Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-01610/USCOURTS-cand-3_10-cv-01610-20/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

IN RE APPLE IPHONE/IPOD 

WARRANTY LITIGATION

____________________________________/

No. C 10-1610 RS

ORDER RE DISPOSITION OF FUNDS 

FROM UNCASHED CHECKS

In an outcome that all parties agree was wholly unanticipated and that is not unambiguously 

addressed by the settlement agreement in this action, approximately 4.6 million dollars’ worth of 

settlement distribution checks that were mailed out to specifically identified class members have 

gone uncashed and have now expired. As average payments were approximately $240 per class 

device, each of the uncashed checks was for a non-trivial sum of money. 

Plaintiffs’ co-lead counsel Chimicles & Tikellis LLP (“Chimicles”) proposes distributing the 

funds from the uncashed checks through a second distribution to those class members who did 

negotiate their checks, with the costs of such further distribution to be borne by defendant Apple. 

Co-lead plaintiffs’ counsel Fazio|Micheletti LLP (“Fazio”) proposes instead distributing the funds to 

the cy pres recipients designated in the settlement agreement. Apple argues that the best way to 

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United States District Court

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protect the interests of the uncompensated class members is through “custodial escheat”—delivery 

of the funds from each uncashed check to the state government of the last known address of the 

named payee, to be held in trust for the payee’s benefit under state unclaimed property laws.

A further distribution to those class members who previously cashed checks is an 

unsatisfactory option. While an argument can be made that many or all of them may not have been 

made completely whole by the prior payments, the agreement here unarguably provided 

compensation that was fair in the settlement context. Giving those individuals more money, while 

providing no further benefit to the balance of the class, does not serve the interests of justice.

Payment to cy pres beneficiaries, of course, does represent an attempt to provide a benefit to 

the class as a whole, including particularly members who have not received direct compensation. 

See Dennis v. Kellogg Co., 697 F.3d 858, 865 (9th Cir. 2012) (“a cy pres award must qualify as ‘the 

next best distribution’ to giving the funds directly to class members.”). This is not, however, a 

situation where class members could not be identified or where each payout would be too small to 

make direct payments economically feasible. Nor is the total amount at stake some relatively small 

sum, representing only a few undeliverable or uncashed checks. Distribution to the cy pres 

recipients of nearly $4.6 million would be completely contrary to what was represented at the time 

the settlement was approved.

“Custodial escheat,” as Apple calls it, most nearly serves the goal of providing direct 

compensation to the class members. Although the term “escheat” is still used, modern unclaimed 

property statutes typically provide for the state to hold property in trust for its owners indefinitely, 

except in certain circumstances. See, e.g., Taylor v. Westly, 402 F.3d 924, 930 (9th Cir. 2005) 

(explaining distinction in California Unclaimed Property Law between “escheat” and “permanent 

escheat”). Thus, depositing the funds from the uncashed checks into the unclaimed property funds 

of the relevant states should permit the affected class members—or even their heirs or 

beneficiaries—to recover the monies at any time in the future. Admittedly, as the Taylor line of 

cases

1

reflects, it may be the case that monies deposited into a state’s unclaimed property system 

often go unclaimed. Nevertheless, proceeding in such a fashion means that at least some of the 

 

1

 See Taylor v. Yee, 780 F.3d 928, 931 n. 1 (9th Cir. 2015) for a listing of the cases.

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United States District Court

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relevant class members likely will receive direct cash distributions, and all of them will have the 

continued opportunity to do so. Neither a redistribution to other class members nor a payout to the 

cy pres beneficiaries carries even the possibility of such direct benefits.

Fazio argues that putting the funds into state unclaimed property systems would be 

improper. It insists unclaimed property/escheat law is effectively inapplicable because, it contends, 

the “residual settlement fund” is not the property of the class. Fazio relies on language from Wilson 

v. Sw. Airlines, Inc., 880 F.2d 807, 811-12 (5th Cir. 1989) that “all class members who presented 

their claims received the full payment due them, and those who did not present claims have waived 

their legal right to do so.” Wilson, however, did not involve checks that had been sent out to 

identified class members and then not cashed. Rather, it involved a true “residual fund” of monies 

that had never been designated as belonging to specific individual class members. Additionally, the 

settlement agreement here did not require class members affirmatively to present claims to be 

entitled to payment. The language in Wilson does not support a conclusion that persons to whom 

settlement checks were actually issued have no remaining interest in those funds merely because the 

checks have expired.

Fazio also argues that the California Supreme Court expressly rejected escheat as an 

appropriate method for disposing of residual settlement funds in State of California v. Levi Strauss

& Co., 41 Cal. 3d 460, 475 (1986) and that a preference for cy pres as the last resort has been 

codified at Cal. Code Civ. Proc. § 384. Levi Strauss, however, explicitly was addressing “general 

escheat” where the funds are deposited into the “general fund of a governmental body” with the 

“benefits of the recovery . . . spread among all taxpayers, [and] no attempt to ensure that the 

spillover is used to effectuate the purposes of the substantive law.” 41 Cal. 3d at 475. While the 

advantage of directing true residual funds to specifically selected cy pres recipients over “general 

escheat” to the state treasury is obvious, it is not implicated here. These funds, already identified as 

belonging to specific class members, will go into “custodial escheat” and be held in trust for those 

persons. For the same reason, § 384 does not call for a different result.

Accordingly, it appears that the most appropriate disposition of the approximately $4.6 

million dollars in uncashed checks is for the administrator to turn over those funds, identified by 

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class member name and amount, to the designated officials in each of the relevant states, to be held 

in trust for the payees pursuant to the unclaimed property laws in those states. Some uncertainty 

remains, however, because the parties have not addressed whether the laws in any of the affected 

states might present a barrier to proceeding in this manner.2 For example, it might be the case that 

state officials would take the position that the administrator may not turn over the funds until the 

expiration of some statutory period, and the parties or administrator would object to leaving some 

portion of this matter still pending until then. Or, in the seemingly unlikely event that some affected 

state has no statutory provisions for custodial escheat, allowing the funds to become the property of 

the state itself would be contrary to the goal of leaving eventual direct compensation to the class 

members open as a possibility.

Therefore, it is hereby ordered that within the next 60 days the parties investigate and 

determine whether the funds representing the uncashed checks may be turned over to the authorities 

in the relevant states in custodial escheat, in a manner that is consistent with the intent of this order. 

In the event no barriers appear, the administrator is hereby authorized and directed to turn over the 

funds to the appropriate state authorities. If any issues arise that the parties are unable to resolve 

among themselves, they may submit a further joint brief succinctly setting out the issues and their 

respective positions, and any proposed resolutions.

IT IS SO ORDERED.

Dated: June 25, 2015

RICHARD SEEBORG

UNITED STATES DISTRICT JUDGE

 

2

 In a slightly different context, the parties have briefly addressed Texas law. In Highland Homes 

Ltd. v. State, 448 S.W.3d 403, 405 (Tex. 2014), the Texas Supreme Court rejected an argument that 

parties could not validly provide in their agreement for any settlement fund residue—including 

monies from checks not cashed within ninety days—to be distributed to a cy pres recipient. The 

court concluded that Texas unclaimed property law did not prevent the plaintiffs from waiving class 

member’s rights to payment if they did not cash their checks within the specified period. Nothing in 

the decision, however, would appear to preclude the Texas authorities from accepting funds in 

custodial escheat where, as here, the parties did not expressly provide for waiver of the plaintiffs’ 

claims to the funds in the event the checks were not cashed.

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