OPINION
The
cy pres
doctrine allows a court to distribute unclaimed or non-distributable portions of a class action settlement fund to the “next best” class of beneficiaries. See
Six (6) Mexican Workers v. Ariz. Citrus Growers,
I.
In August 2009, four named plaintiffs— Dawn Fairchild, Brian Geers, Laurence Gerard, and Robert Nachshin (Plaintiffs)— brought a class action lawsuit against America Online, LLC (AOL) on behalf of a putative class consisting of more than 66 million paid AOL subscribers. Plaintiffs alleged that AOL wrongfully inserted footers containing promotional messages into e-mails sent by AOL subscribers. The amended complaint asserted six causes of action: (1) violation of the Electronic Communications Privacy Act, 18 U.S.C. § 2510 et seq.; (2) unjust enrichment; (3) violation of California Business and Professions Code § 17200 et seq.; (4) breach of contract; (5) violations of the Consumer Legal Remedies Act, California Civil Code § 1750 et seq.; and (6) violation of California Business and Professions Code § 17529 et seq.
The parties entered into voluntary mediation to settle their dispute. Working with retired U.S. District Court Judge Dickran Tevrizian, AOL and Plaintiffs eventually reached a class settlement (the Settlement). The Settlement calls for the certification of a settlement class consisting of “all current AOL members,” or about 66 million subscribers. It further provides that (1) AOL will notify its members of the existence of the e-mail footer advertisements and their ability to opt out of the footers; (2) if AOL continues to append footer advertisements to members’ outgoing e-mails, AOL will re-send the same email notification to members every six months for a period of two years; and (3) AOL will inform future members of the email footers and provide a link enabling *1037 members to opt out of the footer advertisements.
The Settlement also addressed Plaintiffs’ claims for monetary damages. All parties agreed monetary damages were small and difficult to ascertain. The maximum recovery at trial would have been the unjust enrichment AOL received as a result of its footer advertisement sales, or about $2 million. Divided among the more than 66 million AOL subscribers, each member of the class would receive only about 3 cents. The cost to distribute these payments would far exceed the maximum potential recovery.
In lieu of a cost-prohibitive distribution to the plaintiff class and at Judge Tevrizian’s suggestion, the parties agreed that AOL would make a series of charitable donations. Because the 66,069,441 plaintiffs were geographically and demographically diverse, the parties claimed they could not identify any charitable organization that would benefit the class or be specifically germane to the issues in the ease. At the parties’ request, Judge Tevrizian suggested and the parties agreed that AOL would donate $25,000 to three charitable beneficiaries: (1) the Legal Aid Foundation of Los Angeles, (2) the Federal Judicial Center Foundation, and (3) the Boys and Girls Club of America (shared between the chapters in Los Angeles and Santa Monica).
In addition and at the suggestion of Judge Tevrizian, the parties agreed to compensate the named class representatives (for bringing the action) by awarding $35,000 to four charities of the class representatives’ choice (rather than providing direct financial compensation). The Settlement provides that AOL will donate $8,750 to a charity designated by each named representative. These designated charities include the (1) New Roads School of Santa Monica, designated by Ms. Fair-child and Mr. Nachshin; (2) Oklahoma Indian Legal Services, designated by Mr. Geers; and (3) the Friars Foundation, designated by Mr. Gerard. Each entity is a non-profit organization with tax deductible status under 26 U.S.C. § 501(c)(3).
The district court granted preliminary approval of the Settlement and provisionally certified the settlement class. Shortly thereafter, AOL sent an e-mail to over 60 million members of the class notifying them of the Settlement (the Notice). The Notice (1) explained that AOL will make donations to several charities totaling $110,000; (2) notified class members that the full settlement agreement is available at the district court or online at the internet addresses provided in the Notice; and (3) provided contact information, including phone numbers and an e-mail address, where inquiries could be sent. Two members of the class objected to the Settlement: Darren McKinney and Janel Buycks. 1 An additional 4,525 AOL subscribers opted out of the Settlement, but 1,037 failed to provide their names for the opt-out as required by the district court’s instructions, and seven failed to submit opt-out requests before the opt-out deadline.
