In Re Pet Food Products Liability Litigation

PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 08-4741 & 08-4779

IN RE: PET FOOD PRODUCTS LIABILITY LITIGATION

Jim W. Johnson and Dustin Turner,

Appellants at 08-4741

Margaret Picus and Daniel Kaffer,

Appellants at 08-4779

On Appeal from the United States District Court

for the District of New Jersey

D.C. Civil Action No. 07-cv-2867

(Honorable Noel L. Hillman)

Argued February 22, 2010

Before: SCIRICA, CHAGARES and WEIS, Circuit Judges.

(Filed December 16, 2010)

D. J. POWERS, ESQUIRE (ARGUED)

301 Park Lane

Austin, Texas 78704

ROBERT E. MARGULIES, ESQUIRE

Margulies Wind

Harborside Plaza 10

3 Second Street, Suite 1201

Jersey City, New Jersey 07311

JEFFREY L. WEINSTEIN, ESQUIRE

518 East Tyler Street

Athens, Texas 75751

Attorneys for Appellants,

Jim W. Johnson and Dustin Turner

KYLE R. NORDREHAUG, ESQUIRE (ARGUED)

Blumenthal & Nordrehaug

2255 Calle Clara

La Jolla, California 92037

DANIEL I. WARD, ESQUIRE

118 White Horse Road West

Voorhees, New Jersey 08043

Attorneys for Appellants,

Margaret Picus and Daniel Kaffer

2

KENNETH A. WEXLER, ESQUIRE (ARGUED)

Wexler Wallace

55 West Monroe Street

Chicago, Illinois 60603

JENIPHR BRECKENRIDGE, ESQUIRE

Hagens Berman Sobol Shapiro

1918 Eighth Avenue, Suite 3300

Seattle, Washington 98101

STUART A. DAVIDSON, ESQUIRE

Robbins Geller Rudman & Dowd

120 East Palmetto Park Road, Suite 500

Boca Raton, Florida 33432

RUSSELL D. PAUL, ESQUIRE

SHERRIE R. SAVETT, ESQUIRE

Berger & Montague

1622 Locust Street

Philadelphia, Pennsylvania 19103

LISA J. RODRIGUEZ, ESQUIRE

Trujillo, Rodriguez & Richards

258 Kings Highway East

Haddonfield, New Jersey 08033

3

MARK J. TAMBLYN, ESQUIRE

Wexler Wallace

455 Capitol Mall, Suite 231

Sacramento, California 95814

Attorneys for Appellees,

Pet Owner Class Plaintiffs

MARY E. GATELY, ESQUIRE (ARGUED)

CRISTEN S. ROSE, ESQUIRE

DLA Piper

500 8th Street, N.W.

Washington, D.C. 20004

Attorneys for Appellee,

Menu Foods Defendants

MARK C. GOODMAN, ESQUIRE

Squire, Sanders & Dempsey

One Maritime Plaza, Suite 300

San Francisco, California 94111

JOSEPH C. WEINSTEIN, ESQUIRE

Squire, Sanders & Dempsey

4900 Key Tower

127 Public Square

Cleveland, Ohio 44114

4

EVAN S. NADEL, ESQUIRE

Greenberg Traurig

153 Townsend Street, 8th Floor

San Francisco, California 94107

Attorneys for Appellees,

PETCO Animal Supplies Stores, Inc.,

PetSmart, Inc., Target Corporation, Wal-Mart Stores, Inc.

D. JEFFREY IRELAND, ESQUIRE

BRIAN D. WRIGHT, ESQUIRE

Faruki, Ireland & Cox

10 North Ludlow Street

500 Courthouse Plaza, S.W.

Dayton, Ohio 45402

Attorneys for Appellee,

The Iams Company

ANTHONY G. BRAZIL, ESQUIRE

Morris, Polich & Purdy

1055 West Seventh Street, 24th Floor

Los Angeles, California 90017

Attorney for Appellee,

ChemNutra, Inc.

5

RICHARD FAMA, ESQUIRE

RUSSELL G. WHEELER, ESQUIRE

Cozen & O'Connor

45 Broadway Atrium, Suite 1600

New York, New York 10006

Attorneys for Appellee,

Del Monte Foods Co.

CRAIG A. HOOVER, ESQUIRE

Hogan Lovells US

Columbia Square

555 Thirteenth Street, N.W.

Washington, D.C. 20009

Attorney for Appellee,

Nestlé Purina PetCare Company

JAMES D. ARDEN, ESQUIRE

Sidley Austin

787 Seventh Avenue

New York, New York 10019

STEVEN A. KARG, ESQUIRE

Norris, McLaughlin & Marcus

721 Route 202-206

P.O. Box 5933

Bridgewater, New Jersey 08807

Attorneys for Appellee,

Hill's Pet Nutrition, Inc.

6

GARY L. JUSTICE, ESQUIRE

GAIL E. LEES, ESQUIRE

LINDSAY R. PENNINGTON, ESQUIRE

WILLIAM E. WEGNER, ESQUIRE

Gibson, Dunn & Crutcher

333 South Grand Avenue

Los Angeles, California 90071

MARK WHITBURN, ESQUIRE

Gibson, Dunn & Crutcher

2100 McKinney Avenue, Suite 1100

Dallas, Texas 75201

Attorneys for Appellee,

Nutro Products, Inc.

GARY A. BRYANT, ESQUIRE

Willcox & Savage

1800 Bank of America Center

One Commercial Place

Norfolk, Virginia 23510

Attorney for Appellee,

Wilbur Ellis Company

THOMAS P. BRACAGLIA, ESQUIRE

Marshall, Dennehey, Warner, Coleman & Goggin

1845 Walnut Street

Philadelphia, Pennsylvania 19103

Attorney for Appellee,

Natural Balance Pet Foods, Inc.

7

OPINION OF THE COURT

SCIRICA, Circuit Judge.

This is an appeal from the approval of the settlement of

a class action lawsuit stemming from the largest pet food recall

to date. The class action was brought on behalf of consumers in

the United States and Canada who purchased, used or obtained,

or whose pets consumed, wet pet food that was allegedly

contaminated with melamine and cyanuric acid. Plaintiffs

alleged violations of state consumer protection and deceptive

trade practices statutes, as well as state law claims for product

liability, breach of warranty, and negligence. The District Court

certified a settlement-only class and granted approval of a $24

million settlement. Appellants are members of the settlement

class who objected to various aspects of class certification and

the settlement.

We conclude that the class certification requirements of

Federal Rule of Civil Procedure 23(a) and (b) are satisfied with

respect to the settlement class and that the District Court’s

analysis of whether the settlement is fair, reasonable, and

adequate under Federal Rule of Civil Procedure 23(e) was

proper in all respects but one. Accordingly, we will vacate the

court’s order granting final approval of the settlement and

remand for proceedings consistent with this opinion.

I. BACKGROUND AND PROCEDURAL HISTORY

A. The Recall

8

In March 2007, defendant Menu Foods, an Ontario-based

pet food manufacturer, announced a recall of dozens of brands

of wet pet food after the food was linked to the deaths of several

cats and dogs. The recall involved only wet pet food in cans and

foil pouches manufactured between November 8, 2006, and

March 6, 2007. Shortly thereafter, four other defendant pet food

manufacturers initiated recalls of their pet food and treat

products: Hill’s Pet Nutrition and Nestle Purina Pet Care

Company on March 30, 2007; Del Monte Pet Products on April

2, 2007; and Sunshine Mills, Inc., on April 5, 2007. The recall

expanded through 2007, eventually covering approximately 180

brands of pet food and treats produced by twelve different

manufacturers.

After the recall was initiated, it was discovered that

wheat gluten and rice protein concentrate imported from China

and supplied to multiple pet food manufacturers by defendants

ChemNutra, Inc., and Wilbur Ellis appeared to have been

contaminated. These pet food ingredients were adulterated with

both melamine and cyanuric acid, the combination of which can

lead to acute renal failure in small animals if ingested.1

1

On February 6, 2008, after investigations by the Food and

Drug Administration (“FDA”) and the United States Attorney’s

Office, two Chinese nationals and the businesses they operated

(Xuzhou Anying Biologic Technology Development Co., LTD,

and Suzhou Textiles, Silk, Light Industrial Products, Arts and

Crafts I/E Co., LTD), along with a U.S. company (defendant

ChemNutra, Inc.) and its president and chief executive officer,

were indicted by a federal grand jury. The indictments cited the

defendants’ roles in a scheme to import into the United States

9

Altogether, defendants recalled over 60 million cans and

pouches of pet food products. The recall drew substantial media

attention, as well as FDA review, congressional inquiry, and

United States Attorney investigations.

B. The Class Actions and Consolidation

Pet owners soon commenced over 100 putative class

actions against Menu Foods and other pet food manufacturers,

ingredient suppliers, distributors, repackagers, and retailers.2

Plaintiffs brought claims on behalf of all persons who

purchased, used or obtained, or whose pets consumed, any cat

or dog food or treats that allegedly contained contaminated

wheat gluten and/or rice protein concentrate. Each complaint

alleged violations of state consumer protection and deceptive

trade practices statutes, product liability, breach of warranty, and

negligence.

The cases were consolidated by the Judicial Panel on

Multidistrict Litigation and transferred to the United States

products claimed to be wheat gluten, which were contaminated

with melamine and used to make pet food. U.S. Department of

Health & Human Services, U.S. Food and Drug Administration,

Charges Filed in Contaminated Pet Food Scheme (Feb. 19,

2 0 0 8 ) ,

http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm04

8139.htm (last visited Dec. 14, 2010).

2

A complete list of defendants in this case can be found on

the Pet Food Products Liability Settlement website, at

www.petfoodsettlement.com.

10

District Court for the District of New Jersey. In re Pet Food

Prods. Liab. Litig., 499 F. Supp. 2d 1346 (J.P.M.L. 2007).

Counsel then engaged in motion practice involving notice to

potential class members, negotiated to preserve evidence, and

consulted with and deposed experts regarding the contaminated

pet food. In early September 2007, the parties commenced

settlement negotiations, both independently and with a mediator.

On September 26, 2007, the court stayed the litigation to

facilitate formal mediation. Settlement negotiations continued

for seven months, involving cross-country and cross-border

negotiations between the parties, including Canadian plaintiffs

and their counsel. There were more than ten days of formal

mediation and many additional hours of in-person and

telephonic negotiations with representatives of plaintiffs and

over twenty defendants.

