Ted Frank at the Center for Class Action Fairness has had another important victory–obtaining a 9th Circuit reversal of a cy pres award that had been made as part of a settlement with AOL:
The Ninth Circuit U.S. Court of Appeals on Monday rejected a class action settlement that called for AOL Inc. to give $110,000 to random charities, sending a message that courts should be more careful in doling out money under the cy pres doctrine.
A unanimous panel said the charities had nothing to do with the plaintiffs’ email privacy claims and that too much money was being funneled to Los Angeles groups, despite a class spread out across the country. And the court expressed skepticism about whether judges or mediators should make recommendations on how large sums of money get paid out when the money doesn’t go to the class members.
AOL was poised to donate a total of $75,000 to three different charities — Legal Aid Foundation of Los Angeles, the Boys and Girls Clubs of Santa Monica and Los Angeles, and the Federal Judicial Center Foundation — upon the suggestion of a former federal judge who mediated the agreement. Another $35,000 was to go to charities picked by class representatives, an arrangement also recommended by the mediator, Dickran Tevrizian.
“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,” Judge N. Randy Smith wrote for the unanimous three-judge panel.
Also on the panel in Fairchild v. AOL, 10-55129, were Senior Judge Betty Fletcher and U.S. District Judge James Gwin, visiting from Ohio.