Source: https://caselaw.findlaw.com/us-9th-circuit/1586262.html
Timestamp: 2019-06-18 22:30:24
Document Index: 617129502

Matched Legal Cases: ['§ 2510', '§ 17200', '§ 1750', '§ 17529', '§ 10', '§ 2042', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 455', '§ 3']

NACHSHIN v. Janel Buycks, Objector. | FindLaw
NACHSHIN v. Janel Buycks, Objector.
Robert NACHSHIN; Dawn Fairchild; Brian Geers; Laurence Gerard, on behalf of themselves and all others similarly situated, Plaintiffs–Appellees, v. AOL, LLC, a Delaware Limited Liability Company, Defendant–Appellee. Darren McKinney, Objector–Appellant, Janel Buycks, Objector.
Before BETTY B. FLETCHER and N. RANDY SMITH, Circuit Judges, and JAMES S. GWIN, District Judge.* Richard L. Kellner, Kabeteck Brown & Kellner LLP, Los Angeles, CA, for the plaintiffs-appellees. Mark D. Litvack, Pillsbury Winthrop Shaw Pittman, LLP, Los Angeles, CA, for the defendants-appellees. Theodore H. Frank, Center for Class Action Fairness, Washington, D.C., for the objector-appellant.
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 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.
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, 904 F.2d at 1305. The cy pres doctrine “takes its name from the Norman French expression, cy pres comme possible, which means ‘as near as possible.’ “ In re Airline Ticket Comm'n Antitrust Litig., 307 F.3d 679, 682 (8th Cir .2002) (citation omitted). The doctrine originated to save testamentary charitable gifts that would otherwise default. The cy pres doctrine allows a court to modify a trust to best carry out the testator's intent—that is, to effectuate the “next best” use of the gift. Id. In the context of class action settlements, a court may employ the cy pres doctrine to “put the unclaimed fund to its next best compensation use, e.g., for the aggregate, indirect, prospective benefit of the class.” Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 436 (2d Cir.2007) (quoting 2 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 10:17 (4th ed.2002)).
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, Stearns & Co., 626 F.Supp.2d 402, 414–17 (S.D.N.Y.2009); Martin H. Redish et al., Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative and Empirical Analysis, 62 Fla. L.Rev. 617 (2010). Some courts appear to have abandoned the “next best use” principle implicit in the cy pres doctrine. These courts have awarded cy pres distributions to myriad charities which, though no doubt pursuing virtuous goals, have little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved. See, e.g., In re Motorsports Merch. Antitrust Litig., 160 F.Supp.2d 1392, 1396–99 (N.D.Ga.2001) (distributing $1.85 million remaining from a price fixing class action settlement relating to merchandise sold at professional stock car races to ten organizations including the Duke Children's Hospital and Health Center, the Make–a–Wish Foundation, the American Red Cross, and the Susan G. Komen Breast Cancer Foundation); Superior Beverage Co., Inc. v. Owens–Illinois, Inc., 827 F.Supp. 477, 480 (N.D.Ill.1993) (awarding $2 million from an antitrust class action settlement to fifteen applicants, including the San Jose Museum of Art, the American Jewish Congress, a public television station, and the Roger Baldwin Foundation of the American Civil Liberties Union of Illinois).
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 Stearns, 626 F.Supp.2d at 415; see George Krueger & Judd Serotta, Op–Ed., Our Class–Action System is Unconstitutional, Wall St. J., Aug. 6, 2008 (“Judges, in their unlimited discretion, have occasionally been known to order a distribution to some place like their own alma mater or a public interest organization that they happen to favor.”); Editorial, When Judges Get Generous, Wash. Post, Dec. 17, 2007, at A20 (“Federal judges are permitted to find other uses for excess funds, ․ giving the money away to favorite charities with little or no relation to the underlying litigation is inappropriate and borders on distasteful.”); Adam Liptak, Doling out Other People's Money, N.Y. Times, Nov. 26, 2007 (“Lawyers and judges have grown used to controlling these pots of money, and they enjoy distributing them to favored charities, alma maters and the like.”).
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, 904 F.2d at 1307. The proposed cy pres distribution in Six Mexican Workers failed to meet this standard. In that case, the district court awarded a class of 1,349 undocumented Mexican workers $1,846,500 for their Fair Labor Contractor Registration Act claims against a conglomerate of fruit farmers. Id. at 1303–04. The district court ordered that any unclaimed funds be distributed through a cy pres award to the Inter–American Fund (IAF) for indirect humanitarian assistance in Mexico. Id. at 1304. We rejected this award, explaining that (1) the “proposal benefits a group far too remote from the plaintiff class,” (2) “[t]he plan ․ fails to provide adequate supervision over distribution,” and (3) although “the plan permits distribution to areas where the class members may live, ․ there is no reasonable certainty that any member will be benefited.” Id. at 1308–09. We directed the district court on remand to consider escheating the funds pursuant to 28 U.S.C. § 2042 if the court could not develop an appropriate cy pres distribution. Id. at 1309.
We are also not persuaded by the parties' claims that the size and geographic 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 email 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, 904 F.2d at 1309.
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, 208 F.3d at 797 (internal quotation marks and citation omitted).
Although McKinney correctly points out that Judge Snyder's husband served on LAFLA's board, this board includes roughly 50 attorneys representing local law firms, corporations, and community organizations. See Board of Directors, LAFLA, http://www.lafla.org/board.php (last visited Aug. 22, 2011). LAFLA is a non-profit organization that provides access to legal services for low-income individuals in the Los Angeles area. There is no indication in the record that board members receive financial compensation, development commissions, or any other remuneration for their service. Although the proposed cy pres donation of $25,000 to LAFLA is a significant sum of money, McKinney has not shown that the donation would benefit Mr. Snyder in any way other than to enable LAFLA to continue providing legal services to the indigent.
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 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).
1. 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.
2. 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).