Harry Dennis v. Stephanie Berg , 697 F.3d 858 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HARRY DENNIS; JON KOZ, on behalf 
of themselves and all others
similarly situated,
Plaintiffs-Appellees, No. 11-55674

STEPHANIE BERG, D.C. No.
Objector-Appellant, 3:09-cv-01786-
v. IEG-WMC
KELLOGG COMPANY, a Delaware
corporation,
Defendant-Appellee.

HARRY DENNIS; JON KOZ, on behalf 
of themselves and all others
similarly situated, No. 11-55706
Plaintiffs-Appellees,
D.C. No.

OMAR RIVERO, 3:09-cv-01786-
Objector-Appellant, IEG-WMC
v. ORDER AND
KELLOGG COMPANY, a Delaware OPINION
corporation,
Defendant-Appellee.

Appeal from the United States District Court
for the Southern District of California
Irma E. Gonzalez, Chief District Judge, Presiding
Argued and Submitted
June 7, 2012—Pasadena, California
10527
10528 DENNIS v. KELLOGG COMPANY
Filed September 4, 2012
Before: Stephen S. Trott and Sidney R. Thomas,
Circuit Judges, and Kevin Thomas Duffy, District Judge.*
Opinion by Judge Trott
*The Honorable Kevin Thomas Duffy, United States District Judge for
the Southern District of New York, sitting by designation.
10530 DENNIS v. KELLOGG COMPANY
COUNSEL
Joseph Darrell Palmer and Janine R. Menhennet, Law Offices
of Darrell Palmer PC, Solana Beach, California, and Christo-
pher A. Bandas, Bandas Law Firm, P.C., Corpus Christi,
Texas, for the objectors-appellants.
Timothy G. Blood, Blood Hurst & O’Reardon LLP, San
Diego, California, for the plaintiffs-appellees.
Kenneth K. Lee, Jenner & Block LLP, Los Angeles, Califor-
nia, and Richard P. Steinken, Jenner & Block LLP, Chicago,
Illinois, for the defendant-appellee.
ORDER
The Opinion filed July 13, 2012, slip op. 8109, and appear-
ing at 2012 WL 2870128 (9th Cir. 2012), is withdrawn. It
may not be cited as precedent by or to this court or any dis-
trict court of the Ninth Circuit.
With the Opinion withdrawn, the Plaintiffs-Appellees’ peti-
tion for rehearing and petition for rehearing en banc are moot.
The parties may file a petition for rehearing or a petition for
rehearing en banc regarding the Opinion filed concurrently
with this Order.
OPINION
TROTT, Circuit Judge:
Most cases in our judicial system never make it to trial. Lit-
igants often find it advantageous to secure a resolution more
quickly by settling the case and negotiating a result the parties
can tolerate, even though neither side can call it a total win.
DENNIS v. KELLOGG COMPANY 10531
Normally, that is the end of the story, and the parties walk
away — not entirely happy, but not entirely unhappy either.
In a class action, however, any settlement must be
approved by the court to ensure that class counsel and the
named plaintiffs do not place their own interests above those
of the absent class members. In this false advertising case, we
confront a class action settlement, negotiated prior to class
certification, that includes cy pres distributions of money and
food to unidentified charities. It also includes $2 million in
attorneys’ fees while offering class members a sum of (at
most) $15.
After carefully reviewing the class settlement, we conclude
that it must be set aside. The district court did not apply the
correct legal standards governing cy pres distributions and
thus abused its discretion in approving the settlement. The set-
tlement neither identifies the ultimate recipients of the product
and cash cy pres awards nor sets forth any limiting restriction
on those recipients, other than characterizing them as charities
that feed the indigent. To the extent that we can meaningfully
review such distributions where the parties fail to identify the
recipients, we hold that both cy pres portions of the settlement
are not sufficiently related to the plaintiff class or to the
class’s underlying false advertising claims. Moreover, the
$5.5 million valuation the parties attach to the product cy pres
distribution is, at best, questionable. We therefore reverse the
district court’s approval of the settlement, vacate the judg-
ment and the award of attorneys’ fees, and remand for further
proceedings consistent with this opinion.
