A plaintiff alleging ice cream makers falsely advertised their products as “All Natural” may have lost her second chance at a settlement.
Colleen Tobin elected to opt out as a class member in a $7.5 million settlement that was reached in a suit against Ben & Jerry’s and Unilever. That suit – known as Astiana v. Ben & Jerry’s – alleged that the defendants deceptively marketed their ice cream as “All Natural,” when it actually contained cocoa alkalized with potassium carbonate, a man-made, synthetic substance.
Instead, Tobin filed her own class action in New Jersey federal court last November. The case was transferred to California and the parties negotiated a settlement that provided for a $1.3 million fund from which class members could receive between $6 and $50 without proof of purchase.
In ice cream parlance, another scoop was added to the cone. Although the Astiana settlement was initially approved, U.S. District Court Judge Phyllis J. Hamilton denied final approval in light of the U.S. Court of Appeals for the Ninth Circuit’s decision in Dennis v. Kellogg Co. In that case, consumers alleged that Kellogg made false claims that its Frosted Mini-Wheats cereal could improve children’s cognitive development. The parties reached a deal totaling $10.6 million, but the 9th Circuit reversed the approval based on objections from class members, citing concerns about the cy pres award and the size of the attorneys’ fees. Judge Hamilton found similar problems with the Astiana deal and declined to approve it. Skye Astiana then filed a motion to intervene in the Tobin suit.
But U.S. District Court Judge Jeffrey S. White in the Tobin case put his foot on the brakes, “tentatively deny[ing]” both the motion to intervene and the motion for preliminary approval of the settlement. Ordering the parties to prepare themselves for oral argument, he listed several areas of concern with the proposed deal.
Judge White sought answers on a number of issues with the case, beginning with whether venue was proper after the transfer from New Jersey and whether Tobin lacked standing to bring her claims under New Jersey law. The court also questioned what the parties had learned from the failure of the Astiana deal, noting that settlement had a very low response to the publication notice, with fewer than 5,500 claims (totaling less than $33,000). Tobin argued that notice via the Internet and e-mail would boost the response rate, but Judge White asked for substantiation for her argument. “What is the parties’ best argument that additional publication notice would not be the best notice practicable under the circumstances? Do the parties have any evidence regarding the efficacy of their proposed Internet notice?” he asked.
In addition, the Tobin settlement allows class members to donate their award to a charity that receives grants from the Ben & Jerry’s Foundation, and if the settlement fund ends up being undersubscribed, the parties proposed to donate the remainder to charity. Given these conditions, the “Court disagrees with the parties’ view that there is no cy pres component and the Court does not see the nexus between the proposed charities and the nature of the claims,” Judge White noted.
Judge White queried why he should not “view this settlement with greater skepticism, given that it substantially reduces the funds available for settlement purposes” from the $7.5 million Astiana deal.
Finally, the court asked the parties to consider various outcomes with the addition or exclusion of Astiana from the case, including whether her motion to intervene was merely an “end run” around Judge Hamilton’s ruling declining approval in the earlier settlement.
To read the motion for settlement in the Tobin case, click here.
To read Judge White’s order, click here.
Why it matters: While the case presents some unique procedural complications, it reinforces the trend of judges taking a hard look at the terms of class action settlements in false advertising suits. Citing the Kellogg decision, Judge Hamilton denied final approval in the first attempt at settling claims against the ice cream defendants. Judge White appears ready to follow suit unless the parties can overcome his numerous concerns. Parties agreeing to a settlement that includes provisions for charitable donations or a cy pres fund should be prepared to face close scrutiny about whether a sufficient nexus exists to the underlying claims. As the 9th Circuit explained in the Kellogg case, “The gravamen of this lawsuit is that Kellogg advertised that its cereal did improve attentiveness. Those alleged misrepresentations are what provided the plaintiffs with a cause of action under [false advertising 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.