Dennis v. Kellogg Company

Failing to identify recipients, using vague language in a settlement, and failing to delineate specifically how a cash sum or award is to be disbursed can be fatal to cy pres product settlement awards.

The Ninth Circuit set aside the district court’s authorization of a class action settlement between Kellogg Co. (“Kellogg”) and Harry Dennis and Jon Koz (collectively, “Plaintiffs”), determining that the district court abused its discretion by applying incorrect legal standards governing cy pres distributions to approve the settlement. “The settlement of a class action must be fair, adequate, and reasonable,” and a cy pres award must strive to give funds directly to class members “guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members.” In determining whether the settlement satisfied these conditions, the Court found that “[n]ot 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.” The Court held that both cy pres parts of the settlement were insufficiently connected to Plaintiffs and their false advertising claims, and that the settlement failed to describe the ultimate recipients of the product and cash cy pres awards, describing them only as “charities that feed the indigent.” The Court also determined that the settlement failed to set forth any limiting restriction on those recipients. Further, the Court found that the specific Kellogg food items worth $5.5 million was “questionable at best” and lacking clarification as to whether wholesale, retail, or at cost value would be used. The Court concluded that “[t]o approve this settlement despite its opacity would be to abdicate our responsibility to be ‘particularly vigilant’ of pre-certification class action settlements.” REVERSED and REMANDED.