United States District Court, D. Hawaii
BRADLEY WILLCOX, FRANK DOMINICK, and MICHELE SHERIE DOMINICK, Plaintiffs,
LLOYDS TSB BANK, PLC and DOES 1-15, Defendants.
ORDER DENYING PLAINTIFFS' PROPOSED CY PRES REMEDY
AND DIRECTING REVERSION OF UNCLAIMED FUNDS TO
C. Kay, Sr., United States District Judge
reasons set forth below, the Court DENIES Plaintiffs'
proposed distribution of unclaimed funds to EAH Housing,
Honolulu Hawaii and DIRECTS that any unclaimed judgment funds
revert to Defendant.
instant case involves the issuance by Defendant Lloyds TSB
Bank plc, now known as Lloyds Bank plc
(“Lloyds”), of certain dual currency loans, also
referred to as International Mortgage System
(“IMS”) loans. The Court and the parties are
familiar with the extensive factual and procedural history of
this case, and the Court will not repeat it here except as
September 11, 2016, Lloyds signed and delivered to
Plaintiffs' counsel an Offer of Compromise by Lloyds
Pursuant to Federal Rule of Civil Procedure 68 (“Offer
of Judgment”). Decl. of Glenn T. Melchinger ¶ 3,
ECF No. 539-1. Plaintiffs' counsel signed the Offer of
Judgment and delivered it upon the Court on September 22,
2016. ECF No. 539. The Court held a hearing on December 7,
2016 to determine whether the Offer of Judgment is
“fair, reasonable, and adequate, ” in accordance
with Rule 23(e)(2), and on December 14, 2016, the Court
entered an Order Preliminarily Approving Defendant's
Offer of Compromise, Preliminarily Approving Plaintiffs'
Motion to Approve and Enter Judgment, Preliminarily Approving
Plaintiffs' Request for Attorneys' Fees and Costs,
and Preliminarily Approving Plaintiffs' Request for
Incentive Award for Class Representative (“Preliminary
Approval Order”). ECF No. 569.
Court also instructed Plaintiffs' counsel during the
hearing, in its Preliminary Approval Order, and in a minute
order to submit a memorandum regarding a cy pres
remedy to address the funds intended for the four borrowers
that the third party settlement administrator was unable to
locate, which funds will remain unclaimed in the event that
the proposed Offer of Judgment is approved and the funds are
distributed. See Preliminary Approval Order at 40
n.6; ECF No. 571. On December 28, 2016, Plaintiffs filed a
Supplemental Memorandum Regarding Plaintiffs' Petition in
Support of Distribution of Fees and Expenses, proposing that
“any residual proceeds resulting from uncashed checks
be distributed to EAH Housing Hawaii as cy
pres.” ECF No. 572 at 2. Lloyds filed a response
on January 6, 2017, ECF No. 573, and Plaintiffs did not file
courts have broad discretionary powers in shaping equitable
decrees for distributing unclaimed class action funds.”
Six Mexican Workers v. Arizona Citrus Growers, 904
F.2d 1301, 1307 (9th Cir. 1990). “The district
court's choice among distribution options should be
guided by the objectives of the underlying statute and the
interests of the silent class members.” Id.
“The court's alternatives include: (1) cy
pres or fluid distribution, (2) escheat to the
government, and 3) reversion to defendants.”
Id. (citing 2 Newberg on Class Actions
§ 10.17 at 373-374). Plaintiffs have also affirmatively
stated that they do not seek a pro rata distribution here as
it would be impractical. ECF No. 572 at 2. As neither
Plaintiffs nor Lloyds requests that the unclaimed funds
escheat to the government, the Court will only consider a
cy pres distribution or reversion to Lloyds.
have proposed distributing the unclaimed judgment proceeds to
EAH Housing, Honolulu Hawaii as a cy pres recipient,
asserting that the claims at issue relate to housing and
mortgages. ECF No. 572 at 3; Rough Tr. of Hearing 18:1-2. The
Ninth Circuit has directed that cy pres
distributions must “account for the nature of the
plaintiffs' lawsuit, the objectives of the underlying
statutes, and the interests of the silent class members,
including their geographic diversity.” Nachshin v.
