Harry Dennis v. Stephanie Berg
697 F.3d 858
| 9th Cir. | 2012Background
- This is a false advertising class action against Kellogg concerning Frosted Mini-Wheats claims of cognitive benefits.
- Settlement negotiated pre-certification included cy pres distributions to unidentified charities and $2 million in attorneys’ fees.
- Class members would receive $5 per cereal box up to $15; unclaimed funds would feed the indigent via cy pres.
- A separate $5.5 million of food items would be donated to charities feeding the indigent, with no recipients identified.
- Court-approved settlement did not specify cy pres recipients or how food value would be calculated, and total constructive fund valuation was unclear.
- The district court approved the settlement over objections; on appeal, the Ninth Circuit reversed, vacated, and remanded for proceedings consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the cy pres distributions valid pre-certification? | Cy pres lacks nexus to the class and underlying claims. | Cy pres distributions are permissible to distribute unclaimed funds. | No; approval abused discretion; cy pres improper. |
| Is the product cy pres component properly related to the claims? | Product cy pres lacks nexus to UCL/CLRA claims. | Cy pres can be linked to remedying false advertising. | Not sufficiently related; invalid. |
| Must cy pres recipients be identified and limited? | Recipients unidentified; risk of self-interest influence. | Court can approve later identification. | Identification required; lack of identification invalid. |
| Is the $5.5 million food cy pres properly valued? | Value and method of valuation are unclear and potentially illusory. | Value to be determined by sponsors; acceptable. | Valuation ambiguity renders the settlement defective. |
| Was the district court's overall settlement approval appropriate given pre-certification context? | Court must vigilantly assess pre-certification settlements for fairness. | Settlement should be given deference under standard review. | Abuse of discretion; settlement reversed and remanded. |
Key Cases Cited
- Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011) (cy pres must benefit the class and relate to underlying claims)
- Six Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990) (cy pres requires a driving nexus to the class and remedies)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (pre-certification settlements require heightened scrutiny)
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (general standard for evaluating class action settlements)
- Officers for Justice v. Civil Serv. Comm’n, 688 F.2d 615 (9th Cir. 1982) (strong standards for assessing settlement fairness)