C. The Proposed Settlement

The proposed settlement agreement reached by the

parties provides for a $24 million cash fund.3 The settlement

class includes “all persons and entities who purchased, used or

obtained, or whose pets used or consumed Recalled Pet Foods

Product(s).” “Recalled Pet Foods Products” is defined as any

3

The settlement defines “Settlement Fund” as “a fund of

$24,000,000.00 (USD) funded by the Defendants as full

compensation for all Released Claims, the costs of claims

notice, administration, attorneys fees, costs, and expenses

associated with this Settlement in both Canada and the United

States. The Settlement Fund is in addition to the Historic

Payments [defined below].”

11

pet food product that was recalled on or after March 16, 2007,

“because of allegedly contaminated wheat gluten and/or rice

protein concentrate.” The settlement provides recovery for class

members of up to 100% of reasonable economic damages

incurred. Reasonable economic damages supported by

documentation will be paid in full, so long as all accepted claims

do not exceed the available funds; if the total claims exceed the

fund, distribution will be made on a pro rata basis.4 In addition

to or in lieu of payment for documented claims, class members

may receive up to $900 for reasonable claims submitted without

documentation.5

The settlement describes several, non-exclusive

categories of economic damages that may be reimbursed,

including Healthy Screening Claims,6 Injury Claims,7 Deceased

4

Acceptable forms of documentation include veterinarian

bills, veterinary records, statements from veterinarians, copies

of product labels, cancelled checks, receipts, credit card receipts,

and credit card statements.

5

If a class member fails to submit documentation, the Claims

Administrator will evaluate the information provided and make

a reasonable and good faith determination of the validity of the

claim. All class members must sign a verification, under penalty

of perjury, that the information submitted to the Claims

Administrator is true and correct.

6

“Healthy Screening Claims” are “claims for the costs

incurred by a Settlement Class Member whose animal(s) used or

consumed a Recalled Pet Food Product and who took his/her

12

Animal Claims,8 Consumer Food Purchase Claims (“Purchase

animal(s) to a veterinarian for screening or testing because of

the use or consumption of a Recalled Pet Food Product and the

screening or testing proved negative.”

7

“Injury Claims” are “claims for damages allegedly incurred

by Settlement Class Members whose pets used or consumed any

Recalled Pet Food Product and were treated for symptoms or

injuries of acute renal or kidney failure . . . related to the use or

consumption of a Recalled Pet Food Product, but which pets did

not die.” Class members with valid Injury Claims may receive

a full or pro rata reimbursement of veterinary bills incurred after

November 8, 2006, for all diagnostics and treatments stemming

from a pet’s consumption of recalled pet food.

8

“Deceased Animal Claims” are “claims for damages by

Settlement Class Members whose pets used or consumed a

Recalled Pet Food Product and allegedly died as a result of acute

kidney or renal failure . . . or as a result of treatment for acute

kidney or renal failure . . . .” Class members with valid

Deceased Animal Claims may receive reimbursement for

veterinary bills, necropsy, euthanasia, cremation, or

burial/specialty services that occurred after November 8, 2006.

These claimants may also receive reimbursement for either the

cost or fair market value of the deceased pet, whichever is

higher, or if the class member purchased a new pet before May

22, 2008, the reasonable cost of a new pet.

13

Claims”),9 and claims for other economic damage (e.g., travel

and transportation expenses, property damage – such as damage

to carpets – and lost wages). The settlement caps payments for

Healthy Screening Claims and Purchase Claims, as well as

payments for all types of undocumented claims (which are

capped at $900 per claimant, as described above). Payments for

Healthy Screening Claims are limited to an aggregate maximum

of $400,000 out of the $24 million fund, and payments for

Purchase Claims are limited to an aggregate maximum of

$250,000. To the extent that any of the amounts available to

pay Healthy Screening Claims, Injury Claims, Deceased Animal

Claims, Purchase Claims, or claims for other economic damage

would be exhausted by payment of 100% of the claims made in

that category, distribution to pet owners will be adjusted and

paid on a pro rata basis. Any funds remaining after settlement

administration and payment of all valid claims will be donated

to animal welfare-related organizations in both the United States

and Canada.

The settlement also includes an agreement for the future

testing of pet food ingredients. Defendants that manufactured

the recalled pet food products agreed to continue to administer

9

“Consumer Food Purchase Claims” are “claims solely for

reimbursement of the costs associated with the purchase of a

Recalled Pet Food Product by a Settlement Class Member who

has not been reimbursed for such costs to date, including

through return or exchange of the Recalled Pet Food Products.

Consumer Food Purchase Claims do not include Injury Claims,

Deceased Animal Claims, Healthy Screening Claims, or other

claims for economic damage.”

14

their internal quality assurance programs to regularly test

shipments of raw wheat gluten and rice protein concentrate

imported from China for the presence of melamine and cyanuric

acid until May 30, 2009.

The $24 million cash fund is over and above the

approximately $8 million already paid to pet owners by certain

defendants or their insurers as a result of reimbursement claims

programs (“Historic Payments”). “Historic Payments” are

“those amounts already paid by certain of the Defendants,

Released Entities and/or their insurers in settlement or

reimbursement of claims for certain injury, death or screening

expenses associated with a pet’s consumption of Recalled Pet

Food Products.”

The settlement includes a release of claims. Class

members agreed to release:

all claims, demands, actions, suits, and/or causes

of action that have been brought or could have

been brought, are currently pending or were

pending, or are ever brought in the future, by any

Settlement Class Member against any Defendant

or Released Entity, in any forum in Canada or the

United States . . . whether known or unknown,

asserted or unasserted, under or pursuant to any

statute, regulation, common law or equity, that

relate in any way, directly or indirectly, to facts,

acts, events, transactions, occurrences, courses of

conduct, representa tions, omissions,

circumstances or other matters referenced in any

claim raised (including, but not limited to, any

15

claim that was raised against any Released Entity)

in the Pet Food Recall Litigation.

In addition, the settlement provides for attorneys’ fees.

It allows plaintiffs’ lead counsel to apply to the court for

reimbursement of attorneys’ fees in a total amount not to exceed

25% of the settlement fund ($6 million), plus reimbursement of

expenses incurred in the course of the litigation. Similarly,

counsel for Canadian plaintiffs are permitted to apply to the

Canadian Courts for attorneys’ fees in a total amount not to

exceed 6% of the settlement fund ($1.44 million), plus

reimbursement of expenses. Any award of attorneys’ fees and

litigation expenses is to be paid out of the settlement fund.

The settlement included an opt-out provision; class

members could opt out within 60 days from the date notice of

the settlement was disseminated. Class members who chose to

make a claim for benefits were given 160 days from the date of

notice to file their claim forms.

Under the settlement’s claims process, the Claims

Administrator reviews the claim form, any accompanying

documentation, and any explanations for damages that are not

supported by documentation. After evaluation, the Claims

Administrator determines any amounts to be paid. The Claims

Administrator has authority to contact the claimant and the

claimant’s veterinarian to confirm information provided in the

claim form and to seek additional information, if necessary. The

Claims Administrator may deny a claim based on fraud, bad

faith, unreasonable conduct or demand, or intentional or willful

misconduct by a class member. The Claims Administrator has

complete and final authority to determine the amount to be paid

16

on each claim and its decision is final, binding, and not subject

to appeal.

D. Procedural History

On May 22, 2008, the settling parties filed a joint motion

for preliminary certification of the settlement class, preliminary

approval of the class action settlement, and approval of the

proposed form of notice. A hearing on the motion was held on

the same day. On May 30, 2008, the District Court entered an

order preliminarily approving the proposed settlement class and

the settlement. The court found that the “proposed settlement is

fair, reasonable and adequate and that the proposed Settlement

Class meets all of the applicable requirements under Rule 23(a)

and 23(b)(3) of the Federal Rules of Civil Procedure.”

The Order also approved the plan for publishing class

notice. Notice was published extensively in newspapers,

magazines, and other periodicals throughout the United States

and Canada.10 In addition, a toll-free number and a settlement

website were established, through which class members could

10

As part of the media campaign, summary publications were

published in consumer magazines (Parade, AARP, and People);

pet magazines (Dog Fancy, Cat Fancy, AKC Family Dog, Bark,

Best Friends, and Dog World); U.S. Veterinary Publications

(DVM Magazine, Journal of the American Veterinary Medical

Association, Trends Magazine, Veterinary Forum, Veterinary

Medicine, Veterinary Practice News); the Canadian Veterinary

Journal; and newspapers in major metropolitan areas (15 U.S.

newspapers, including the New York Times and USA Today,

and 15 Canadian newspapers).

17

obtain additional information and copies of settlement

documents, including claim forms and a list of all recalled pet

food products. As of September 30, 2008, a total of 28,955

notices were sent by direct mail to potential class members who

had submitted claims or were paid as part of the Historic

Payment programs. Notice also was sent to the American

Veterinarian Medical Association and the Canadian Veterinary

Medical Association for further dissemination to their members

and veterinarians.

On September 2, 2008, Jim Johnson and Dustin Turner

filed objections to the proposed settlement. On September 12,

Margaret Picus and Daniel Kaffer filed objections, a motion to

intervene, and a request for limited discovery. On October 3,

plaintiffs and defendants filed a motion for final approval and an

opposition to the motion to intervene. On October 14, the court

held a fairness hearing and heard argument on the motion to

approve the settlement, the motion to intervene, and co-lead

plaintiffs’ counsels’ motion for attorneys’ fees.11 The court

11

As of the date of the fairness hearing, approximately 10,000

claims had been submitted. The average claim was

approximately $1,430, before review by the Claims

Administrator. Out of the 10,000 claims, approximately 6,000

included a Purchase Claim. The average Purchase Claim was

approximately $75, again before review by the Claims

Administrator. The claims period closed on November 24,

2008, approximately six weeks after the date of the fairness

hearing. At our direction, the settling parties provided us with

updated claims information after oral argument. According to

the Claims Administrator, as of February 23, 2010, 24,344

18

heard oral argument from all parties who requested the

opportunity to speak, including objectors.

In an order entered on November 17, 2008, and an

accompanying 65-page opinion filed the following day, the

court certified plaintiffs’ class for settlement purposes under

Rule 23(a) and (b)(3), granted the motion for approval of

settlement under Rule 23(e), granted plaintiffs’ motion for

attorneys’ fees, denied the motion to intervene, and overruled

the various objections to the settlement. In re Pet Food Prods.

timely claims were submitted, and 20,550 were deemed payable.

