Quaker Oats Case Settles—and Cheaply

Quaker Oats Case Settles—and Cheaply

A settlement approved by a California federal judge features a vow by Quaker Oats Co. to remove trans fats from some of its products in the future along with $700,000 in plaintiffs’ attorneys’ fees.

But for almost all class members, it offers only a sense of satisfaction that they contributed to ending what the consolidated suit called the company’s false marketing of those products as healthy.

On July 29, U.S. District Judge Richard Seeborg, of the Northern District of California, signed off on the agreement in In Re Quaker Oats Labeling Litigation, which contains a promise from Quaker Oats to remove partially hydrogenated oil, a source of artery-clogging trans fat, from its Oatmeal To Go and Instant Quaker Oatmeal products by the end of 2015, and not to reintroduce them for 10 years.

The company also agreed not to use the oil for 10 years in products that now don’t contain it. In addition, Quaker Oats, which maintains it did not engage in false or misleading labeling, said it nonetheless will remove a statement about trans fat from labels. It estimated the cost of reformulating products will be about $1.4 million. According to the deal, plaintiffs’ attorneys will receive up to $760,000, and the current named plaintiffs will each get $750.

Consumers will receive just injunctive relief, in the form of Quaker Oats’ concessions. The parties agreed that, given the low price of each product—typically less than $3—the value of each class consumer’s claim would be “exceedingly small,” according to the settlement documents. Given that, and the relatively large size of the class, “a large part of the common fund would likely be wasted locating and sending low-value checks to Class Members,” the joint motion states.

That did not sit well with two objectors to the deal. Class member Amy Yang called it a “self-dealing settlement,” and calculated that, using the percentage rate commonly used to come up with attorney fees, the class should have been awarded about $2 million.

Former lead class representative Robert Chacanaca, who was ousted when new attorneys took over the case in June, 2011, said the deal was unfair and essentially worthless. Noting the U.S. Food and Drug Administration last November essentially sounded the death knell for trans fat in food, Chacanaca said Quaker Oats would likely have stopped using the substance soon, with or without the settlement. And he cautioned that the U.S. Circuit Court of Appeals for the Ninth Circuit, in In Re: Bluetooth, did not look kindly on “zero-value settlements.”

Seeborg was unmoved. “(T)he facts here support no inference of impropriety that would warrant rejecting either the settlement agreement or the requested fees,” he wrote.

Lisa Hoffman contributes to law.com.