On December 7, 2009, McKinney filed a formal Objection to the Proposed Settlement pending before the district court. In his briefs and at oral argument, McKinney argued, among other things, that: (1) the charitable award does not meet the standard for cy pres, because the charities selected by the parties do not relate to the *1038 issue in the case and are not geographically diverse; (2) the district court judge should have recused herself given her husband’s position as a director on the board of one of the charity beneficiaries, the Legal Aid Foundation of Los Angeles; and (3) AOL’s Notice to the class was defective, because it did not specify that Ms. Fairchild worked for the charity she selected to receive a charitable donation.
The district court denied McKinney’s objections, finding that (1) Judge Tevrizian’s involvement in the negotiations was a significant indicator of the agreement’s fairness, (2) the class was receiving significant prospective relief in addition to the cy pres awards, and (3) “the charities that have been chosen are [not] inappropriate or out of line with other class actions settlements that I have seen approved in this court and in other courts.” Judge Snyder also declined to recuse herself, explaining “I have considered [the motion], but I do not think it is a basis for recusing myself in this matter. I certainly had no involvement in picking the charities. The parties picked the charities and I was asked to approve the settlement.” On December 31, 2009, the district court issued a Final Order Re Approval of Class Action Settlement' and Final Judgment Thereon, noting that the court “has considered and denied all objections filed in this action.” On appeal, McKinney raises the same three objections he made before the district court.
II.
We review a district court’s approval of a proposed class action settlement, including a proposed
cy pres
settlement distribution, for abuse of discretion.
Rodriguez v. W. Publ’g Corp.,
We have recognized that federal courts frequently use the
cy pres
doctrine “in the settlement of class actions where the proof of individual claims would be burdensome or distribution of damages costly.”
Six Mexican Workers,
However, as a growing number of scholars and courts have observed, the
cy pres
doctrine — unbridled by a driving nexus between the plaintiff class and the
cy pres
beneficiaries — poses many nascent dangers to the fairness of the distribution process.
See, e.g., S.E.C. v. Bear, Steams & Co.,
When selection of
cy pres
beneficiaries is not tethered to the nature of the lawsuit and the interests of the silent class members, the selection process may answer to the whims and self interests of the parties, their counsel, or the court. Moreover, the specter of judges and outside entities dealing in the distribution and solicitation of settlement money may create the appearance of impropriety.
Bear Steams,
To remedy some of these concerns, we held in
Six Mexican Workers
that
cy pres
distribution must be guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members.
2
Six Mexican Workers,
The cy pres distribution in this case fails to meet any of the guiding standards in Six Mexican Workers. The proposed awards fail to (1) address the objectives of the underlying statutes, (2) target the plaintiff class, or (3) provide reasonable certainty that any member will be benefit-ted. Plaintiffs in this case brought claims against AOL for breach of electronic communications privacy, unjust enrichment, and breach of contract, among others, relating to AOL’s provision of commercial email services. Yet none of the cy pres donations — $25,000 each to the Legal Aid Foundation of Los Angeles, the Boys and Girls Clubs of Santa Monica and Los Angeles, and the Federal Judicial Center Foundation-have anything to do with the objectives of the underlying statutes on which Plaintiffs base their claims.
The
cy pres
distribution also fails to target the plaintiff class, because it does not account for the broad geographic distribution of the class.
See In re Airline Ticket Comm’n Antitrust Litig.,
We are not persuaded by AOL’s argument that courts must defer to the parties’ freely-negotiated settlement, or AOL’s reliance on the statement from
Rodriguez
that judicial review “must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned.”