See Letter from Edward J. Sincavage, CPA, Heffler, Radetich &

Saitta LLP, to counsel for plaintiffs and defendants (Mar. 8,

2010) (on file with the Clerk’s Office). The average claim is

approximately $1,283.00, for an estimated payable amount of

$26,365,575.41. Id. Out of the 20,550 payable claims, 11,306

included a Purchase Claim. Id. The average Purchase Claim is

approximately $52.84, for an estimated payable amount of

$597,427.05. See id. Because the settlement caps Purchase

Claims at $250,000, class members will receive a 41.85%

recovery on Purchase Claims. Id. After deducting the amount

of timely payable Purchase Claims of $597,427.05 from the

amount of timely payable claims of $26,365,575.41, the Claims

Administrator estimates that claims for economic losses other

than Purchase Claims will be $25,768,148.36. The Claims

Administrator estimates that payments for these claims will be

approximately 49% of the payable amounts (due to deductions

from the settlement fund for attorneys’ fees, expenses, notice

costs, settlement administration costs, and the $250,000

allocation for Purchase Claims). Id.

19

Liab. Litig., MDL No. 1850, 2008 WL 4937632 (D.N.J. Nov.

18, 2008) (“Fairness Opinion”). On November 19, 2008, the

court entered judgment, dismissing the case with prejudice.

The Johnson/Turner objectors and the Picus/Kaffer objectors

filed timely notices of appeal.12

Objectors challenge both the class certification and the

approval of the settlement. Objectors assert an intra-class

conflict between class members whose damages are limited to

Purchase Claims13 and those who assert claims for other

economic damages for pets that became ill or died post

consumption. Additionally, the Johnson/Turner objectors

contend differences in state laws create conflicts between class

members. Objectors contend both alleged conflicts preclude a

finding of adequate representation and necessitate the creation

of subclasses. With regard to fairness, both objectors challenge

the $250,000 allocation for Purchase Claims. Finally, the

Picus/Kaffer objectors challenge the denial of their motion for

leave to intervene and motion for discovery, and the approval of

the release.

“We review the decision of the District Court to certify

12

The District Court had jurisdiction over the class action

under 28 U.S.C. § 1332(d)(2)(A). We have jurisdiction under

28 U.S.C. § 1291.

13

As noted, Purchase Claims are “claims solely for

reimbursement of the costs associated with the purchase of a

Recalled Pet Food Product by a Settlement Class Member who

has not been reimbursed for such costs to date, including

through return or exchange of the Recalled Pet Food Products.”

20

[a] class and approve [a] settlement under an abuse of discretion

standard.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516,

527 (3d Cir. 2004). “An abuse of discretion may be found

where the district court’s decision rests upon a clearly erroneous

finding of fact, an errant conclusion of law or an improper

application of law to fact.” Id. (internal quotation marks

omitted).

II. CLASS CERTIFICATION

In order to approve a class settlement agreement, a

district court first must determine that the requirements for class

certification under Rule 23(a) and (b) are met.14 The Supreme

14

The four threshold requirements of Rule 23(a) are (1)

numerosity (a “class [so large] that joinder of all members is

impracticable”); (2) commonality (“questions of law or fact

common to the class”); (3) typicality (named parties’ claims or

defenses “are typical . . . of the class”); and (4) adequacy of

representation (representatives “will fairly and adequately

protect the interests of the class”). Fed. R. Civ. P. 23(a);

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997). In

addition to the threshold requirements of Rule 23(a), parties

seeking class certification must show that the action is

maintainable under Rule 23(b)(1), (2), or (3). Rule 23(b)(3), the

provision at issue in this case, provides for so-called “opt-out”

class actions suits. See Amchem, 521 U.S. at 615. Under Rule

23(b)(3), two additional requirements must be met in order for

a class to be certified: (1) common questions must

“predominate over any questions affecting only individual

members” (the “predominance requirement”); and (2) class

21

Court has made clear that “[s]ettlement is relevant to a class

certification.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591,

619 (1997). Consequently, a district court “may take the

proposed settlement into consideration when examining the

question of certification.” In re Prudential Ins. Co., 148 F.3d

283, 308 (3d Cir. 1998). In Amchem, the Supreme Court

explained:

Confronted with a request for settlement-only

class certification, a district court need not inquire

whether the case, if tried, would present

intractable management problems, for the

proposal is that there be no trial. But other

specifications of [Rule 23]—those designed to

protect absentees by blocking unwarranted or

overbroad class definitions—demand undiluted,

even heightened, attention in the settlement

context. Such attention is of vital importance, for

a court asked to certify a settlement class will lack

the opportunity, present when a case is litigated,

to adjust the class, informed by the proceedings as

they unfold.

Amchem, 521 U.S. at 620 (citations omitted). In Prudential, we

noted Amchem’s particular emphasis on the Rule 23(a)(4)

requirement that “‘the representative parties will fairly and

resolution must be “superior to other available methods for the

fair and efficient adjudication of the controversy” (the

“superiority requirement”). Fed. R. Civ. P. 23(b)(3).

22

adequately protect the interests of the class.’” Prudential, 148

F.3d at 308 (quoting Fed. R. Civ. P. 23(a)(4)). “Indeed, the key

to Amchem appears to be the careful inquiry into adequacy of

representation.” Id.; see Amchem, 521 U.S. at 621

(“Subdivisions (a) and (b) [of Rule 23] focus court attention on

whether a proposed class has sufficient unity so that absent class

members can fairly be bound by decisions of class

representatives. That dominant concern persists when

settlement, rather than trial, is proposed.”).

A. The District Court’s Opinion

The District Court determined that the settlement class

should be certified for settlement purposes after concluding that

the Rule 23 requirements were satisfied. The court found that

the class, which includes “thousands of consumers that are

geographically dispersed throughout the United States and

Canada,” met Rule 23(a)(1)’s numerosity requirement because

“a class of this size makes joinder of all members

impracticable.” Fairness Opinion, 2008 WL 4937632, at *4.

Second, the court found that Rule 23(a)(2)’s commonality prong

was satisfied based on its finding that eight questions of law and

fact were common to the class, including “[w]hether defendants

intentionally, recklessly or negligently authorized injurious pet

food to enter the market.” Id. at *5. Third, the court determined

the class met Rule 23(a)(3)’s typicality requirement because

“the claims of the class representatives are aligned with those of

the class members since the claims of the representatives arise

out of the same conduct and core facts surrounding the Recall.”

Id. Fourth, the court determined the dual components of the

adequacy of representation requirement of Rule 23(a)(4) were

satisfied because (1) the named plaintiffs’ interests were

23

“directly aligned with those of other members of the Class” as

“the representative plaintiffs were damaged as a result of

defendants’ allegedly unlawful conduct, and the plaintiffs would

have had to prove the same wrongdoing as the absent Class

members to establish defendants’ liability;” and (2) “plaintiffs

have retained attorneys who are highly qualified, experienced

and able to conduct this litigation.” Id. at *6.

The District Court also concluded that the standards of

Rule 23(b)(3) were met, finding the predominance requirement

was satisfied because the “same set of core operative facts and

theory of proximate cause apply to each member of the class.”

Id. The class actions concern consumers who purchased, used,

or obtained recalled pet food products, and if “plaintiffs and

potential class members were to bring individual actions, they

would each be required to prove the same wrongdoing by

defendants in order to establish liability.” Id. The superiority

requirement was satisfied because “absent class certification, the

Court may be faced with litigating over 100 individual lawsuits

all of which would arise out of the same set of operative facts”

and “the resolution of common issues alleged in one action will

result in more efficient use of judicial resources and bring about

a single outcome.” Id.

No one has challenged the District Court’s findings that

the proposed class satisfied the numerosity, commonality,

typicality, predominance, and superiority requirements, and we

believe these findings were well within the court’s sound

discretion. Objectors argued below that the class does not

satisfy the Rule 23(a) requirement of adequacy of representation

because of intra-class conflicts of interest. The District Court

noted the objection to the settlement “on the ground that

24

[objectors’] interests as ‘mere purchasers,’ [were] not adequately

represented by the Class representatives,” but rejected their

argument because both groups shared the common interest of

maximizing recovery for Purchase Claims:

The Class representatives in this case were

purchasers of pet food whose pets consumed the

contaminated pet food. Co-lead counsel asserts

that they were designated to represent the entire

Settlement Class, including “mere purchasers.”

The Court does not find any conflict between the

interests of the Proposed Intervenors and the

Class representatives who purchased the Recalled

Pet Food Products, as their interests in

maximizing recovery of such damages for the

purchase of such products are aligned with the

interests of “mere purchasers” in maximizing

recovery for such product purchase claims.

Id. at *8.

After reviewing objectors’ arguments, and for the reasons

we discuss, we hold that the District Court exercised sound

discretion in certifying the settlement class.

B. Challenges to Adequacy of Representation

A class may not be certified unless the representative

class members “will fairly and adequately protect the interests

of the class.” Fed. R. Civ. P. 23(a)(4). Rule 23(a)’s adequacy

of representation requirement “serves to uncover conflicts of

interest between named parties and the class they seek to

25

represent.” Amchem, 521 U.S. at 625.15 Class representatives

“must be part of the class and possess the same interest and

suffer the same injury as the class members.” Id. at 625-26

(citation and internal quotation marks omitted).

“When appropriate, a class action may be divided into

subclasses that are each treated as a class under [Rule 23].” Fed.

R. Civ. P. 23(c)(5). Subclasses are appropriate “‘[w]here a class

is found to include subclasses divergent in interest.’” In re Ins.

Brokerage Antitrust Litig., 579 F.3d 241, 271 (3d Cir. 2009)

(quoting Fed. R. Civ. P. 23(c) advisory committee’s note); see

also Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999)

(explaining that Amchem requires “a class divided between

holders of present and future claims” to be “divi[ded] into

homogeneous subclasses . . . with separate representation to

eliminate conflicting interests of counsel”). Accordingly, we

have held that “[a] district court hearing a class action has the

discretion to divide the class into subclasses and certify each

subclass separately.” In re Cendant Corp. Sec. Litig., 404 F.3d

173, 202 (3d Cir. 2005). Our standard of review is informed by

the careful balancing of costs and benefits on the part of a

district judge when deciding whether to certify a subclass:

[T]he option to utilize subclasses “is designed to

prevent conflicts of interest in class

representation.” [Cendant Corp., 404 F.3d at

202]. Nonetheless, “[w]hile subclasses can be

15

The other component of the adequacy of representation

inquiry—the qualifications of counsel to represent the class—is

not at issue in this appeal.

