies cereals purchased during the class period, up to a maximum of $15 per class member.44 If payment to all eligible claimants exceeds the Settlement Fund, each claimant's award will be proportionately reduced. On the other hand, if payment to all eligible claimants leaves a remaining balance in the Settlement Fund, that balance will be distributed to Feeding America, a national hunger charity.45
The settlement also requires that Kellogg make a charitable donation of Kellogg branded cereals and other food products with a retail value of $2.5 million to Feeding America ("Cy Pres Fund").46 Finally, Kellogg agrees that it will permanently cease making immunity claims on its products' labeling, packaging, marketing, and advertising unless, at the time the claims are made, it possesses competent and reliable scientific evidence that supports the claims.47
Pursuant to the agreement, Kellogg will pay all costs associated with administration of the class settlement, including the cost of providing notice to class members and processing claims. These amounts will not be paid from the settlement fund.48 The agreement permits plaintiffs' counsel to apply for an award of attorneys' fees and costs to be paid from the settlement fund.49 Counsel applied for fee award of $1,147,715.50, as well as a lodestar multiplier, resulting in totalfees of $1,323,143.64.50 They also sought costs of $23,143.64. Kellogg agreed not to oppose incentive awards of $5,000 for each named plaintiff, also to be paid from the settlement fund.51 The Amended Stipulation states that class counsel will "agree to apply for and to accept an award of attorneys' fees in the total amount of $879,237 and expenses in the total amount of $19,418.64, to be paid from the Settlement Fund."52
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