Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 1 of 8
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`STEVEN PRESCOTT, et al.,
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`Plaintiffs,
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`v.
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`BAYER HEALTHCARE LLC, et al.,
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`Case No. 20-cv-00102-NC
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`ORDER DENYING WITHOUT
`PREJUDICE MOTION FOR
`PRELIMINARY APPROVAL
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`Re: Dkt. No. 81
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`Defendants.
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`Plaintiffs Mike Xavier and Steven Prescott (“Plaintiffs”) bring a putative class
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`action against Bayer Healthcare LLC and Beiersdorf, Inc. (“Defendants”). Defendants
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`manufacture, market, and sell Coppertone sunscreen products throughout the United
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`States. Plaintiffs allege that the “mineral-based” label on Defendants’ products deceive
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`consumers into believing they contain only mineral active ingredients when they contain
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`chemical active ingredients as well. See Dkt. No. 1. Before the Court is Plaintiffs’ motion
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`for preliminary approval of class action settlement. Dkt. No. 81 (“Mot.”). The Court held
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`a hearing on this motion on April 21, 2021. Having considered the Plaintiffs’ motion, the
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`arguments of counsel at the April 21, 2021, hearing, and the record in this case, the Court
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`DENIES without prejudice Plaintiffs’ motion for preliminary approval of class action
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`settlement.
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 2 of 8
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`I. LEGAL STANDARD
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`Federal Rule of Civil Procedure 23(e) provides that “[t]he claims, issues, or
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`defenses of a certified class . . . may be settled . . . only with the court’s approval.” Fed. R.
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`Civ. P. 23(e). “The purpose of Rule 23(e) is to protect the unnamed members of the class
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`from unjust or unfair settlements affecting their rights.” In re Syncor ERISA Litig., 516
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`F.3d 1095, 1100 (9th Cir. 2008). Accordingly, in order to approve a class action
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`settlement under Rule 23, a district court must conclude that the settlement is
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`“fundamentally fair, adequate, and reasonable.” Hanlon v. Chrysler Corp., 150 F.3d 1011,
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`1026 (9th Cir. 1998) overruled on other grounds by Wal-Mart Stores, Inc. v. Dukes, 564
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`U.S. 338 (2011). In determining whether the proposed settlement meets this standard, the
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`Court does not have the ability “to delete, modify, or substitute certain provisions . . . The
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`settlement must stand or fall in its entirety.” Id. at 1026.
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`Where “the parties negotiate a settlement before the class has been certified,
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`settlement approval requires a higher standard of fairness and a more probing inquiry than
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`may normally be required under Rule 23(e).” Roes, 1–2 v. SFBSC Mgmt., LLC, 944 F.3d
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`1035, 1048 (9th Cir. 2019) (internal quotation marks and citations omitted). In such cases,
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`the Court must apply “an even higher level of scrutiny for evidence of collusion or other
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`conflicts of interest than is ordinarily required under Rule 23(e) before securing the court’s
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`approval as fair.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 946 (9th Cir.
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`2011). Signs of potential collusion include:
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`“(1) when counsel receive a disproportionate distribution of the settlement;
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`(2) when the parties negotiate a ‘clear sailing’ arrangement” (i.e., an
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`arrangement where defendant will not object to a certain fee request by class
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`counsel); and (3) when the parties create a reverter that returns unclaimed
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`fees to the defendant.”
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`Allen v. Bedolla, 787 F.3d 1218, 1224 (9th Cir. 2015) (quoting In re Bluetooth, 654 F.3d at
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`947) (internal quotations omitted). “The Court may grant preliminary approval of a
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`settlement and direct notice to the class if the settlement: “(1) appears to be the product of
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 3 of 8
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`serious, informed, non-collusive negotiations; (2) has no obvious deficiencies; (3) does not
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`improperly grant preferential treatment to class representatives or segments of the class;
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`and (4) falls within the range of possible approval.” Harris v. Vector Mktg. Corp., No. 08-
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`cv-05198-EMC, 2011 WL 1627973, at *7 (N.D. Cal. 2011); In re Tableware Antitrust
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`Litig., 484 F. Supp. 2d 1079–80 (N.D. Cal. 2007).
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`II. DISCUSSION
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`The Court denies without prejudice the motion for preliminary approval of the class
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`action settlement for the following reasons: (1) the proposed release in the settlement
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`agreement is overbroad, (2) the parties lack an explanation regarding a non-collusive
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`relationship to the cy pres beneficiary, (3) the justification for the exceeding administrative
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`expenses and attorneys’ fees request is inadequate, (4) the parties’ proposed notice is
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`incomplete, and (5) the settlement fails to comply with Northern District procedural
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`guidance regarding claim forms.