26

useful in preventing conflicts of interest, they

have their drawbacks.” Id. (citing a secondary

source for the proposition that subclassing can

create a “Balkanization” of the class action and

present a huge obstacle to settlement if each

subclass has an incentive to hold out for more

money). Because “the decision whether to certify

a subclass requires a balancing of costs and

benefits that can best be performed by a district

judge,” we accord substantial deference to district

courts with respect to their resolution of this issue.

Id.; see Alexander v. Gino’s, Inc., 621 F.2d 71, 75

(3d Cir. 1980) (noting that “the district court has

considerable discretion in utilizing subclasses”

under Rule 23(c)). Thus, “[w]here the district

court has declined to certify a subclass, we will

ordinarily defer to its decision unless it

constituted an abuse of discretion.” [Cendant

Corp., 404 F.3d at 202].

Ins. Brokerage, 579 F.3d at 271.

Objectors maintain subclasses were necessary for a

number of reasons, none of which lead us to conclude the

District Court abused its discretion in declining to subdivide the

class. First, relying primarily on Amchem,16 objectors contend

16

The proposed class in Amchem encompassed, at minimum,

hundreds of thousands of individuals who were, or may be in the

future, injured by past exposure to asbestos products

manufactured by one of more than 20 defendant companies.

27

subclasses and separate representation were required here

because of conflicts of interest between class members with only

Purchase Claims (of pet food) and class members with Injury

Claims (those who assert claims for pets that became ill or died

after consuming recalled pet food).17 We disagree. All of the

claims covered by the settlement are claims for economic

damages, e.g., for the cost of recalled pet food, the cost of

veterinary treatment, or the cost of a replacement pet.

Furthermore, all class members here have present claims.

Amchem, 521 U.S. at 597. The class representatives in Amchem,

some of whom had diverse medical conditions as a result of

asbestos exposure and some of whom had not yet manifested

any asbestos-related condition, “sought to act on behalf of a

single giant class rather than on behalf of discrete subclasses.”

Id. at 626. The Supreme Court found that in “significant

respects, the interests of those within the single class [were] not

aligned.” Id. “Most saliently, for the currently injured, the

critical goal [was] generous immediate payments. That goal

tug[ged] against the interest of exposure-only plaintiffs in

ensuring an ample, inflation-protected fund for the future.” Id.

Thus, the proposed class could not satisfy Rule 23(a)(4)’s

adequacy of representation requirement. Id. at 625.

17

For ease of reference, throughout our discussion of the

alleged conflict between class members with only Purchase

Claims and class members with claims for other economic

damages, we will use the term “Injury Claim” to mean any claim

for economic damages for pets that became ill or died after

consuming recalled pet food. Class members with Injury Claims

may also have Purchase Claims.

28

Objectors fault the District Court’s reliance on the fact

that class representatives have both Purchase Claims and Injury

Claims. See Amchem, 521 U.S. at 627.18 But objectors have not

identified adverse interests that would require the establishment

of subclasses. Nor are the other cases cited by objectors—In re

Community Bank of Northern Virginia, 418 F.3d 277 (3d Cir.

2005), and In re General Motors Corp., 55 F.3d 768 (3d Cir.

1995)—apposite.

In Community Bank, we determined that a settlement

class was not properly certified because the district court did not

engage in a proper Rule 23(a) and (b) analysis. Because it was

possible that the class could be properly certified on remand, we

examined some of the relevant factors to be considered,

18

The Court in Amchem noted that when “adversity among

subgroups” requires that subclasses be established, a court

cannot approve a settlement without creating subclasses on the

basis of the consent of the class representatives, who are

members of the distinct groups. 521 U.S. at 627 (quoting In re

Joint Eastern & Southern Dist. Asbestos Litig., 982 F.2d 721,

742-43 (2d Cir. 1992), modified on reh’g sub nom. In re

Findley, 993 F.2d 7 (2nd Cir. 1993)). “The class representatives

may well have thought that the Settlement serves the aggregate

interests of the entire class. But the adversity among subgroups

requires that the members of each subgroup cannot be bound to

a settlement except by consents given by those who understand

that their role is to represent solely the members of their

respective subgroups.” Id. (quoting Joint Eastern & Southern

Dist. Asbestos Litig., 982 F.2d at 742-43).

29

including adequacy of representation. The objectors alleged

many class members had colorable Truth in Lending Act

(“TILA”) and Home Ownership and Equity Protection Act

(“HOEPA”) claims that had not been asserted by class counsel

either in the complaint or during settlement negotiations.

Because it appeared that the named plaintiffs had “no incentive

to maximize such claims for the approximately 14,000 class

members who may [have retained] this valuable cause of

action,” we noted that “[a]t the very least, consideration should

have been given to the feasibility of dividing the class into sub-

classes so that a court examining the proposed settlement could

have judged the fairness of the settlement as it applied to

similarly situated class members.” 418 F.3d at 307.

Objectors contend the class representatives had no

incentive to maximize the Purchase Claims because the value of

the Injury Claims was much greater than the Purchase Claims.

But unlike in Community Bank where the class representatives

did not have TILA or HOEPA claims and the settlement failed

to provide recovery for those claims, here, the class

representatives all have Purchase Claims and the settlement

allocates a portion of the recovery to those claims.

Objectors’ reliance on General Motors is likewise

misplaced. The plaintiffs in General Motors were purchasers of

certain GM trucks that may have had a design defect in the

location of the fuel tank. The class consisted of individual

owners of a single truck as well as “fleet owners,” such as

governmental agencies, who owned a number of trucks. All of

the class representatives were individual owners. Objectors

contended the disparity in settlement benefits enjoyed by the

two different groups created an intra-class conflict that

30

precluded a finding of adequate representation.19 We agreed,

focusing on the terms of the settlement, which evidenced “the

disparity in the prospective value to the different sections of the

class”:

The fleet owners will never enjoy the benefits of

the settlement terms, such as the intra-household

transfer option, intended specifically for the

benefit of individual owners. Thus, we must be

concerned that the individual owners had no

incentive to maximize the recovery of the

government entities; they could skew the terms of

the settlement to their own benefit. Not

surprisingly, the settlement leaves fleet owners

with significantly less value than individual

owners. At the very least, the class should have

been divided into sub-classes so that a court

examining the settlement could consider

settlement impacts that would be uniform at least

within the sub-classes.

19

The settlement provided $1,000 coupons redeemable

toward the purchase of any new GM truck within a 15-month

period. The certificates were transferable with the vehicle, and

could be transferred to a class member’s family member. In lieu

of a $1000 certificate, class members could request that a

nontransferable $500 certificate be issued to any third party

except a GM dealer or its affiliates. The $500 certificate could

only be used on more expensive truck models and was subject

to the same 15-month redemption period as the $1000

certificates. Gen. Motors Corp., 55 F.3d at 780.

31

Gen. Motors Corp., 55 F.3d at 801.

There is no analogous conflict in this case. The remedial

interests of class members with only Purchase Claims are

represented by class representatives with Purchase Claims, and

the settlement provides up to $250,000 for these claims.

Moreover, class members with only Purchase Claims do not

receive less value for identical claims asserted by other class

members.

Objectors contend inadequate representation is

demonstrated in the settlement’s allocation terms, which

designate the vast majority of the fund to Injury Claims, while

Purchase Claims are capped at $250,000.20 But varied relief

20

Objectors’ concerns about the fairness of the settlement,

i.e., that the $250,000 allocated to Purchase Claims is

inadequate, seem to drive much of their argument that there was

inadequate representation in this case. See, e.g., Picus/Kaffer

Br. at 26 (“By settling these claims of this unrepresented

subclass for the grossly inadequate compensation of $250,000

. . . the current Settlement is unfair and inadequate to

unrepresented class members like Appellants.”). We recognize

that in some situations an unfair settlement may be the result of

inadequate representation. And when inadequate representation

leads to an unfair settlement, the analyses of Rule 23(a)’s

adequacy of representation requirement and Rule 23(e)’s

requirement that the proposed settlement be “fair, reasonable

and adequate” will be similar. But in this case, even if the

settlement is found to be unfair on remand, we do not believe

any such finding would be the result of inadequate class

32

among class members with differing claims in class settlements

is not unusual. See Petrovic v. Amoco Oil Corp., 200 F.3d 1140,

1146 (8th Cir. 1999) (“[A]lmost every settlement will involve

different awards for various class members.”); see also

Prudential, 148 F.3d at 289-90 (holding the district court

properly certified a national settlement class in a circumstance

in which the class was comprised of policyholders who

allegedly were the victims of several different types of

fraudulent and misleading sales practices and the settlement

created an alternative dispute resolution mechanism to

determine the kind and amount of relief to be granted).21 Such

differences in settlement value do not, without more,

demonstrate conflicting or antagonistic interests within the class.

See Ins. Brokerage, 579 F.3d at 272.22

representation. For the reasons explained, we do not believe

class members with only Purchase Claims have interests that

diverge from class members with Injury Claims and Purchase

Claims.

21

Cf. Robert G. Bone, Agreeing to Fair Process: The

Problem with Contractarian Theories of Procedural Fairness,

83 B.U. L. Rev. 485, 550 & n.191 (2003) (noting that settlement

value is affected by many different factors, including “severity

of injury, applicable substantive law, risk-preferences, and so

on” and that “wealth transfers [in the sense of settlement value]

are endemic to damage class actions that settle for average

amounts”).

22

Cf. Bone, supra, at 550 (noting that “[i]f a difference in

settlement value were enough by itself to require the creation of

33

We addressed disparity in allocation in Insurance

Brokerage, holding the district court did not abuse its discretion

by failing to subdivide the class. The objectors argued before

the district court that subclasses were needed to ensure adequate

representation for different types of insurance policyholders and

to ensure a fair allocation of the settlement fund.23 We

acknowledged that there was some appeal to the argument,

“given that the Plan of Allocation divid[ed] the total settlement

award on the basis of the type of insurance, thereby creating

different groups for the purpose of reimbursement, and the

groups [did] not have access to an equal percentage of the fund.”

Id. at 272. But we noted that “subclasses are only necessary

when members of the class have divergent interests,” and the

district court had not found any divergent interests existed

between the allocation groups. Id. We rejected objectors’

argument that the fact that the fund was allocated so that a

greater percentage of the settlement value was designated for

certain class members demonstrated a conflict between groups.

subclasses, the number of subclasses would make many class

actions impossible, and at least in mass tort cases, create another

source of unfairness by leaving some litigants without any

meaningful recovery at all”).

23

Objectors argued subclasses were required for “Excess

Claimants” (policyholders who purchased additional insurance

policies, in excess of their primary insurance coverage, from or

through one of the defendants) and “Non-Excess Claimants”

(policyholders who purchased a primary insurance policy from

or through one of the defendants). Ins. Brokerage, 579 F.3d at

270 n.27.

