The Ninth Circuit reversed the district court’s approval of a class action settlement last Monday in Nachshin v. AOL, remanding the two-year old case back to the district court for a new round of settlement negotiation and approval. No. 10-55129 (9th Cir. Nov. 21, 2011). The class action was brought in 2009, alleging that the Internet company violated the Electronic Communications Privacy Act (ECPA) when it inserted footers containing promotional messages into e-mails sent by its users. The complaint also alleged unjust enrichment, breach of contract, and violations of state law.
The problem with the settlement was not that the class representatives failed to adequately represent class members, as in the Second Circuit’s recent decision in the latest iteration of the Tasini v. New York Times case, or that the interests of the members of the proposed class (all 66 million of them) were too factually and legally different to proceed in a class action, as in the Ninth Circuit’s recent decision in Ellis v. Costco Wholesale Corp. Instead, the Ninth Circuit reversed the settlement on the less common ground that it provided for distributions from the settlement fund to charities that were unrelated to the claims underlying the lawsuit.