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`A. The Proposed Release Is Overbroad
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`1. Release of Claims
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`The Court concludes that the release contained within the proposed settlement
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`agreement conflicts with Ninth Circuit precedent, which only allows release of claims
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`“where the released claim[s] [are] based on the identical factual predicate as that
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`underlying the claims in the settled class action.” Hesse v. Sprint Corp., 598 F.3d 581, 590
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`(9th Cir. 2010) (internal quotations and citation omitted); see also Chavez v. PVH Corp.,
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`No. 13-cv-01797-LHK, 2015 WL 581382, at *5 (N.D. Cal. Feb. 11, 2015) (“District courts
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`in this Circuit have declined to approve settlement agreements where such agreements
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`would release claims based on different facts than those alleged in the litigation at issue.”).
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`Here, the releases contained in the settlement agreement contain sweeping language
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`and are not consistently reflected in the motion for preliminary approval or the proposed
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`order seeking final approval. Under the settlement agreement, “Released Claims” is
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`defined as claims arising out of, or “relat[ing] in any way to: (a) allegations, claims, or
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`contentions that were or could have been asserted in the Litigation;” (b) the Products,
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 4 of 8
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`including but not limited to, their performance as well as any advertising, labeling . . . of
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`any type whatsoever regarding such Products;” and “(c) all labels or packaging for the
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`Coppertone sunscreen products that conform to the terms of the Settlement.” Dkt. No. 81-
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`4 “Settlement Agr.” § 2.35 (emphasis added). In contrast, the proposed order for final
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`approval attached to the settlement agreement specifies that the claims to be released must
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`arise out of, or relate in any manner to “the purchase of Coppertone sunscreen products
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`that contain a ‘mineral-based’ label on or before [Notice Date].” Dkt. No. 81-4, Ex. D
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`(emphasis added).
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`In light of the sweeping language in the agreement itself, the settlement releases
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`claims that are not “based on the identical factual predicate as that underlying the claims in
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`the settled class action.” Hesse, 598 F.3d at 590. The parties must narrow the scope of the
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`release in the settlement agreement to be more specific about the claims being released to
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`specify that it only pertains to claims about the purchase of Coppertone sunscreen products
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`that contain a “mineral-based” label.
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`2. Release of Parties
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`Furthermore, under the settlement agreement, the released parties are defined as
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`“Defendants and each and all of their predecessors in interest, former, present and future
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`direct and indirect subsidiaries . . . successors . . . whether specifically named and whether
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`or not participating in the settlement by payment or otherwise.” Settlement Agr. § 2.36.
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`Similarly, the language of the release is too broad for class members to ascertain which
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`party is released from future claims. Accordingly, the parties must narrow the scope of the
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`release of parties.
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`3. Waivers
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`Finally, the settlement agreement contains a waiver of Cal. Civ. Code § 1542.
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`Section 1542 provides that “a general release does not extend to claims that the creditor or
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`releasing party does not know or suspect to exist in his or her favor at the time of executing
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`the release and that, if known by him or her, would have materially affected his or her
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`settlement with the debtor or released party.” Cal. Civ. Code § 1542. The Court finds that
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 5 of 8
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`without written acknowledgement of this waiver from the class members in the agreement,
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`the Court cannot ascertain whether the class members knowingly waive this protection. In
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`any subsequent motion for preliminary approval, the parties must more clearly explain the
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`class members’ acknowledgment of this waiver and must narrow the scope of the released
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`claims and parties.
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`B. Cy Pres Beneficiary
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`The parties designated Look Good Feel Better as the cy pres beneficiary.
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`Settlement Agr. § 2.40. Under the settlement agreement, Defendants agreed to pay a total
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`monetary benefit of $2.25 million into a common fund, with no right of reversion. See
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`Mot. at 1. After paying valid claims from settlement class members, attorneys’ fees,
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`litigation expenses, service awards, and administrative expenses, any remaining amount
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`will be disbursed to Look Good Feel Better. Settlement Agr. § 3.10. At the hearing on
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`April 21, 2021, the parties indicated that they selected Look Good Feel Better because it is
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`a company that targets cancer, and these Products are often used to avoid cancer. See Dkt.
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`No. 86 (“Prelim. Appr. Hearing (Apr. 21, 2021)”). Counsel for the parties also indicated
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`that they are not aware of any connection between the attorneys and the cy pres
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`beneficiary, and although Bayer has supported Look Good Feel Better in the past,
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`numerous companies have done so as well. Id. Despite those remarks, the Court cannot
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`conclude that there is a non-collusive relationship between the cy pres beneficiary and
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`Bayer, or between the cy pres beneficiary and counsel. In any subsequent motion for
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`preliminary approval, the parties must more clearly explain how no collusion or conflict of
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`interest exists.
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`C. Administrative Expenses and Attorney’s Fees
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`Under the settlement agreement, notice and claims administration costs are to be
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`paid from the fund, up to $530,000 plus postage. See Settlement Agr. § 5.7. The Court
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`cannot conclude that this amount reflects a fair and adequate distribution of settlement
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`funds. Although counsel posits that the budget is on par with market rates for other class
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`actions where consumer data is unavailable, see Dkt. No. 81-2 “Bruce Decl.” ¶ 7, and that
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 6 of 8
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`the settlement administrator here provides a high level of professionalism, see Prelim.
