Kashi Co. has agreed to pay $5 million to consumers and to change the labeling on some food products to resolve a class action that accused the cereal company of falsely advertising its products as “all natural” or “nothing artificial” when they contained synthetic and artificial ingredients, according to a proposed settlement filed in California federal court.
The Kellogg subsidiary does not admit to any liability in the settlement, which was filed in documents with the U.S. District Court for the Southern District of California on May 2.
Terms of the agreement were included in the plaintiffs’ memorandum in support of their motion for preliminary approval of class action settlement.
Plaintiffs said that after two days of mediation, the parties reached a “comprehensive settlement that more broadly achieves relief for California purchasers of Kashi Products” containing certain ingredients, including pyridoxine hydrochloride, calcium pantothenate, hexane-processed soy ingredients, ascorbic acid and more.
In their 2012 amended class-action complaint, plaintiffs alleged that the company inflated prices of its food products by misleading consumers into believing the products lacked any artificial ingredients. Plaintiffs said they bought the products based in part on Kashi’s misleading statements printed on the products’ labels.
Under the agreement, which is subject to court approval, Kashi will pay $5 million to fund cash payments to class members who submit valid claims for products purchased between Aug. 24, 2007 and May 2, 2014, in California.
Those consumers with written proof of purchase will recover 50 cents per package for every product purchased, while those without proof of purchase will receive the same but with a limit of $25 per household.
Kashi has also agreed to modify its current labeling and advertising to remove “All Natural” and “Nothing Artificial” from products that contain certain ingredients, unless the ingredients are approved or determined as acceptable for products identified as “natural” by a federal agency or controlling regulatory body.
“Per the terms of our agreement, we will make the decision to change our formulas or our labels by end of the year,” Kris Charles, Kellogg Co. spokesperson said in a emailed statement.
In a separate agreement also filed in the same court on May 2, Kashi’s Bear Naked Inc. unit, which makes granola bars and other products, agreed to pay $325,000 to settle a related suit.
A hearing has been set for May 27 for the court to consider granting preliminary approval to both deals.
Laura Castro contributes to law.com.