AOL, LLC, 663 F.3d 1034, 1036 (9th Cir. 2011). There
must be a “driving nexus between the plaintiff class
and the cy pres beneficiaries, ” id.
at 1038, and proposed awards are inappropriate where they
fail to provide reasonable certainty that any member will be
benefitted. See id. at 1040.
plaintiffs assert that EAH Housing is “one of the
largest and most respected nonprofit housing development and
management organizations in the western United States,
” and “is clearly ‘tethered to the nature
of the lawsuit'”. ECF No. 572 at 3. However, Lloyds
has raised doubts about the appropriateness of EAH Honolulu
as an appropriate cy pres recipient, arguing that it
fails to target the geographic distribution of the plaintiff
class and because nonprofit housing is insufficiently
tethered to the underlying breach of contract issues here.
ECF No. 573 at 5-7.
respect to the geographic distribution of the class, the
Court notes that the class certified was limited to U.S. or
Canadian citizens or entities who were “residents or
citizens of the State of Hawaii, or owners of property in
Hawaii that was mortgaged to secure any such IMS loan.”
ECF No. 366 at 2-3, 21. As the class definition was limited
to individuals with a connection to Hawaii, awarding the
remaining funds to a Hawaii organization would appear to
account for the interests of the class. See Harlan v.
Transworld Sys., Inc., No. 13-5882, 2015 WL 505400, at
*10 (E.D. Pa. Feb. 6, 2015) (finding that limiting the cy
pres award to programs in Philadelphia matched the
geographic scope of the lawsuit where class was defined by
persons with addresses in Philadelphia). In addition, where
the unclaimed funds are limited, as they are here, courts
have allowed funds to be directed to a more narrow geographic
area where they can be more impactful. See, e.g.,
In re Citigroup Inc. Sec. Litig., ___ F.Supp.3d.
___, 07-CV-9901, 2016 WL 4198194, at *7 (S.D.N.Y. Aug. 9,
next to the nexus between the proposed cy pres
recipient and the nature of the lawsuit, Plaintiffs appear to
rely primarily on the fact that a district court in
California approved EAH Housing of California as a cy
pres recipient in a “nearly identical”
matter, Dugan v. Lloyds TSB Bank, PLC, Case No.
12-cv-02549 (N.D. Cal.). ECF No. 572 at 3. In that case, the
parties appear to have specified the cy pres
recipient as part of the settlement agreement itself. See
Dugan, No. 12-cv-2937 (N.D. Cal.), ECF Nos. 429-3 at
3, 437 at 4. Although the Dugan matter appears to
involve similar issues, the Court is unable to discern the
district court's reasons for approving the cy
pres recipient, and as such, the award is not persuasive
on its own.
Dennis v. Kellogg Co. the Ninth Circuit found an
insufficient nexus where the claims at issue involved
deceptive advertising of food products, and the proposed
cy pres recipients were charities who provided food
for the indigent. 697 F.3d 858, 867 (9th Cir. 2012). The
court concluded that the case was not about the nutritional
value of food, as the defendants asserted, but rather the way
that the food was marketed, which included claims about the
effect on children's cognitive performance. Id.
The court then determined that the appropriate recipients
were organizations dedicated to protecting consumers from
false advertising, not charities which provide food for the
needy. Id. The Court finds that nexus here between
EAH Housing and the nature of the lawsuit is somewhat similar
to the nexus in Dennis, which the Ninth Circuit
found insufficient. Although both EAH Housing and the
contracts at issue here relate to housing, the core of this
case is about Lloyds' lending practices, not low-income
housing development. As such, Dennis suggests that a
cy pres distribution to EAH Housing, Honolulu may
not be an entirely appropriate mode of distributing the
of distributing the unclaimed funds to a cy pres
recipient, Lloyds requests that the unclaimed funds revert to
it. ECF No. 573 at 8. “Reversion to the defendant may
be appropriate when deterrence is not a goal of the statute
or is not required by the circumstances.” Six
Mexican Workers, 904 F.2d at 1308. In Van Gemert v.
Boeing, the Second Circuit affirmed reversion of
unclaimed funds to the defendant where the Special Master
concluded that a defendant in a private breach of contract
action should not have to pay more than the amount claimed
and had not acted in bad faith. 739 F.2d 730, 737 (2d Cir.
1984). The Fifth Circuit has also recognized that defendants
may retain an equitable interest in remaining funds where the
purpose of the statute is compensatory and the defendant
otherwise has clean hands. Wilson v. Southwest Airlines,
Inc., 880 F.2d ...