I
BACKGROUND
In January 2008, Kellogg Co., the maker of Frosted Mini-
Wheats cereal, began a marketing campaign that claimed the
cereal was scientifically proven to improve children’s cogni-
10532 DENNIS v. KELLOGG COMPANY
tive functions for several hours after breakfast. Obviously
aimed at parents of school-age children, Kellogg’s advertise-
ments allegedly included the following statements:
• “Does your child need to pay more attention in
school? . . . A recent clinical study showed that
a whole grain and fiber-filled breakfast of Frosted
Mini-Wheats® helps improve children’s atten-
tiveness by nearly 20%.”
• “Kellogg recently commissioned research to
measure the effect on kids of eating a breakfast
of Frosted Mini-Wheats® cereal. An independent
research group conducted a series of standard-
ized, cognitive tests on children ages 8 to 12 who
ate either a breakfast of Frosted Mini-Wheats®
cereal or water. The result? The children who ate
a breakfast of Frosted Mini-Wheats® cereal had
a nearly 20% improvement in attentiveness.”
• “Based upon independent clinical research, kids
who ate Kellogg’s® Frosted Mini-Wheats®
cereal for breakfast had up to 18% better atten-
tiveness three hours after breakfast than kids who
ate no breakfast.”
According to a declaration submitted by lead counsel for
the plaintiff class, counsel began investigating these market-
ing claims and, in April and May 2009, drafted a class action
complaint on behalf of Ohio resident Jon Koz, alleging viola-
tions of Ohio consumer protection laws. Around the same
time, another law firm was investigating the same marketing
claims on behalf of California resident Harry Dennis.
Although Mr. Koz never filed his Ohio complaint, Mr. Dennis
filed suit in August 2009 against Kellogg in the United States
District Court for the Southern District of California, alleging
violations of that state’s Unfair Competition Law (UCL) and
asserting a claim of unjust enrichment.
DENNIS v. KELLOGG COMPANY 10533
Sometime prior to January 2010, counsel for Koz and coun-
sel for Dennis discovered they were involved in similar activi-
ties and decided to join forces. Because informal settlement
attempts were unsuccessful, counsel for the consumers and
for Kellogg participated in a day-long mediation session with
Martin Quinn of JAMS, a well-established alternative dispute
resolution firm. As a result of this mediation session and
numerous other settlement discussions, the parties agreed, in
principle, to settle the case.
Meanwhile, the Dennis lawsuit had been gathering dust. On
June 22, 2010, the district court notified the parties of its
intent to dismiss the case for lack of prosecution. Koz and
Dennis immediately filed a joint amended class action com-
plaint.
In their amended complaint, the named plaintiffs
(“Plaintiffs”) asserted that Kellogg’s marketing claims regard-
ing the effect of Frosted Mini-Wheats on children’s attentive-
ness were false, that the study upon which these results were
based did not support the company’s claims, and that the
study was not scientifically valid. The Plaintiffs asserted
unjust enrichment, claims under the UCL and California’s
Consumer Legal Remedies Act (CLRA), and claims under
“similar laws of other states.”
Over the next three months, the parties continued to work
out the details of their settlement. Ultimately, they agreed to
settle the case on the following terms:
• Kellogg agreed to establish a $2.75 million settle-
ment fund for distribution to class members on a
claims-made basis. Class members submitting
claims would receive $5 per box of cereal pur-
chased, up to a maximum of $15. Any remaining
funds would not revert to Kellogg, but would
instead be donated to unidentified “charities cho-
sen by the parties and approved by the Court pur-
10534 DENNIS v. KELLOGG COMPANY
suant to the cy pres doctrine. . . . If the total
amount of eligible claims exceeds the Settlement
Fund, then each claim’s award shall be propor-
tionately reduced.”