34

We found that the difference in allocations was “simply a

reflection of the extent of the injury that certain class members

incurred and d[id] not clearly suggest that the class members had

antagonistic interests.” Id. We also found it important that

many class members were members of both policyholder groups

and would be entitled to recover damages for overpayment of

premiums for both types of insurance. “This illustrate[d] that

the Plan of Allocation did not create de facto subclasses among

the class members but merely created a structure for ensuring

that reimbursement [was] tied to the extent of damages incurred

on certain policies of insurance.” Id.

As in Insurance Brokerage, the District Court here did

not find divergent interests between the allocation groups. The

fact that the settlement fund allocates a larger percentage of the

settlement to class members with Injury Claims does not

demonstrate a conflict between groups. Instead, the different

allocations reflect the relative value of the different claims.24

Many class members are members of both allocation groups,

and will be entitled to recover damages for both Purchase

Claims and Injury Claims.

Objectors also point to an alleged disparity in the strength

of the various claims. According to objectors, defendants have

24

At the fairness hearing, the settling parties advised the court

that the average Purchase Claim was approximately $75, while

the average Injury Claim was approximately $1,500. No one

challenges the settling parties’ general representation that a

claim for veterinary care, on average, will be more costly than

a claim for the purchase price of recalled pet food.

35

no defense to the Purchase Claims, so that class members with

Purchase Claims would automatically recover 100% of the value

of the recalled pet food if the case were to proceed through

litigation. They note the settling parties themselves have

characterized the Injury Claims as difficult to prove and fraught

with causation problems.

As with differences in settlement value, alleged

differences in the strength of the various claims asserted in this

class action do not, by themselves, demonstrate conflicting or

antagonistic interests within the class that would require

subclasses. Objectors have not convinced us that “the refund

claims are as strong a claim as is imaginable.” The District

Court made no findings on the merits of the Purchase Claims,

and we are not in a position to do so here. But we are skeptical

of objectors’ theory that because defendants initiated the recall,

class members are automatically legally entitled to a 100%

recovery of the money paid for recalled pet food. As noted,

several defendants initiated voluntary reimbursement programs

immediately after the recall. There may or may not be good

business reasons to implement recalls and reimbursement

programs but these programs do not establish strict liability or

automatically provide for a 100% recovery. The various

authorities objectors cite (e.g., the Consumer Product Safety

Act, 15 U.S.C. §§ 2051–2084) do not support their far-reaching

assertion that “[a] consumer who does not use a recalled product

is entitled to a refund, without any requirement of showing that

the product is defective.” The fact that courts and various

government agencies may order consumer recalls and refunds in

certain circumstances does not mean that class members in this

case—who assert only that defendants initiated a voluntary

36

recall and reimbursement program—have a fool-proof legal

claim against defendants.

Objectors’ assessment of the Purchase Claims, moreover,

fails to take into account class members with undocumented

claims. The settling parties, of course, were aware of the

reimbursement programs and negotiated the settlement

understanding that the vast majority of class members with

documentation for the purchase of recalled pet food would

pursue a remedy through the various reimbursement programs.

The settling parties assumed—correctly, as it turned out—that

the majority of class members asserting Purchase Claims

through the settlement would do so without documentation. See

infra Section III.B. While the settlement provides up to $900 in

recovery for reasonable claims submitted without

documentation, it is not the case that a class member with no

documentation to support the cost of a purchase for a specific

brand of recalled pet food, during a specific time period, has “as

strong a claim as is imaginable.”

But even assuming objectors’ characterization of the

Purchase Claims as “strong” and Injury Claims as “weak”

carries some validity, objectors fail to articulate how differences

in the relative strength of the different claims would lead to

conflicts of interest in class representation. Objectors simply

allege a “substantial conflict” required subclasses in this case.

It appears to us objectors’ focus on the relative strength of the

claims, like their focus on the disparity of the allocation, is more

appropriately addressed as a Rule 23(e) adequacy of allocation

question, rather than a Rule 23(a) adequacy of representation

question.

37

Objectors also assert a class conflict allegedly resulting

from different factual bases for the various claims. According

to objectors, the Purchase Claims are based on the fact that

defendants recalled the pet food, while the Injury Claims are

based on the fact that the food was contaminated. Whether the

pet food was actually contaminated, they argue, is immaterial

for the Purchase Claims. We disagree. But more importantly,

objectors again fail to explain, and we cannot discern, any

antagonistic interests between class members arising from the

factual underpinnings of the various claims. We believe the

District Court properly determined that all class members have

claims arising out of the sale of potentially contaminated pet

food. That some class members have additional claims arising

out of the use of the recalled food does not create a conflict

between class members.

Finally, the Johnson/Turner objectors assert that

differences in state law create conflicts among class members

that preclude a finding of adequate representation.25 According

to objectors, these differences necessitated creating subclasses

to meet Rule 23(a)’s adequacy of representation requirement.

25

Although normally differences in state law are raised as a

challenge to Rule 23(b)(3)’s predominance requirement, Rule

23(a)(2)’s commonality of law or fact prerequisite, or both, see,

e.g., Warfarin, 391 F.3d at 529, objectors do not argue that

variations in state laws “are so significant so as to defeat

commonality and predominance,” id. Instead, they argue the

differences in state laws “go directly to the adequacy [of

representation] issue.” Here we address adequacy of

representation under Rule 23(a)(4).

38

We disagree and find no merit in objectors’ argument that state

law differences created conflicts among class members that

defeat adequacy of representation and preclude certification of

a nationwide class. Objectors fail to explain how the differences

in state laws have created conflicts of interest between the

named plaintiffs and absent class members in the context of

adequacy of representation in this settlement class. We agree

with the District Court that “the representative plaintiffs’

interests are directly aligned with those of other members of the

Class.” Fairness Opinion, 2008 WL 4937632, at *6. As the

District Court determined, “the representative plaintiffs were

damaged as a result of defendants’ allegedly unlawful conduct,

and the plaintiffs would have had to prove the same wrongdoing

as the absent Class members to establish defendants’ liability.”

Id.

In sum, objectors fail to articulate any conflict or

adversity among class representatives and class members. It is

not enough for objectors to point to differences in claims,

allocation amounts, or state laws without identifying how such

differences demonstrate a conflict of interest. We agree with the

District Court’s finding that the interests of class members with

only Purchase Claims are aligned with the interests of class

members with Injury Claims. The District Court exercised

sound discretion by finding the adequacy of representation

requirement was met, by declining to create subclasses, and by

certifying the settlement class.26

26

The Picus/Kaffer objectors challenge the District Court’s

order denying their motion for leave to intervene to provide

separate representation for class members with only Purchase

39

III. FAIRNESS OF THE PROPOSED SETTLEMENT

“Even if it has satisfied the requirements for certification

Claims. We review the denial of a motion to intervene as of

right under Federal Rule of Civil Procedure 24(a)(2) for an

abuse of discretion. United States v. Alcan Aluminum, 25 F.3d

1174, 1179 (3d Cir. 1994). “However, our review is more

stringent than the abuse of discretion review we apply to a

denial of a motion for permissive intervention. We will reverse

only if we find the district court has applied an improper legal

standard or reached a decision we are confident is incorrect.”

Id. (citations and internal quotation marks omitted).

A class member seeking intervention as a matter of right

under Rule 24(a)(2) must establish “1) a timely application for

leave to intervene, 2) a sufficient interest in the underlying

litigation, 3) a threat that the interest will be impaired or affected

by the disposition of the underlying action, and 4) that the

existing parties to the action do not adequately represent the

prospective intervenor’s interests.” Liberty Mut. Ins. Co. v.

Treesdale, Inc., 419 F.3d 216, 220 (3d Cir. 2005) (citing

Kleissler v. U.S. Forest Serv., 157 F.3d 964, 969 (3d Cir. 1998)).

“To overcome the presumption of adequate representation, the

proposed intervenor must ordinarily demonstrate adversity of

interest, collusion, or nonfeasance on the part of a party to the

suit.” Cmty. Bank, 418 F.3d at 315. As explained above, the

District Court properly determined that absent class members’

interests were adequately represented by plaintiffs.

Accordingly, objectors were not entitled to intervene as a matter

of right.

40

under Rule 23, a class action cannot be settled without the

approval of the court and a determination that the proposed

settlement is fair, reasonable and adequate.” Prudential, 148

F.3d at 316 (internal quotation marks omitted) (citing Gen.

Motors Corp., 55 F.3d at 785); see also Fed. R. Civ. P. 23(e)(2).

Under Rule 23(e), trial judges bear the important responsibility

of protecting absent class members, “which is executed by the

court’s assuring that the settlement represents adequate

compensation for the release of the class claims.” Gen. Motors

Corp., 55 F.3d at 805; see also Ehrheart v. Verizon Wireless,

609 F.3d 590, 593 (3d Cir. 2010) (“The purpose of Rule 23(e)

is to protect the unnamed members of the class.”) (citing

Warfarin, 391 F.3d at 534). We have stressed the importance of

Rule 23(e), noting that “a district court acts as a fiduciary,

guarding the claims and rights of the absent class members.”

Ehrheart, 609 F.3d at 593; accord Warfarin, 391 F.3d at 534;

Gen. Motors Corp., 55 F.3d at 785; see also Amchem, 521 U.S.

at 623 (noting that the Rule 23(e) inquiry “protects unnamed

class members from unjust or unfair settlements affecting their

rights when the representatives become fainthearted before the

action is adjudicated or are able to secure satisfaction of their

individual claims by a compromise” (internal quotation marks

omitted)).

We ask district courts to apply an even more rigorous,

“heightened standard” in cases “where settlement negotiations

precede class certification, and approval for settlement and

certification are sought simultaneously.” Warfarin, 391 F.3d at

534. We have explained that this “heightened standard is

designed to ensure that class counsel has demonstrated sustained

advocacy throughout the course of the proceedings and has

41

protected the interests of all class members.” Prudential, 148

F.3d at 317 (internal quotation marks omitted).

In Girsh v. Jepson, we articulated nine factors to be

considered when determining the fairness of a proposed

settlement:

(1) the complexity, expense and likely duration of

the litigation; (2) the reaction of the class to the

settlement; (3) the stage of the proceedings and

the amount of discovery completed; (4) the risks

of establishing liability; (5) the risks of

establishing damages; (6) the risks of maintaining

the class action through the trial; (7) the ability of

the defendants to withstand a greater judgment;

(8) the range of reasonableness of the settlement

fund in light of the best possible recovery; [and]

(9) the range of reasonableness of the settlement

fund to a possible recovery in light of all the

attendant risks of litigation.

