Smith v. Keurig Green Mountain, Inc.

Background

Kathleen Smith brought a consumer class action alleging that Keurig Green Mountain, Inc. falsely and misleadingly labeled, marketed, and sold plastic single-serve coffee pods as recyclable. Smith alleged that municipal recycling facilities were not properly equipped to handle the pods, which were small and contaminated with foil and food waste, and that the pods often ended up in landfills even when facilities could segregate and clean them. She alleged that she would not have bought the products, or would have paid less for them, had she known they were not recyclable.

The original complaint asserted claims for breach of express warranty; violations of California’s Consumers Legal Remedies Act; violations of California’s Unfair Competition Law based on fraudulent, unlawful, and unfair acts; and unjust enrichment. The court had previously denied Keurig’s motion to dismiss and had certified a class of California purchasers. The proposed settlement instead covered a nationwide class. Plaintiff Downing, who had filed a related Massachusetts class action, joined Smith as a proposed class representative in this case.

Proposed Settlement

The Settlement Class covered all persons in the United States who purchased Keurig’s pods for personal, family, or household purposes during the period beginning June 8, 2016, and ending when settlement notice was first published. The agreement excluded Keurig, its affiliates and certain personnel and family members, federal judges who had presided over the action and their immediate family members, the retired mediator and his immediate family members, people who timely opted out, and people who purchased the challenged products for resale.

Keurig agreed to make a non-reversionary $10 million payment into a cash account. The account would cover class-member payments, settlement-administration expenses capped at $500,000, incentive awards, and attorneys’ fees and costs. A claimant without proof of payment would receive $5. A claimant with proof of payment would receive $0.35 for every ten pods purchased, with a minimum payment of $6 and a maximum payment of $36; each household could submit only one claim.

Keurig also agreed to qualify recyclable-pod statements with the disclaimer “Check Locally – Not Recycled in Many Communities.” The disclaimer would appear whenever Keurig represented that the pods were recyclable, including on packaging, electronic advertising, video content, its website, and publicly available corporate-responsibility and sustainability reports. The agreement set minimum visibility standards for the disclaimer.

Unclaimed settlement funds would be distributed cy pres—that is, to organizations connected to the class’s interests—with 75 percent going to the Ocean Conservancy and 25 percent to Consumer Reports, Inc. Class members would release broad categories of claims related to the challenged recyclability representations and the settlement representations, subject to an exception for certain future governmental determinations or regulations described in the agreement. The proposed incentive awards were capped at $5,000 for Smith and $1,000 for Downing. Class counsel could seek up to 30 percent of the settlement fund, or $3 million, plus costs.

Amended Complaint and Provisional Class Certification

The court granted leave for Smith to file a second amended complaint that would expand the class definition to a national class and add Downing. The proposed pleading asserted claims under California consumer-protection laws, the Massachusetts Consumer Protection Act, breach of express warranty, unjust enrichment, misrepresentation, and declaratory relief. The court stated that the second amended complaint would be dismissed if the settlement were not finally approved or became void under its terms.

For settlement purposes, the court provisionally certified the nationwide Settlement Class under Federal Rule of Civil Procedure 23. The court found that the class was sufficiently numerous, shared common legal and factual questions, and had claims typical of the class. It also found that Smith, Downing, and proposed class counsel adequately represented the class and had no apparent conflicts of interest.

The court further found that the settlement class satisfied the requirements for injunctive relief under Rule 23(b)(2), because the labeling changes would apply nationwide. It found that common issues predominated under Rule 23(b)(3), including what reasonable consumers would understand the packaging and advertising to mean, whether the pods were recyclable, and whether the representations were likely to deceive consumers. The court also found that a class action was the superior method of resolving the controversy. It appointed Smith and Downing as class representatives and appointed Lexington Law Group and Shapiro Haber & Urmy LLP as class counsel.

Preliminary Approval

The court applied heightened scrutiny because the proposed settlement involved a nationwide settlement class broader than the previously certified California class. For preliminary approval, the court considered whether the settlement appeared to result from serious and informed negotiations without collusion, whether it improperly favored some class members, whether it fell within the possible range of approval, and whether it had obvious deficiencies.

The court preliminarily found that the settlement was fair, reasonable, and adequate. It noted that the agreement did not return unclaimed funds to Keurig, did not contain a provision preventing Keurig from objecting to attorneys’ fees, and did not provide a disproportionate allocation to counsel. The court also found a sufficient connection between the proposed nonprofit recipients and the class’s interests in preventing consumer fraud involving recyclable-plastic labeling. The court reserved decisions on the final amounts of attorneys’ fees and incentive awards for the final approval stage.

The court concluded that the settlement amount and labeling changes fell within the possible range of approval, particularly in light of the risks of continued litigation, including maintaining class treatment and proving damages. It found no obvious deficiencies.

Notice and Disposition

The court approved the proposed notice process, which included direct email notice to more than 1.6 million people who had purchased products from Keurig’s website, publication in People Magazine and the California edition of USA Today, press releases, digital advertising, and notices on settlement and class-counsel websites. The court found that the plan was reasonably calculated to inform class members of the proposed settlement and that the notice content provided sufficient information about the case and settlement.

The court granted Plaintiffs’ motion for preliminary approval. It also directed the plaintiffs to file the amended complaint within five days, directed the parties to submit a schedule for settlement events, and directed them to implement the proposed notice plan. The order granted preliminary approval and set the case on a path toward a later final approval hearing; it did not make a final determination approving the settlement.