• Kellogg agreed to distribute, also pursuant to the
cy pres doctrine, $5.5 million “worth” of specific
Kellogg food items to charities that feed the indi-
gent. The settlement does not specify the recipi-
ent charities, nor does it indicate how this $5.5
million in food will be valued — at cost, whole-
sale, retail, or by some other measure.
• Kellogg agreed that for three years, it would “re-
frain from using in its advertising and on its
labeling for the Product any assertion to the
effect that ‘eating a bowl of Kellogg’s® Frosted
Mini-Wheats cereal for breakfast is clinically
shown to improve attentiveness by nearly
20%.’ ” Kellogg would still be allowed to claim
that “[c]linical studies have shown that kids who
eat a filling breakfast like Frosted Mini-Wheats
have an 11% better attentiveness in school than
kids who skip breakfast.”
• Kellogg agreed to pay class counsel’s attorneys’
fees and costs “not to exceed a total of $2 mil-
lion.” Class counsel eventually requested the full
$2 million in fees and costs.1
• The Plaintiffs agreed to release all claims arising
out of the challenged advertising.
Together with notice and administrative costs approximated at
1
Although the district court’s order listed the attorneys’ fees as $2.4 mil-
lion, all parties agree that the correct figure is $2 million.
DENNIS v. KELLOGG COMPANY 10535
$391,500, the parties value the settlement, or the constructive
common fund, at $10,641,500.
The claims period has now closed. Although there is noth-
ing in the record to indicate how many class members submit-
ted claims, class counsel represented at oral argument that the
claims submitted total approximately $800,000.
On the Plaintiffs’ motion, the district court certified the
class — defined as “[a]ll persons or entities in the United
States who purchased the Product” during the settlement class
period — granted preliminary approval of the settlement, and
approved the proposed class notice. Because Kellogg sells its
products to wholesalers, not directly to consumers, there was
no way to identify each member of the class. Therefore, the
class notice was published in Parents magazine and other
“targeted sources based on market research about consumers
who purchased the products,” including 375 websites.
Two class members objected to the settlement: Stephanie
Berg and Omar Rivero (Objectors). As relevant to this appeal,
the Objectors argued that the settlement’s use of cy pres relief
was improper because “the only relationship between this
lawsuit and feeding the indigent is that they both involve food
in some way.” They argued also that the cy pres distributions
would benefit class counsel and Kellogg, but not the class
members, because class members “have no idea how their
funds might be used or in whose hands their monies will end
up.” Finally, the Objectors argued that the attorneys’ fees —
which represented approximately 19% of a common fund
allegedly worth over $10.64 million — were excessive. The
district court approved the class settlement and dismissed the
case with prejudice. In doing so, however, the court did not
address the Objectors’ argument that the cy pres distributions
were too remote from the class members and were not suffi-
ciently related to their UCL and CLRA claims. The court also
approved the requested attorneys’ fees, stating that the fees
were
10536 DENNIS v. KELLOGG COMPANY
fair and reasonable in light of the results achieved,
the risks of litigation, the skill required and the qual-
ity of work, the contingent nature of the fee, the bur-
dens carried by class counsel, and the awards made
in similar cases. See Vizcaino v. Microsoft Corp.,
290 F.3d 1043, 1048-50 (9th Cir. 2002). Accord-
ingly, the objections are overruled.
The Objectors timely appealed.
II
STANDARD OF REVIEW
The settlement of a class action must be fair, adequate, and
reasonable. Fed. R. Civ. P. 23(e)(2). “We review a district
court’s approval of a proposed class action settlement, includ-
ing a proposed cy pres settlement distribution, for abuse of
discretion. A court abuses its discretion when it fails to apply
the correct legal standard or bases its decision on unreason-
able findings of fact.” Nachshin v. AOL, LLC, 663 F.3d 1034,
1038 (9th Cir. 2011) (internal citations omitted).
