## Facts

- Consumers sued Kellogg alleging false and misleading advertising that Frosted Mini-Wheats was “scientifically proven to improve kids’ attentiveness by nearly 20%.”
- The actions were coordinated and resolved through a pre-certification nationwide settlement.
- The settlement created a $2.75 million claims-made cash fund; class members could claim $5 per box, capped at $15 per person.
- Kellogg also agreed to provide $5.5 million worth of food to charities described only as organizations that “feed the indigent,” without identifying specific recipients or restricting the selection beyond that description.
- The settlement did not specify how the “$5.5 million” food distribution would be valued.
- The parties valued the settlement at about $10.64 million and sought $2 million in attorneys’ fees based largely on that valuation.
- Kellogg agreed to stop using the challenged advertising for a period of years.
- Two class members objected, arguing the cy pres relief lacked a connection to the class and the fee request was excessive given the settlement’s actual class benefit.
- The district court approved the settlement and awarded the requested fees; the objectors appealed.

## Issues

1. Whether the district court abused its discretion under Rule 23(e) by approving a settlement with cy pres distributions to unidentified charities without a sufficiently close connection between the class’s interests and the cy pres beneficiaries.
2. Whether the district court abused its discretion by awarding $2 million in attorneys’ fees based on an inflated or uncertain valuation of the settlement, including the cy pres component.

## Decision

- The Ninth Circuit reversed the order approving the settlement and vacated the attorneys’ fee award.
- The court held the cy pres component was improperly structured because it failed to identify recipients or impose restrictions sufficient to ensure a close connection between the class and the beneficiaries.
- The court held the settlement valuation was unreliable where a major component (food distribution) lacked a defined valuation method, making the fee award unsupported by the demonstrated benefit to the class.
- The case was remanded for further proceedings.

## Legal Principles

- A class action settlement must be “fair, reasonable, and adequate” under Federal Rule of Civil Procedure 23(e), with special attention to protecting absent class members’ interests.
- Cy pres relief may be used only when it is tethered to the objectives of the underlying claims and bears a “driving nexus” to the interests of class members; recipients must reasonably approximate those interests.
- Cy pres distributions must be sufficiently defined and constrained to permit meaningful judicial review of their appropriateness.
- Attorneys’ fees must be evaluated in light of the actual and reliably measured benefit conferred on the class; speculative or indeterminate valuation cannot justify a large fee award.

## Conclusion

The Ninth Circuit set aside a pre-certification consumer settlement because its cy pres relief was not adequately targeted to the class and its valuation was too uncertain to support approval or the requested fee award, requiring renewed settlement consideration on remand.


Dennis v. Kellogg Co., 697 F.3d 858 (9th Cir. 2012)