521 F.2d 153, 157 (3d Cir. 1975) (internal quotation marks and

alterations omitted). The settling parties bear the burden of

proving that the Girsh factors weigh in favor of approval of the

settlement. Gen. Motors Corp., 55 F.3d at 785. The district

court’s findings under the Girsh test are factual, and will be

upheld unless they are clearly erroneous. Id. at 786.

In Prudential, we held because of a “sea-change in the

nature of class actions” after Girsh was decided thirty-five years

ago, it may be helpful to expand the Girsh factors to include,

when appropriate, the following non-exclusive factors:

42

[T]he maturity of the underlying substantive

issues, as measured by experience in adjudicating

individual actions, the development of scientific

knowledge, the extent of discovery on the merits,

and other factors that bear on the ability to assess

the probable outcome of a trial on the merits of

liability and individual damages; the existence

and probable outcome of claims by other classes

and subclasses; the comparison between the

results achieved by the settlement for individual

class or subclass members and the results

achieved—or likely to be achieved—for other

claimants; whether class or subclass members are

accorded the right to opt out of the settlement;

whether any provisions for attorneys’ fees are

reasonable; and whether the procedure for

processing individual claims under the settlement

is fair and reasonable.

148 F.3d at 323.

The district court must make findings as to each of the

nine Girsh factors in order to approve a settlement as fair,

reasonable, and adequate, as required by Rule 23(e). The factors

we identified in Prudential are illustrative of additional inquiries

that in many instances will be useful for a thoroughgoing

analysis of a settlement’s terms.

Because district courts must make findings as to each of

the Girsh factors, and the Prudential factors where appropriate,

the court cannot substitute the parties’ assurances or conclusory

statements for its independent analysis of the settlement terms.

43

Cf. Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277, 283 (7th

Cir. 2002) (cautioning against “paint[ing] with too broad a brush

[and] substituting intuition for . . . evidence and careful

analysis”). When the parties have not supplied the information

needed for the court to determine whether the settlement is fair,

reasonable, and adequate, the court may affirmatively seek out

such information. See id. at 285 (noting that courts may require

the parties to present evidence to enable the court to make

findings regarding the strength of the plaintiffs’ case, the range

of possible damages, and the likely duration of the litigation if

not presently settled).

We reaffirm the “overriding public interest in settling

class action litigation.” Warfarin, 391 F.3d at 535; see also

Ehrheart, 609 F.3d at 595 (noting the “especially strong”

presumption in favor of voluntary settlements in “‘class actions

. . . where substantial judicial resources can be conserved by

avoiding formal litigation’” (quoting Gen. Motors Corp., 55

F.3d at 784)). But cognizant that Rule 23(e) places a duty on

district courts to safeguard the interests of class members, we

believe courts may find it necessary to drill down into the case

and into the agreement to make an independent, “scrupulous”

analysis of the settlement terms. Prudential, 148 F.3d at 317.

A. The District Court’s Opinion

The District Court determined that the settlement was

fair, reasonable, and adequate under Rule 23(e) after considering

the nine Girsh factors. The court’s analysis focused primarily

on the Injury Claims and did not specifically reference the

Purchase Claims. With regard to the complexity, expense, and

likely duration of the litigation, the court focused on (1) the

44

scope and breadth of the litigation, which stemmed from a

massive pet food recall, involved over 60 million containers of

more than 90 brands of pet food, and resulted in approximately

115 nationwide class action lawsuits; (2) the complex medical

and toxicological issues involving the combined impact of

melamine and cyanuric acid on small animal renal systems,

which likely would have required multiple experts, at an

“enormous cost,” who would be delving “into somewhat new

territory involving the effects of these toxins on cats and dogs”;

(3) the likelihood that discovery would be “extensive and

require significant resources”; and (4) counsels’ representation

that pursuing the actions “through pretrial motion practice,

formal discovery and trial would involve potentially several

additional years to this litigation and could deprive pet owners

of relief.” Fairness Opinion, 2008 WL 4937632, at *12-13.

The court determined that the reaction of the

overwhelming majority of the class had been positive, thereby

satisfying the second Girsh factor (as of the date of the fairness

hearing, over 9,357 claims had been received, with 89 exclusion

requests from U.S. residents, 25 from Canadian residents, and

28 objections). Id. at *13. With regard to the third factor, the

court found that adequate informal discovery was conducted as

well as some formal discovery, such that counsel were able to

gain an appreciation of the merits of the case as well as the legal

theories and risks. Id. at *14.

The court determined the fourth and fifth Girsh factors

were satisfied, as there was risk to plaintiffs in establishing

causation, liability, and damages if the case proceeded to trial.

Id. at *15. With regard to causation, the court focused first on

plaintiffs’ representations of toxicity. Plaintiffs stated that

45

although research on the toxicity of melamine and cyanuric acid

“demonstrated a strong relationship to acute renal failure,” few

studies had been conducted, and the studies that were conducted

were inconclusive with respect to how many pets became ill or

died as a result of eating recalled pet food. Id. The court also

credited plaintiffs’ representations that causation would be a

“major battleground” between experts, and would involve issues

individual to each pet, such as age and health at the time

allegedly contaminated food was consumed. Id. Liability

would be “hotly contested because the adulteration of wheat

gluten and rice protein concentrate . . . was a criminal act by

Chinese companies.” Id. Further, “as the product moved

through the manufacturing and distribution process . . . varying

degrees of liability would exist between manufacturers, private

labelers and entities that were strictly retailers.” Id. With regard

to damages, the court cited plaintiffs’ admission they did not

know how many pets became ill or died as a result of consuming

recalled pet food, thus creating uncertainty on the possible

ultimate damages. Id.

The sixth factor, the risks of maintaining a class through

trial, weighed in favor of settlement, because “given the

potential differences as to the health of the pet and the size of

the pet, there exist[ed] more than a slight risk of modification or

decertification” if the case proceeded to trial. Id. at *16. With

regard to defendants’ ability to withstand greater judgment and

enforceability of judgment, the court “acknowledg[ed] the fact

that Menu Foods [the major defendant in this litigation] ha[d]

incurred substantial cost in recalling the contaminated pet food,

costs incurred outside of th[e] litigation yet nonetheless factored

into the financial viability of Menu Foods’ ability to pay the

46

settlement. The amount of settlement, coupled with the

expectation that some pet owners w[ould] be able to recover

most if not all of their costs, weigh[ed] in favor of settlement.”

Id. (citing McCoy v. Health Net, Inc., 569 F. Supp. 2d 448, 462-

63 (D.N.J. 2008)).

Finally, the court determined the eighth and ninth Girsh

factors, the range of reasonableness of the settlement fund in

light of the best possible recovery and the range of

reasonableness of the settlement fund to a possible recovery in

light of all the attendant risks of litigation, weighed in favor of

settlement:

In this case, plaintiffs state that the Settlement

allows Class Members to have the potential to

obtain up to 100% of their economic damages

after submitting a valid claim while avoiding the

risk of litigation. Plaintiffs argue that since the

Class Members could potentially recover up to

100% of their economic damages, it is preferable

to the very real possibility of a smaller recovery

or no recovery at all. Plaintiffs also state that the

proposed Settlement represents a significant

recovery in light of the attendant risks of litigation

of proving causation, damages and liability.

The Court finds that the range of reasonableness

under the eighth and ninth Girsh factors weigh[s]

in favor of settlement. Although some Class

Members may not be reimbursed fully for their

economic damages depending upon whether the

fund can support the number of claims ultimately

47

submitted, it does have the potential to allow most

Class Members to be reimbursed fully. The Court

also notes that by settling, the Class Members will

receive money now at present value, rather than

later, assuming they would be successful in

litigation.

Id. at *17 (citing Gen. Motors Corp., 55 F.3d at 806).

Objectors contend the District Court erred in finding the

settlement fair, reasonable, and adequate. After reviewing the

parties’ arguments and conducting our own review of the record,

we find the District Court lacked the information necessary to

evaluate the value and allocation of the Purchase Claims and so

we will vacate and remand on this one issue. In all other

respects we will affirm.

B. The $250,000 Cap on Purchase Claims

At the final fairness hearing, objectors argued that the

$250,000 allocated for Purchase Claims was inadequate and

rendered the settlement unfair and unreasonable. Objectors

pointed out that no sales information for the recalled food had

been presented to the court and that there was no information in

the record that would allow the court to evaluate whether

$250,000 was a reasonable settlement for the Purchase Claims.

Faced with objections to the allocation, the settling parties

explained to the court how they arrived at the $250,000

allocation.27 First, counsel contended that everyone at the

27

In their memorandum of law in support of their joint motion

for preliminary approval of the settlement, the settling parties

did not discuss the merits of the Purchase Claims, how the

48

negotiating table believed the “vast majority” of people who

wanted refunds for the purchase of recalled pet food had already

returned the food to retailers or called the toll-free numbers of

manufacturers and received a refund.28 Second, counsel

parties’ valued the Purchase Claims, or why the parties capped

the Purchase Claims at $250,000. Similarly, at the preliminary

fairness hearing, the settling parties offered no analysis of the

merits or value of the Purchase Claims and did not explain why

the Purchase Claims were capped at $250,000 out of a $24

million settlement. The discussion at the preliminary fairness

hearing focused almost exclusively on the Injury Claims.

28

At oral argument on appeal, the settling parties revealed for

the first time (as far as we can tell) more detailed information

about why they agreed upon a $250,000 cap on the Purchase

Claims. Plaintiffs’ counsel explained that the settling parties

knew that class members with documentation for Purchase

Claims had access to 100% recovery for their claims outside of

the settlement. The purpose of the $250,000 allocation, they

said, was to protect class members who lacked documentation

(that is, class members who had not retained their sales

receipts). Counsel also defended the figure, arguing that a

higher amount might induce fraudulent requests.