Appellate review of a settlement agreement is generally
“extremely limited.” Hanlon v. Chrysler Corp., 150 F.3d
1011, 1026 (9th Cir. 1998). But where, as here, class counsel
negotiates a settlement agreement before the class is even cer-
tified, courts “must be particularly vigilant not only for
explicit collusion, but also for more subtle signs that class
counsel have allowed pursuit of their own self-interests and
that of certain class members to infect the negotiations.” In re
Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th
Cir. 2011). In such a case, settlement approval “requires a
higher standard of fairness” and “a more probing inquiry than
may normally be required under Rule 23(e).” Hanlon, 150
F.3d at 1026. “To survive appellate review, the district court
must show it has explored comprehensively all factors,” id.,
and must give “a reasoned response” to all non-frivolous
DENNIS v. KELLOGG COMPANY 10537
objections, Officers for Justice v. Civil Serv. Comm’n, 688
F.2d 615, 624 (9th Cir. 1982).
III
DISCUSSION
The Cy Pres Distributions of Food and Unclaimed Funds
A.
As a preliminary matter, Plaintiffs argue that we must
refrain from addressing the validity of the cy pres doctrine
with respect to the cash settlement fund. They assert that this
issue will not be ripe until it is determined that available cash
remains in that fund after the claims process has concluded.
They rely on Rodriguez v. West Publishing Corp., 563 F.3d
948, 966 (9th Cir. 2009), where we declined for this reason
to take on this issue. However, Rodriguez is distinguishable
for two reasons.
First, the deadline here for the submission of claims was
June 3, 2011, a date long since past. The Declaration dated
October 10, 2011 of Lance P. Blair, the claims administrator,
advised the district court that money “will remain in the set-
tlement fund for a cy pres distribution after the payment of all
claims.”
Second, as noted earlier, Plaintiffs’ counsel represented
during oral argument that the claims submitted totaled
roughly $800,000, leaving almost $2 million in the settlement
fund for cy pres distribution, plus any accumulated interest.
Accordingly, we deem this issue ripe for determination.
B.
[1] Cy pres is shorthand for the old equitable doctrine “cy
près comme possible” — French for “as near as possible.”
10538 DENNIS v. KELLOGG COMPANY
Although the doctrine originated in the area of wills as a way
to effectuate the testator’s intent in making charitable gifts,
federal courts now frequently apply it in the settlement of
class actions “ ‘where the proof of individual claims would be
burdensome or distribution of damages costly.’ ” Nachshin,
663 F.3d at 1038 (quoting Six Mexican Workers v. Ariz. Cit-
rus Growers, 904 F.2d 1301, 1305 (9th Cir. 1990)). Used in
lieu of direct distribution of damages to silent class members,
this alternative allows for “aggregate calculation of damages,
the use of summary claim procedures, and distribution of
unclaimed funds to indirectly benefit the entire class.” Six
Mexican Workers, 904 F.2d at 1305. To ensure that the settle-
ment retains some connection to the plaintiff class and the
underlying claims, however, a cy pres award must qualify as
“the next best distribution” to giving the funds directly to
class members. Id. at 1308 (internal quotation marks omitted).
[2] Not just any worthy recipient can qualify as an appro-
priate cy pres beneficiary. To avoid the “many nascent dan-
gers to the fairness of the distribution process,” we require
that there be “a driving nexus between the plaintiff class and
the cy pres beneficiaries.” Nachshin, 663 F.3d at 1038. A cy
pres award must be “guided by (1) the objectives of the
underlying statute(s) and (2) the interests of the silent class
members,” id. at 1039, and must not benefit a group “too
remote from the plaintiff class,” Six Mexican Workers, 904
F.2d at 1308. Thus, in addition to asking “whether the class
settlement, taken as a whole, is fair, reasonable, and adequate
to all concerned,” we must also determine “whether the distri-
bution of the approved class settlement complies with our
standards governing cy pres awards.” Nachshin, 663 F.3d at
1040 (internal quotation marks omitted).
