## Facts

- AOL subscribers alleged AOL automatically appended promotional “footers” to outgoing subscriber emails, generating about $2 million in revenue.
- Plaintiffs brought a nationwide putative class action asserting statutory and common-law claims, including under the Electronic Communications Privacy Act and California consumer statutes, plus contract and unjust enrichment theories.
- The parties reached a settlement for a class defined as all current AOL members, approximately 66 million subscribers.
- Injunctive-style relief required AOL to notify members about the footer advertisements and offer an opt-out; if the practice continued, AOL would re-notify every six months for two years and provide notice and opt-out information to future members.
- Because individual losses were not readily provable and a pro rata distribution would yield only a few cents per member, the settlement provided a $110,000 cy pres distribution to designated charities rather than direct payments.
- The cy pres recipients included several Southern California organizations, a judicial-education foundation, an Oklahoma legal-services organization, and other charities.
- An objecting class member appealed, arguing the cy pres beneficiaries lacked a meaningful connection to the nationwide email-user class and were geographically concentrated.

## Issues

1. Whether the district court abused its discretion by approving cy pres distributions that were geographically concentrated and substantively unrelated to the claims and class members’ interests.
2. Whether the district judge was required to recuse under 28 U.S.C. § 455(a) or § 455(b)(4), (b)(5)(iii) based on alleged connections to one cy pres recipient.
3. Whether the adequacy of class notice required reversal (raised on appeal but not reached).

## Decision

- The Ninth Circuit reversed in part, affirmed in part, and remanded.
- The court held the district court abused its discretion in approving the cy pres distributions because they were directed to “geographically isolated and substantively unrelated” charities for a nationwide class.
- The court rejected the recusal challenge, concluding the record did not show a disqualifying financial or personal interest under § 455.
- The court declined to decide the class-notice issue.

## Legal Principles

- Cy pres distributions are permissible for unclaimed or non-distributable settlement funds only as the “next best” use for the class.
- In approving cy pres recipients, courts must consider the nature of the lawsuit, the objectives of the underlying statutes, and the interests of absent class members, including their geographic diversity.
- Cy pres beneficiaries should have a substantial nexus to the class’s interests and should not reflect arbitrary local favoritism when the class is nationwide.
- Judicial recusal under 28 U.S.C. § 455 requires facts showing a reasonable basis to question impartiality or a qualifying financial/personal interest; generalized institutional connections are insufficient without a disqualifying interest.

## Conclusion

The Ninth Circuit required that cy pres awards in a nationwide class settlement be closely connected to the class’s substantive interests and reasonably attentive to geographic breadth, and it remanded after finding the approved charity selections failed those standards while upholding the denial of recusal.


Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011)