A brief one this week, involving a settlement that did not reach final approval. Dremak v. Iovate Health Sci. Group, Inc., No. 09md2087, 2013 U.S. Dist. LEXIS 165225 (S.D. Cal. Nov. 19, 2013) involved an attempted settlement of personal injury class and labeling class actions involving products with hydroxycut [http://en.wikipedia.org/wiki/Hydroxycut]. The proposed settlement involved $10 million in cash and $10 million in hydroxycut products. Any remaining cash after distribution would be distributed as "Additional Product."
The court was not impressed by the structure of the settlement. As it stated:
The biggest problem with the proposed cy pres distribution in this settlement is that it simply does not benefit the class.
Nor did class counsel really argue that it did. Instead, they argued that
the cy pres remedy provides a benefit to the class members because the master settlement in the personal injury cases was reached based on the assumptions underlying the settlement of this class action. In other words, class members who suffered personal injury benefit from the cy pres remedy, because without the cy pres provisions in this settlement, the settlement of the personal injury cases might not have occurred. Iovate’s attorney adds that without the cy pres remedy, the class action settlement may fall apart and, therefore, the non-personal injury class members also receive a benefit from the inclusion of the cy pres provisions. The Court is not convinced by these arguments. The Court doubts that causing a benefit in the form of facilitating settlement in this action or the separate personal injury actions is the type of "indirect benefit" that cy pres remedies are meant to provide. The focus should be on whether the funds themselves are being used for the benefit of the class.
(Bold added.) In other words, you can’t justify a cy pres settlement by arguing that without the cy pres, there wouldn’t be a settlement. There must be an actual, concrete benefit to the class apart from the settlement itself.