The opinion of the court was delivered by: Irma E. Gonzalez United States District Judge
ORDER GRANTING PLAINTIFFS' MOTION FOR PRELIMINARY APPROVAL [Doc. No. 90]
Before the Court is the Plaintiffs' unopposed motion for preliminary approval of class action settlement. [Doc. No. 90.] For the reasons and with the reservations below, the Court hereby GRANTS Plaintiffs' motion.
This consumer class action, which alleges Defendant Kellogg Company made false and unsubstantiated representations in its advertising and labeling of its Frosted Mini-Wheats products, originally settled with the approval of this Court on April 5, 2011. [See Doc. No. 49.] Under the original settlement, all claims*fn1 arising out of the challenged advertising were released in exchange for:
* a $2.75 million cash fund for distribution to class members on a claims-made basis;
* Kellogg distributing, pursuant to the cy pres doctrine, $5.5 million of food products to charities to feed the indigent;
* Kellogg refraining from using the challenged representations in advertising for three years; and
* approximately $2 million in attorneys' fees and costs.
The original settlement's cash value thus totaled approximately $10.5 million. With attorney and claims administration fees and costs subtracted, the cash value to the class totaled approximately $8.5 million.
But on September 4, 2012, the Ninth Circuit reversed the final settlement approval order, vacated the judgment and award of attorneys' fees, and remanded for further proceedings, finding that the cy pres award under the terms of the original settlement failed to target the plaintiff class. See Dennis v. Kellogg Company, 697
F.3d 858, 869 (9th Cir. 2012). While the asserted claims concern fair competition and consumer protection, the cy pres award would benefit the indigent. The Ninth Circuit reasoned that "[t]his noble goal . . . has little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved." Id. at 866.
Thus, on remand, the parties renegotiated and, by the present motion for preliminary approval, propose a revised settlement. Under the revised settlement, all claims arising out of the challenged advertising are released in exchange for:
* a $4 million cash fund for distribution to class members on a claims-made basis, any remaining balance of which to be distributed equally, pursuant to the cy pres doctrine, among Consumers Union, Consumer Watchdog, and the Center for Science in the Public Interest; and
* Kellogg refraining from using the challenged representations in advertising for three years.
The revised settlement's cash value thus totals at most $4 million. Minus attorneys' fees of up to 25% plus costs as well as approximately $550,000 in claims notice and administration costs, the cash value to the class totals approximately $2-2.5 million.
"Voluntary conciliation and settlement are the preferred means of dispute resolution in complex class action litigation." Smith v. CRST Van Expedited, Inc., 2013 WL 163293, at *2 (S.D. Cal. Jan. 14, 2013) (citing Officers for Justice v. Civil Service Com'n of City and County of San Francisco, 688 F.2d 615, 625 (9th Cir. 1982)). But because "[t]he class action device . . . is  susceptible to abuse and carries with it certain inherent structural risks, . . . class actions may be settled only with the approval of the district court." Officers for Justice, 688 F.3d at 623; see also Fed. R. Civ. P. 23(e). "The primary concern . . . is the protection of those class members . . . whose rights may not have been given due regard by the negotiating parties." Id. at 624. "Once the named parties reach a settlement in a purported class action, they are always solidly in favor of their own proposal. There is no advocate to critique the proposal on behalf of absent class members." Kakani v. Oracle Corp., 2007 WL 1793774, at *1 (N.D. Cal. June 19, 2007) (citing Staton v. Boeing Co., 327 F.3d 938, 959-60 (9th Cir. 2003)). Given these risks and concerns, "[a]pproval . . . involves a two-step process in which the Court first determines whether a proposed class action settlement deserves preliminary approval and then, after notice is given to class members, whether final approval is warranted." National Rural Telecommunications Cooperative v. DIRECTTV, Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004).
The present motion concerns the first step: preliminary approval. This "initial decision to approve or reject a settlement proposal is committed to the sound discretion of the trial judge." Officers for Justice, 688 F.2d at 625. And "[b]ecause class members will subsequently receive notice and have an opportunity to be heard on the settlement, th[e] Court need not review the settlement in detail at this juncture." In re M.L. Stern Overtime Litig., 2009 WL 995864, at *3 (S.D. Cal. April 13, 2009). Still, even at this preliminary stage, "a district court may not simply rubber stamp stipulated settlements." Kakani, 2007 WL 1793774, at *1. Moreover, "where, as here, class counsel negotiates a settlement agreement before the class is even certified, courts must be particularly vigilant not only for explicit collusion, but also for more subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations." Dennis v. Kellogg, 697 F.3d 858, 864 (9th Cir. 2012) (internal quotation omitted). Before preliminary approval may be granted, the Court must "ratify both the propriety of  certification and the fairness of the settlement." Staton, 327 F.3d at 952.
I. Propriety of Certification
Plaintiffs seek certification of a settlement class under Fed. R. Civ. R. 23(b)(3). "To obtain certification of a class action . . . under Rule 23(b)(3), a plaintiff must satisfy Rule 23(a)'s  prerequisites of numerosity, commonality, typicality, and adequacy of representation, and must also establish that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, __ U.S. __, 133 S. Ct. 1184, 1191 (2013) (internal citations omitted).
To satisfy the numerosity requirement, a proposed class must be "so numerous that joinder of all members is impracticable." Fed. R. Civ. P. 23(a). "Joinder need not be impossible, as long as potential class members would suffer a strong litigation hardship or inconvenience if joinder were required." Rannis v. Recchia, 380 Fed. App'x. 646, 651 (9th Cir. May 27, 2010) (citing Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913-14 (9th Cir. 1964)). Nor is the requirement "tied to any fixed numerical threshold - it 'requires examination of the specific facts of each case and imposes no absolute limitations.'" Id. (quoting General Tel. Co. of the Nw., Inc. v. EEOC, 446 U.S. 318, 330 (1980)). Here, although the exact class size is unknown, the putative class potentially covers hundreds of thousands of purchases of cereal nationwide. The Court finds it reasonable to infer that joinder is impracticable and thus that numerosity is preliminarily met. See Newberg on Class Actions (2012), §3.13 ("a good-faith estimate of the class size is sufficient when the precise number of class members is not readily ascertainable.").
"Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury." Wal-Mart Stores, Inc. v. Dukes, __ U.S. __, 131 S. Ct. 2541, 2551 (2011) (internal quotation omitted). This means "[t]heir claims must depend on a common contention . . . of such a nature that it is capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Id. Here, it appears that determination of whether the challenged cereal advertising is or is not misleading would resolve a central issue class-wide in one stroke. Thus, commonality is preliminarily met.
"The typicality prerequisite . . . is fulfilled if 'the claims or defenses of the representative parties are typical of the claims or defenses of the class.'" Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998) (quoting Fed. R. Civ. P. 23(a)(3)). "Under the rule's permissive standards, representative claims are 'typical' if they are reasonably co-extensive with those of absent class members; they need not be substantially identical." Id. Here, Plaintiffs ...