A review of our relevant precedent reveals that the settle-
ment here fails to satisfy those standards. In Six Mexican
Workers v. Arizona Citrus Growers, a class of undocumented
Mexican farm workers sued various companies for violations
of the Farm Labor Contractor Registration Act. 904 F.2d at
DENNIS v. KELLOGG COMPANY 10539
1303. After a bench trial, the district court found the defen-
dants liable for over $1.8 million, which we later reduced to
$850,000, in statutory damages. Id. at 1303-04, 1310. The dis-
trict court identified the Inter-American Fund, which provided
humanitarian aid in Mexico, as the cy pres recipient of any
unclaimed funds. Id. at 1304.
We held that the cy pres distribution was an abuse of dis-
cretion because there was “no reasonable certainty” that any
class member would benefit from it, even though the money
would go “to areas where the class members may live.” Id. at
1308. The choice of charity and its relation to the class mem-
bers and class claims — or lack thereof — figured heavily in
our analysis. The purpose of the statute was to compensate
victims of unscrupulous employers and to deter future viola-
tions, but the Inter-American Fund was “not an organization
with a substantial record of service nor [was] it limited in its
choice of projects,” and any distribution would therefore have
required court supervision “to ensure that the funds [were]
distributed in accordance with the goals of the remedy.” Id. at
1309. Because “the district court’s application [of the cy pres
doctrine] was inadequate to serve the goals of the statute and
protect the interests of the silent class members,” we reversed
the cy pres distribution. Id. at 1312.
We recently came to a similar conclusion in Nachshin v.
AOL, LLC. In that case, AOL was accused of violating a num-
ber of statutes, including the UCL and the CLRA, by wrong-
fully inserting commercial footers into the plaintiffs’ outgoing
emails. 663 F.3d at 1036. Because damages would be small
and distribution to the class prohibitively expensive, AOL
agreed, as part of a class settlement, to make substantial dona-
tions to three charities: the Legal Aid Foundation of Los
Angeles, the Federal Judicial Center Foundation, and the Los
Angeles and Santa Monica chapters of the Boys and Girls
Club of America. Id. at 1037.
We held that the cy pres distribution “fail[ed] to target the
plaintiff class, because it d[id] not account for the broad geo-
10540 DENNIS v. KELLOGG COMPANY
graphic distribution of the class.” Id. at 1040. The class
included over 66 million AOL users across the country, but
two-thirds of the donations were slated for Los Angeles chari-
ties. Further, although the donation to the Federal Judicial
Center Foundation “at least conceivably benefit[ed] a national
organization,” the Foundation “ha[d] no apparent relation to
the objectives of the underlying statutes, and it [wa]s not clear
how this organization would benefit the plaintiff class.” Id.
We noted, however, that it would not be difficult for the par-
ties to come up with an appropriate charity if they wished to
do so:
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 inter-
net users from fraud, predation, and other forms of
online malfeasance.
Id. at 1041. In approving the cy pres distribution to charities
that had no relation to the class or to the underlying claims,
the district court “applied the incorrect legal standard” and
abused its discretion. Id. at 1040.
[3] The cy pres awards in the settlement here are likewise
divorced from the concerns embodied in consumer protection
laws such as the UCL and the CLRA. As California courts
have stated, “[t]he UCL is designed to preserve fair competi-
tion among business competitors and protect the public from
nefarious and unscrupulous business practices,” Wells v.
One2One Learning Found., 10 Cal. Rptr. 3d 456, 463-64 (Ct.