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`Appr. Hearing (Apr. 21, 2021), these administration costs consist of approximately 23
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`percent of the settlement fund. Without additional information about comparable market
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`bids and costs incurred for administration of notice and claims programs for similar
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`consumer class actions, the Court cannot conclude that these administrative expenses are
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`distributed proportionately.
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`Additionally, the parties request a maximum of one-third of the settlement fund to
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`be disbursed for attorneys’ fees and costs. Settlement Agr. § 6.1; Mot. at 8. Although the
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`parties acknowledged at the hearing that one-third of the settlement fund is a discretionary
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`cap that falls above the Ninth Circuit’s 25 percent benchmark, the Court cannot ascertain
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`whether the one-third attorneys’ fee award is warranted in this case. The parties cite
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`several cases in the Ninth Circuit where courts awarded one-third of the settlement fund
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`for attorneys’ fees upon a showing of vigorous opposition, complex issues, and cases that
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`went on appeal. See Mot. at 8, n.6. Those cases, however, are not necessarily similar to
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`the instant case as it pertains to consumer class actions. Upon a subsequent motion for
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`preliminary approval, the parties must further explain, through use of comparable cases,
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`why the Court should depart from the Ninth Circuit’s 25 percent benchmark for attorneys’
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`fees.
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`D. Class Notice
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`The Court also concludes that the proposed notice forms provide incomplete notice
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`to class members. Federal Rule of Civil Procedure 23(e)(1) requires a court to “direct
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`notice [of a proposed settlement] in a reasonable manner to all class members who would
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`be bound by the proposal.” Fed. R. Civ. P. 23(e)(1). The Court acknowledges the parties’
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`efforts to contact and secure relief for the class members, but the Court identifies two
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`errors the parties must address.
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`First, the preliminary approval motion states that notice will be provided to the class
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`using “cost-efficient and effective methods designed to reach consumers of household
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`products,” where no contact is reasonably available, including: “(1) a settlement website,
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 7 of 8
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`(2) internet impression advertising, (3) targeted search term advertising, and (4) a press
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`release.” Settlement Agr., Ex. B ¶¶ 14, 16, 17, 18. The Notice Plan is designed to reach a
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`minimum of 70 percent of the class via online advertising links, is designed to reach 66
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`million combined impressions on various targeted websites, and targets those who have
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`purchased sunscreen or demonstrated interest in those Products. See Mot. at 9; see also
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`Settlement Agr., Ex. B ¶¶ 18, 20. It is unclear why the Notice Plan is only designed to
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`reach a minimum of 70 percent of class members, whether that is a common percentage in
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`consumer class actions, and what else can be done to reach the remaining 30 percent of
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`class members. Furthermore, it is unclear whether the settlement administrator is limited
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`to issuing a press release and internet notice, or whether the administrator can obtain the
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`mailing and email addresses of any consumers, or attempt any other effective methods to
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`reach more than 70 percent of consumers.
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`Second, the Northern District guidelines counsel parties to include instructions in
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`the Notice on how to access the case docket via PACER or in person at any of the court’s
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`locations. See N.D. Cal. Proc. Guidance for Class Action Settlements. The parties omitted
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`these instructions in both the long-form and short-form notices, and there is no indication
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`whether those instructions will be made available on the website for class members. Thus,
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`the notice forms do not provide adequate notice to class members about the procedure for
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`accessing the case docket. The parties should remedy these deficiencies in any future
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`motion for preliminary approval.
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`E. Claim Forms
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`Finally, the settlement agreement fails to conform to the Northern District’s
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`procedural guidance on claim forms. The procedural guidance dictates that if there is a
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`claim form, the parties should state in their motion for preliminary approval “an estimate
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`of the number and/or percentage of class members who are expected to submit a claim in
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`light of the experience of the selected claims administrator and/or counsel from other
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`recent settlements of similar cases, the identity of the examples used for the estimate, and
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`the reason for the selection of those examples.” N.D. Cal. Proc. Guidance for Class Action
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`Case 5:20-cv-00102-NC Document 87 Filed 04/29/21 Page 8 of 8
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`Settlements. Here, the preliminary approval motion contains the figures showing the
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`Defendant’s percentage of sales, but the preliminary approval motion does not contain an
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`estimate of the number of class members who are expected to submit a claim. The parties
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`must provide the claim form information outlined in the Northern District of California’s
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`procedural guidance.
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`III. CONCLUSION
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`In sum, based on the foregoing deficiencies, the Court cannot conclude that the
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`proposed settlement is “fundamentally fair, adequate, and reasonable.” Hanlon, 150 F.3d
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`at 1026. Accordingly, the Court DENIES without prejudice Plaintiffs’ motion for
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`preliminary approval of class settlement. The Court sets a telephonic further case
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`management conference on May 26, 2021, at 10:00 a.m., with a joint case update due on
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`May 19, 2021.
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`IT IS SO ORDERED.
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`Dated: April 29, 2021
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`_____________________________________
`NATHANAEL M. COUSINS
`United States Magistrate Judge
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