According to the Claims Administrator, 11,306 timely,

payable Purchase Claims have been made, for a total of

$597,427.05. See Letter from Edward J. Sincavage, CPA,

Heffler, Radetich & Saitta LLP, to counsel for plaintiffs and

defendants (Mar. 8, 2010) (on file with the Clerk’s Office). Of

the 11,306 Purchase Claims, 1,655 were submitted with

complete documentation. Id. Because the total amount

49

believed that the “vast majority” of the 60 million units of

recalled pet food was never sold to consumers. It was on the

retail shelves at the time the recall was announced and then was

removed from the shelves and put into storage. In response to

the court’s inquiry into whether the settling parties knew what

percentage of the recalled pet food was actually sold at retail,

counsel explained that the parties had “not been able to get

[their] hands around that” because of the unorganized way in

which some of the recalled food was returned.29

The court also inquired into whether any of the $8

million in Historic Payments had gone to claimants seeking a

refund for recalled pet food. Counsel explained that some

portion, “but not very much,” of the $8 million was

compensation for recalled food. Counsel for Petco, Wal-Mart,

and Petsmart explained that when a consumer submitted a

veterinary claim, a refund for recalled food, if due, would also

be paid to resolve the claim on a global basis. But, according to

counsel, the $8 million excludes any refunds paid to consumers

who simply brought recalled products back to the store from

which they made their purchase. These amounts “have not been

calculated as part of this proceeding.”

allocated for Purchase Claims is $250,000, payments for

Purchase Claims will be approximately 41.85% of the payable

amounts. Id. Thus, as the settlement currently stands, 1,655

class members with full documentation to support their Purchase

Claims will receive approximately a 41.85% recovery on these

claims.

29

See discussion infra note 31.

50

The District Court determined that because the recall

involved a defined number of products manufactured over only

a short time period (approximately four months) and because

“many purchasers of Recalled Pet Food Products ha[d] already

[been] compensated outside of the Settlement,” the $250,000

allocation was fair and adequate:

The Recall involves a defined number of products

manufactured over only a few months [between

November 8, 2006, and March 6, 2007]. The

Settlement Agreement applies only to products

recalled in or after March 2007. More

importantly, it was represented to the Court

during the fairness hearing by co-lead counsel and

defense counsel—and it makes common

sense—that manufacturers and retailers have

already provided compensation to purchasers of

recalled products through the Historical Payments

or through point of sale refunds or [as] a result of

the Recall. Therefore, many purchasers of

Recalled Pet Food Products have already [been]

compensated outside of the Settlement.

Therefore, the $250,000 amount allocated is

adequate for payment for “Consumer Food

Purchase Claims” defined as “claims solely for

reimbursement of the costs associated with the

purchase of a Recalled Pet Food Product by a

Settlement Class Member who has not been

reimbursed for such costs to date, including

through return or exchange of the Recalled Pet

Food Products.”

51

Fairness Opinion, 2008 WL 4937632, at *8.

We see no error in the District Court’s common sense

finding that many purchasers of recalled pet food were

compensated for refunds outside of the settlement. But the fact

that many consumers had already received refunds did not

necessarily answer whether the $250,000 allocation was a fair

and adequate settlement of the Purchase Claims.

No one has challenged the adequacy of the $24 million

settlement fund, and we do not doubt the able District Court

properly determined that the fund was a fair and adequate

settlement of all the claims advanced by plaintiffs in this case.

The District Court carefully examined each of the Girsh factors.

But the parties did not focus on the Purchase Claims. We are

unable to determine whether the $250,000 allocation was a fair

and adequate settlement of the Purchase Claims given the risks

of establishing liability and damages and the likely return to the

class of continued litigation. Under this set of facts—where

funds available for some claims are capped while others are

not—the settling parties should have provided the court with

more detailed information about why they settled on the

$250,000 cap.

The settling parties also should have provided

information to determine the range of reasonableness of the

$250,000 allocation “in light of the best possible recovery,”

Prudential, 148 F.3d at 322, and “in light of all the attendant

risks of litigation,” Girsh, 521 F.2d at 157 (quoting City of

Detroit v. Grinnel Corp., 495 F.2d 448, 463 (2d Cir. 1974)). We

have explained that “in cases primarily seeking monetary relief,”

district courts should compare “the present value of the damages

52

plaintiffs would likely recover if successful, appropriately

discounted for the risk of not prevailing . . . with the amount of

the proposed settlement.” Gen. Motors Corp., 55 F.3d at 806

(quoting Manual for Complex Litigation (Second) § 30.44, at

252 (1985)); Prudential, 148 F.3d at 322. “This figure should

generate a range of reasonableness (based on size of the

proposed award and the uncertainty inherent in these estimates)

within which a district court approving (or rejecting) a

settlement will not be set aside.” Gen. Motors Corp., 55 F.3d at

806. Precise value determinations are not required. Cf.

Warfarin, 391 F.3d at 538 (finding no error in the district court’s

analysis of the final two Girsh factors where the plaintiffs’

expert “estimated recoverable damages to be as low as $7.1

million and as high as $133.8 million,” and the district court

described the methodology utilized by the expert to arrive at the

figures and concluded the estimate was reasonable).30

Here, the settling parties failed to provide the District

Court with estimations of recoverable damages for the Purchase

Claims including sales information quantifying the amount of

30

We note that in some cases, “the traditional calculus

suggested by the Manual for Complex Litigation . . . and

adopted by [us] cannot be applied.” Prudential, 148 F.3d at

323. In Prudential, calculating the value of the best possible

recovery would have been “exceedingly speculative” and both

the structure of the settlement and the uncapped benefit fund

made it “difficult to determine accurately the actual value of the

settlement.” Id. at 322-23. In such cases, district courts may not

be able to reduce the final Girsh factors “to a concrete formula.”

Id. at 322. This may or may not be the case here.

53

recalled pet food sold to consumers and the amount of refunds

already paid to consumers.31 If available, this information

31

There appears to be disagreement or confusion among the

parties with respect to the availability of sales information for

the recalled pet food. At the fairness hearing, counsel for

defendant Proctor & Gamble explained that defendants had been

unable to determine what percentage of the recalled pet food (60

million containers) was actually sold at retail, due to the manner

in which some of the product was returned. From what we can

discern from the record, it appears that after the recall was

announced, large quantities of recalled pet food were returned

to some defendants, and some amount of the returned product

was returned as “Unorganized Inventory,” consisting of boxes

and barrels full of a combination of recalled pet food, non-

recalled pet food, and other items that were inadvertently swept

off store shelves.

According to defendants, “[t]he circumstances under

which the Unorganized Inventory was returned to Defendants

prevented each manufacturing Defendant from determining the

amount of product sold and returned, and the amount of product

simply returned from store shelves.” At oral argument,

plaintiffs’ counsel argued that sales information could have been

obtained through discovery. Objectors contend the settling

defendants knew how much recalled product was sold, but

intentionally failed to inform the District Court of the

information. The District Court noted at the fairness hearing

that information on refunds could have been obtained.

From our review of the record, it appears that some

defendants have compiled the amount of returned “organized”

pet food. For example, the Director of Quality Assurance of

54

would have enabled the court to make the required value

comparisons and generate a range of reasonableness to

determine the adequacy of the settlement amount. Cf. Warfarin,

391 F.3d at 538 (settlement fund represented 33% of available

damages); Cendant, 264 F.3d at 241 (settlement represented 36-

37% of damages).

The settling parties contend they provided substantial

support for the adequacy of the $250,000 allocation by citing the

limited time period of the recall—November 8, 2006, through

March 6, 2007—and the significant refunds and compensation

provided for the purchase of recalled pet food outside of the

settlement through point-of-sale refunds, refunds offered by

manufacturers, and the Historic Payments. As noted, however,

this information was insufficient.

In sum, we find the District Court lacked the information

defendant Del Monte Foods Company testified that “[t]he

majority of the recalled pet treats and food held by Del Monte

are inventoried by product-type or SKU and date of manufacture

. . . . These units (pet treats or food packaged for retail sale) are

stored in cases and stacked on full or partial pallets. . . . As such,

there are records and documents that show whether this product

ever left Del Monte’s warehouses, or was delivered to a retailer

or distributor and returned.” And as of December 2007,

defendant Menu Foods was storing “approximately 2,123,974

cases of Organized Product, amounting to approximately

51,000,000 individual units of Organized Product, [and]

approximately 647,917 cases of Unorganized Materials,

[amounting to approximately 15,550,008 individual units of

Unorganized Materials].”

55

necessary to determine whether the $250,000 allocated to

Purchase Claims was fair, reasonable, and adequate.

Accordingly, we will remand for further Rule 23(e) proceedings

only on the allocation for Purchase Claims. On remand, the

settling parties should either produce the relevant information or

demonstrate that it is unavailable or that producing it would be

unfeasible.

C. The Release

The Picus/Kaffer objectors challenge the District Court’s

order approving the settlement’s release. Under the terms of the

release, “Settlement Class Members” release all claims that have

been brought or could have been brought against defendants that

relate in any way to “matters referenced in any claim raised . .

. in the Pet Food Recall Litigation.” “Settlement Class

Member[s]” are all individuals “who purchased, used or

obtained, or whose pets used or consumed Recalled Pet Food

Product(s)” who have not opted out. “Recalled Pet Food

Products” are defined as any pet food product that was recalled

on or after March 16, 2007, “because of allegedly contaminated

wheat gluten and/or rice protein concentrate.” Thus, by its

terms, the release does not apply to claims relating to pet food

that was not recalled after March 16, 2007, because of allegedly

contaminated wheat gluten and/or rice protein concentrate. In

other words, the release does not apply to non-contaminated pet

food, whether or not recalled by defendants or others.

The Picus/Kaffer objectors have asserted claims in non-

MDL pet food lawsuits alleging that they purchased pet food

56

that was falsely labeled as “Made in the USA.”32 Objectors

32

On April 30, 2007, Margaret Picus filed a class action in

Nevada state court (which was removed to the United States

District Court for the District of Nevada), alleging a scheme

among several defendants to sell “Ol’ Roy” brand pet food

products to consumers as “Made in the USA,” when some

ingredients were manufactured outside of the United States. See

Picus v. Wal-Mart Stores, Inc., 256 F.R.D. 651, 654 (D. Nev.

2009). On March 16, 2009, the Picus court granted the

defendants’ motion to deny class certification for litigation

purposes, holding that individual issues would predominate at

trial and that a class action was not the superior method of

adjudication. See id. at 660.

In May 2007, Robert Kennedy filed a complaint in

California state court (which was removed to the United States

District Court for the Southern District of California) alleging

several defendants engaged in a scheme through which four

varieties of Natural Balance pet food were sold to consumers

with the label “Made in the USA” when the products actually

were manufactured either in whole or in part in China. See

Kennedy v. Natural Balance Pet Foods, Inc., No. 07-cv-1082 H,

2007 WL 2300746, at *1 (S.D. Cal. Aug. 8, 2007). Objector

Daniel Kaffer was a member of the putative class in Kennedy.