App. 2004), rev’d in part on other grounds, 141 P.3d 225
(Cal. 2006), and the purpose of the CLRA is similarly “to pro-
tect consumers against unfair and deceptive business prac-
tices,” Cal. Civ. Code § 1760. Although there is no way to
DENNIS v. KELLOGG COMPANY 10541
identify either the product or the cash cy pres beneficiaries
from this record, we do know that according to the settlement,
any charity to receive a portion of the cy pres distributions
will be one that feeds the indigent. This noble goal, however,
has “little or nothing to do with the purposes of the underlying
lawsuit or the class of plaintiffs involved.” Nachshin, 663
F.3d at 1039.
[4] At oral argument, Kellogg’s counsel frequently
asserted that donating food to charities who feed the indigent
relates to the underlying class claims because this case is
about “the nutritional value of food.” With respect, that is
simply not true, and saying it repeatedly does not make it so.
The complaint nowhere alleged that the cereal was unhealthy
or lacked nutritional value. And no law allows a consumer to
sue a company for selling cereal that does not improve atten-
tiveness. The gravamen of this lawsuit is that Kellogg adver-
tised that its cereal did improve attentiveness. Those alleged
misrepresentations are what provided the Plaintiffs with a
cause of action under the UCL and the CLRA, not the nutri-
tional value of Frosted Mini-Wheats. Thus, appropriate cy
pres recipients are not charities that feed the needy, but orga-
nizations dedicated to protecting consumers from, or redress-
ing injuries caused by, false advertising. On the face of the
settlement’s language, “charities that provide food for the
indigent” may not serve a single person within the plaintiff
class of purchasers of Frosted Mini-Wheats.
Our concerns are not placated by the settlement provision
that the charities will be identified at a later date and approved
by the court — a decision from which the Objectors might
again appeal. Our standards of review governing pre-
certification settlement agreements require that we carefully
review the entire settlement, paying special attention to
“terms of the agreement contain[ing] convincing indications
that the incentives favoring pursuit of self-interest rather than
the class’s interests in fact influenced the outcome of the
negotiations.” Staton v. Boeing Co., 327 F.3d 938, 960 (9th
10542 DENNIS v. KELLOGG COMPANY
Cir. 2003). Cy pres distributions present a particular danger in
this regard. “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.” Nachshin, 663 F.3d at 1039. This record leaves open
the distinct possibility that the asserted $5.5 million value of
the product cy pres award and the remaining cash cy pres
award will only be of serendipitous value to the class purport-
edly protected by the settlement. The difficulty here is that, by
failing to identify the cy pres recipients, the parties have
restricted our ability to undertake the searching inquiry that
our precedent requires. The cy pres problem presented in this
case is of the parties’ own making, and encouraging multiple
costly appeals by punting down the line our review of the set-
tlement agreement is no solution.
C.
[5] On remand, the parties are free to negotiate a new set-
tlement or proceed with litigation. If they again decide to set-
tle, they must correct the additional serious deficiencies we
find in this settlement agreement. Not only does the settle-
ment fail to identify the cy pres recipients of the unclaimed
money and food, but it is unacceptably vague and possibly
misleading in other areas as well.
The settlement states only that Kellogg will donate “$5.5
million worth” of food. (emphasis added). But the settlement
document gives no hint as to how that $5.5 million will be
valued. Is it valued at Kellogg’s cost? At wholesale value? At
retail? The exact answer to this question has important ramifi-
cations relating to the accurate valuation of the constructive
common fund and thereby the reasonableness of attorneys’
fees. Kellogg stated at oral argument and in its briefs to the
district court that it will value the food donation at wholesale,
but the only legally-enforceable document — the settlement
— says nothing of the sort. Additionally, the settlement fails
DENNIS v. KELLOGG COMPANY 10543
to include any restrictions on how Kellogg accounts for the cy
pres distributions. Can Kellogg use the value of the distribu-
tions as tax deductions because they will go to charity? And
given that Kellogg already donates both food and money to
charities every year — which is unquestionably an admirable
act — will the cy pres distributions be in addition to that
which Kellogg has already obligated itself to donate, or can
Kellogg use previously budgeted funds or surplus production
to offset its settlement obligations? Again, the settlement is
silent, and we have only Kellogg’s statements as to its future
intentions. All of this vagueness detracts from our ability to
determine the true value of the constructive common fund.
