Emma Gallimore Jan. 22, 2016, 8:26am


SAN DIEGO (Legal Newsline) - A decision from a San Diego federal judge demands that attorneys who seek approval of class action settlements must carefully choose the people and organizations that will benefit from the settlement.

Judge Dana M. Sabraw, of the U.S. District Court for the Southern District of California, hast denied preliminary approval of a proposed class action settlement in Peterson v. CJ America, Inc., over Annie Chun soup products.

Sabraw identified two defects in the settlement. First, the plaintiff failed to show that California law should apply to the non-California class members.

Second, that the cy pres recipients, people or organizations who will benefit from the settlement if it cannot be paid solely to the class members, are suitable to the nature of the case.

Dennis Peterson alleged that Annie Chun’s packaged food contained ingredients that had monosodium glutamate, more commonly known as MSG, even though labeling on the product stated “no MSG added.”

He brought claims under the Consumers Legal Remedies Act, the False Advertising Law, and the Unfair Competition Law. He also brought a breach of express warranty claim.

The parties reached a $1.5 million settlement that encompassed an incentive award to the plaintiff, attorneys fees and settlement administration expenses, and cash awards to class members.

It also named three cy pres organizations: the National Farm to School Network, the Mayo Clinic, and Action for Healthy Kids.

The court took issue with these cy pres entities, saying that precedent required “that there be a driving nexus between the plaintiff class and the cy pres beneficiaries.”

The precedent was set by a 2012 case, Dennis v. Kellogg Co., which also addressed issues of false advertising.

In that case the court concluded that “appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising.”

“In the wake of the Kellogg decision, federal courts have paid particular attention to the cy pres residents,” said attorney Maya Ingram, of Morrison Foerster.

For the Peterson case, the plaintiff will have to provide specific evidence that the proposed recipients provided consumers with information on food labeling and food choices. Though the court recognized that the plaintiff had “noble and lofty goals,” it did not serve the objective of the statutes at issue.

The court also raised concerns about the scope of the class. Although CJ Food products were sold in California and the company had an office there, the company’s headquarters are in South Korea. The record did not show where marketing and labeling decisions were made.

“To remedy this settlement, plaintiff will need to demonstrate that California had significant contacts that created state interests such that applying California law to non-California class members was neither arbitrary nor fundamentally unfair or the parties will potentially need to renegotiate the scope of the class,” Ingram said.

Once the settlement has been renegotiated to address the court’s issues, the plaintiff can submit the proposal to the court for approval.

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