Rodriguez,
We are also not persuaded by the parties’ claims that the size and geographic
*1041
diversity of the plaintiff class make it “impossible” to select an adequate charity. It is clear that all members of the class share two things in common: (1) they use the internet, and (2) their claims against AOL arise from a purportedly unlawful advertising campaign that exploited users’ outgoing e-mail messages. The parties should not have trouble selecting beneficiaries from any number of non-profit organizations that work to protect internet users from fraud, predation, and other forms of online malfeasance. If a suitable
cy pres
beneficiary cannot be located, the district court should consider escheating the funds to the United States Treasury.
See Six Mexican Workers,
III.
McKinney argues Judge Snyder should have recused herself from the hearing adjudicating the fairness and propriety of the proposed
cy pres
distribution in this case. We review the district court’s decision whether to grant a motion for recusal for an abuse of discretion.
United States v. Wilkerson,
A. Recusal under 28 U.S.C. § 455(a)
McKinney first argues that 28 U.S.C. § 455(a) requires Judge Snyder to have recused herself, because her husband sat on the board of one of the proposed
cy pres
beneficiaries, the Legal Aid Foundation of Los Angeles (LAFLA). Though McKinney claims that the somewhat attenuated connections between the Settlement and Mr. Snyder’s board service should raise questions about Judge Snyder’s impartiality, McKinney has not shown that Judge Snyder abused her discretion in denying the motion for recusal. The test for recusal under § 455(a) is “whether a reasonable person with knowledge of all the facts would conclude that the judge’s impartiality might reasonably be questioned.”
Wilkerson,
B. Recusal under 28 U.S.C. § 455(b)(4), (5)(iii)
McKinney also argues Judge Snyder should have recused herself, because her husband either (1) had a “financial interest in the subject matter in controversy or in a party to the proceeding,” 28 U.S.C. § 455(b)(4) (2006); or (2) had an “interest that could be substantially affected by the outcome of the proceeding,” id. § 455(b)(5)(iii). We disagree. The record gives no indication that Mr. Snyder had a financial interest in the subject matter in controversy. The statute defines financial interest as, among other things, “a relationship as director ... in the affairs of a party.” 28 U.S.C. § 455(d)(4) (emphasis added). Mr. Snyder had no interest in a “party” to the proceeding. LAFLA was not a “party” to the proceeding. LAFLA was neither named as a party nor represented by counsel. Its status as one of three proposed cy pres beneficiaries was the result of a fortuitous recommendation by the mediator—not by a decision made *1042 by Judge Snyder or at the encouragement of Mr. Snyder or any LAFLA representative. McKinney fails to cite precedent supporting the proposition that someone or something fortuitously impacted by a proceeding should be treated as a “party” to the proceeding under § 455(b).
Mr. Snyder did not have an interest that could be “substantially affected” by the outcome of the proceeding. Although LAFLA would no doubt consider the $25,000
cy pres
donation significant, there is no reason to believe Mr. Snyder (as one of 50 volunteer board members) would himself realize a significant benefit.
See Sensley v. Albritton,
We conclude that she did not abuse her discretion under § 455 in denying McKinney’s motion to recuse.
IV.
Lastly, McKinney argues that the class notice was not sufficient. We decline to address the issue, because we have already held that the proper legal standard was not applied to approve the ey pres distribution. Therefore, it is unnecessary to decide whether the Notice was legally significant.
REVERSED in part, AFFIRMED in part, and REMANDED.
We DENY AOL’s motion to take judicial notice of the amended class notice posted online.
The parties bear their own costs.
Notes
. Ms. Buycks, who objected on the basis that she preferred the charitable donation be made to her own charitable foundation, the Imitators of God Foundation, Inc., was apparently the daughter of an official AOL subscriber. The district court allowed Ms. Buyck’s mother to opt out of the Settlement.
. We also note that the American Law Institute has adopted a rule for cy pres awards requiring parties "to identify a recipient whose interests reasonably approximate those being pursued by the class.” Principles of the Law of Aggregate Litigation § 3.07(c) (Am. L.Inst.2010).