Moreover, Plaintiffs’ counsel tells us that settlements like
this serve the purposes of “restitutionary disgorgement and
deterrence.” If the product cy pres distribution is form over
substance and not worth nearly as much to Kellogg as the set-
tlement claims, then these goals are not served. To the con-
trary, the settlement is a paper tiger.
This deficiency raises in turn serious issues about the
alleged dollar value of the product cy pres award, an impor-
tant number used to measure the appropriateness of attorneys’
fees. For example, if the alleged $5.5 million value of the
product cy pres distribution turns out on close examination to
be an illusion and is subtracted from the alleged $10.64 mil-
lion value of the common fund, the dollar value of the settle-
ment fund plummets to $5.14 million, and the $2 million
attorneys’ fees award becomes 38.9% of the total, which is
clearly excessive under our guidelines. This possibility gives
us an additional reason to be vigilant regarding the particulars
of this class action settlement: is it all that it appears to be?
Are the assigned numbers real, or not? This issue is particu-
larly critical with a cy pres product settlement that has a tenu-
ous relationship to the class allegedly damaged by the conduct
in question. The issue of the valuation of this aspect of a set-
tlement must be examined with great care to eliminate the
possibility that it serves only the “self-interests” of the attor-
10544 DENNIS v. KELLOGG COMPANY
neys and the parties, and not the class, by assigning a dollar
number to the fund that is fictitious.
Neither class counsel nor Kellogg offers any credible rea-
son for the mysteries in the current settlement. To approve
this settlement despite its opacity would be to abdicate our
responsibility to be “particularly vigilant” of pre-certification
class action settlements. In re Bluetooth Headset Prods. Liab.
Litig., 654 F.3d at 947.
D.
[6] For the foregoing reasons, we conclude that the district
court did not apply the correct legal standards for cy pres dis-
tributions as set forth in Six Mexican Workers and Nachshin.
Therefore, the approval of the settlement was an abuse of dis-
cretion.
[7] We do not have the authority to strike down only the
cy pres portions of the settlement. “It is the settlement taken
as a whole, rather than the individual component parts, that
must be examined for overall fairness,” and we cannot “de-
lete, modify or substitute certain provisions. The settlement
must stand or fall in its entirety.” Hanlon, 150 F.3d at 1026
(internal quotation marks omitted). See also Jeff D. v. Andrus,
899 F.2d 753, 758 (9th Cir. 1989) (“[C]ourts are not permitted
to modify settlement terms or in any manner to rewrite agree-
ments reached by parties.”). Thus, we reverse the district
court’s order approving the settlement and dismissing the
case, vacate the judgment and award of attorneys’ fees,2 and
remand for further proceedings.
2
Our decision on the merits of the settlement renders moot the attor-
neys’ fees issue. Waggoner v. C&D Pipeline Co., 601 F.2d 456, 459 (9th
Cir. 1979).
DENNIS v. KELLOGG COMPANY 10545
IV
CONCLUSION
Class counsel and Kellogg ask us for the impossible — a
verdict before the trial. They essentially say, “Just trust us.
Uphold the settlement now, and we’ll tell you what it is later.”
But that is not how appellate review works. The settlement
provides no assurance that the charities to whom the money
and food will be distributed will bear any nexus to the plain-
tiff class or to their false advertising claims and therefore vio-
lates our well-established standards governing cy pres awards.
Moreover, the true value of the product cy pres initiative has
yet to be determined, making it impossible to assess, and thus
evaluate, the true value of the common fund.
REVERSED, JUDGMENT VACATED, and CASE
REMANDED.