On June 12, 2008, after the District Court in this case issued its

order granting preliminary certification of the settlement class

and preliminary approval of the settlement, the Kennedy court

denied plaintiff’s motion for class certification. The Kennedy

court determined the plaintiff and all the putative class members

were included in the settlement class identified by the settlement

in this case because the products specified in the complaint were

57

argued below that the release was overbroad because it

improperly released their mislabeling claims without

consideration. After questioning the parties at the fairness

hearing, the District Court disagreed. The court determined that

to the extent individuals purchased “Recalled Pet Food

Products,” their “Made in the USA” claims for those specific

purchases would be released by the proposed settlement. See

Fairness Opinion, 2008 WL 4937632, at *8. But claims for

purchases of pet food that was not recalled after March 16,

2007, because of allegedly contaminated wheat gluten and/or

rice protein concentrate were “outside the scope of the

Settlement Agreement.” Id. The court explained that Picus’s

and Kaffer’s claims were based on their alleged purchase of

mislabeled products over a period of more than four years,

among the “Recalled Pet Food Products” defined in the

settlement. Although plaintiff Kennedy had opted out of this

case, the Kennedy court denied his motion for class certification,

in part, because “every member of [the] putative class

appear[ed] to be subject to the MDL court’s preliminary

approval order enjoining other actions related to the recalled

products.” The court also denied the motion because individual

issues under state law predominated over common issues.

On January 6, 2010, the United States Court of Appeals

for the Ninth Circuit affirmed the denial of the motion for class

certification, but did not base its decision on the settlement in

this case. See Kennedy v. Natural Balance Pet Foods, Inc., 361

F. App’x 785 (9th Cir. 2010); see also Defs.’ Rule 28(j) Letter

(filed 1/14/10). Instead, the court affirmed on the ground

plaintiff failed to satisfy the predominance requirement of Rule

23(b)(3). See Kennedy, 361 F. App’x at 785.

58

beginning in April 2003, and their lawsuits asserted claims for

various pet food products and varieties that were outside the

scope of the pet food recalls. The court found that “[t]o the

extent these claims relate to products other than the Recalled Pet

Food Products, they are not the subject of this Pet Food Recall

MDL. Therefore, [Picus’s and Kaffer’s] claims in the state

actions are not released by the Settlement . . . .” Id.

Objectors contend the release should not have been

approved because: (1) the Kennedy court construed the release

as barring claims for non-contaminated pet food purchases; (2)

defendant Natural Balance argued before the Kennedy court that

the release barred claims for non-contaminated pet food

purchases; and (3) the list of recalled pet food products attached

to the Final Approval Order includes a few non-contaminated

Natural Balance dog food products.

Objectors’ arguments lack merit. The settling parties

agree that the release does not encompass claims relating to non-

contaminated pet food products, including any mislabeling

claims asserted in the Picus and Kennedy actions that are based

on non-contaminated pet food. The fact that the district court in

the Kennedy action may have misconstrued the release as

barring claims for non-contaminated pet food purchases is not

a reason to invalidate the release. The Kennedy court interpreted

the release before the final fairness hearing in this case and

before the District Court determined the scope of the release in

its opinion. More importantly, the Ninth Circuit affirmed the

decision to deny class certification in Kennedy without reference

to this case. See Kennedy, 361 F. App’x at 785.

Additionally, the fact that—prior to the fairness hearing

59

and final approval of the settlement—one defendant argued for

a different interpretation of the release does not render the

release invalid. There presently is no dispute between objectors

and the settling parties regarding the scope of the release. All

parties agree that the District Court properly determined that to

the extent the “Made in the USA” claims relate to products other

than “Recalled Pet Food Products,” they are not the subject of

this action and are therefore not released. Finally, the fact that

the list of “Recalled Pet Food Products” attached to the Final

Approval Order inadvertently includes a few non-contaminated

Natural Balance dog food products does not invalidate the

release. As defendants note, the list of recalled pet foods is not

determinative and has no independent significance—it must be

read in conjunction with the terms of the release, which does not

apply to claims relating to non-contaminated pet food.33

33

The Picus/Kaffer objectors also contend the District Court

erred by failing to grant their request for limited discovery to

establish the alleged insufficiency of the settlement. In Girsh,

we reversed the district court’s final approval of a class action

settlement, finding, among other things, that an objector “was

entitled to at least a reasonable opportunity to discovery against”

the settling parties because he had not been “afforded an

adequate opportunity to test by discovery the strengths and

weaknesses of the proposed settlement.” Girsh, 521 F.2d at

157. We later explained in Community Bank that our finding

regarding objector discovery in Girsh “was predicated on the

total inadequacy of the record upon which the settlement was

approved,” as well as the fact that the objector was denied

meaningful participation at the fairness hearing. Cmty. Bank,

418 F.3d at 316. We concluded, therefore, that “Girsh cannot

60

D. Attorneys’ Fees

Appellants do not challenge the award of attorneys’ fees.

Because no one (no class member as objector) raised this issue

on appeal, there has been no briefing on the matter. In its Note

to the 2003 amendments to Rule 23, the Advisory Committee on

Civil Rules directed the district courts to rigorously scrutinize

the award of attorneys’ fees. See Fed. R. Civ. P. 23(h)(4)

stand for the proposition that, as a general matter, objectors have

an absolute right to discovery.” Id. “On the other hand, we

[have] recognized that discovery may be appropriate if lead

counsel has not conducted adequate discovery or if the

discovery conducted by lead counsel is not made available to

objectors.” Id.; see also Prudential, 148 F.3d at 325 (holding

the district court acted well within its discretion in denying an

objector’s request for discovery where the objector was able to

present his arguments to the court during the fairness hearing

and where the court found the objector “had ample opportunity

to avail himself of the substantial discovery provided to Lead

Counsel but failed to do so, and that additional discovery was

unnecessary because [the objector] focused primarily on legal

issues”). Here, because we will remand for further proceedings

on the fairness of the $250,000 allocation, we need not reach

this issue. On remand, objectors may renew their request for

limited discovery, which the court may grant or deny in its

discretion. See Cmty. Bank, 418 F.3d at 316 (“The District

Court has discretion to employ the procedures that it perceives

will best permit it to evaluate the fairness of the settlement.”

(internal quotation marks omitted)).

61

advisory committee’s note (“Whether or not there are formal

objections, the court must determine whether a fee award is

justified . . . .”). In this respect we do not disagree with the

concurrence. Nor do we conclude the question of attorneys’

fees cannot be considered on appeal sua sponte, depending on

the facts and circumstances of each case. Nevertheless, in this

case, we believe the district court made an extensive inquiry into

and discharged adequately its responsibility to assess the

reasonableness of attorneys’ fees.

IV. CONCLUSION

For the foregoing reasons, we will affirm the certification

of the proposed class for settlement and the denial of the motion

for leave to intervene. We will vacate the approval of the

settlement and remand for further Rule 23(e) proceedings on the

allocation for Purchase Claims.

62

In re: Pet Food Products Liab. Litig., Nos. 08-4741 & 08-

4779

WEIS, J., Concurring and Dissenting.

I am pleased to join the majority opinion but

write separately on two issues. There is no discussion in that

opinion of the size of the attorneys’ fees included in the

settlement: 31% of the $24 million settlement ($7.44

million). To my mind, the record does not demonstrate

adequate support for the amount awarded and, because we are

directing a remand, I would include the fee award as an

additional issue to be resolved.

Moreover, I am not persuaded that application

of the cy pres doctrine is appropriate in the class action

setting. I would hold that any funds remaining at the

conclusion of the claims process should be distributed to class

members where possible or should be escheated to the

government.

The petition for legal fees here presents an all-

too-familiar scenario. Plaintiffs’ lawyers submitted their

justification for a substantial fee, emphasizing the risks of an

unsuccessful outcome for class members and attributing the

negotiated settlement to exceptional skill and dedication.

Defendants remained silent on the issue, likely because, as we

have observed on a number of occasions, they were interested

primarily in “buying peace.” See, e.g., In re Gen. Motors

Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d

768, 819-20 (3d Cir. 1995) (“G.M. Trucks”) (A[T]his court

has recognized that >a defendant is interested only in

1

disposing of the total claim asserted against it; . . . the

allocation between the class payment and the attorneys= fees

is of little or no interest to the defense.=@ (quoting Prandini v.

Nat=l Tea Co., 557 F.2d 1015, 1020 (3d Cir. 1977))).

Recognizing the parties’ disincentives to invoke

judicial scrutiny of fee awards, as well as the potential for a

“misalignment of the attorneys’ and the class’s interests,” id.

at 821, we have held that “a thorough judicial review of fee

applications is required in all class action settlements,” id. at

819. The purpose of this robust and exacting review is to

detect not only “actual abuse” caused by attorney-class

conflict, but also “potential public misunderstandings [that

such conflict] may cultivate.” Id. at 820 (quoting In re Agent

Orange Prod. Liab. Litig., 818 F.2d 216, 225 (2d Cir. 1987)).

Given the plaintiffs’ desire to enforce the

judgment and the defendants’ longing to be done with this

litigation, it is not surprising that no party to this appeal has

challenged the attorneys’ fee award. Nevertheless, that does

not, in my opinion, relieve this Court of the responsibility it

has assumed to ensure that the award is reasonable.

I.

The Notice of Appeal cites the judgment

enforcing the settlement agreement, a component of which

included the fee award. Accordingly, our jurisdiction over

that matter is not in question. The issue here is whether sua

sponte review of the reasonableness of the attorneys’ fee

award is appropriate in these circumstances where the matter

has not been briefed.

2

The courts’ general policy, born in part of

historically self-imposed limitations and as a means of coping

with overburdened dockets, is to deny review of issues not

briefed on appeal. See, e.g., Pfeifer v. Jones & Laughlin Steel

Corp., 678 F.2d 453, 456-58 (3d Cir. 1982), vacated on other

grounds, 462 U.S. 523 (1983) (failure to object in district

court to measure of damages barred appellate review of that

issue). Pfeifer, however, did not purport to make this policy

absolute.

Nor has the Supreme Court definitively

resolved the issue of reviewability. In Singleton v. Wulff,

428 U.S. 106, 121 (1976), the Court said, “The matter of what

questions may be taken up and resolved for the first time on

appeal is one left primarily to the discretion of the courts of

appeals, to be exercised on the facts of individual cases. We

announce no general rule.”

A noteworthy case in this field is Erie R.R. Co.

v. Tompkins, 304 U.S. 64 (1938), whose landmark holding --

that in diversity cases, substantive state law, not federal

common law, controls -- addressed an issue never raised by

the parties.1

1

See Albert Tate, Sua Sponte Consideration on Appeal, 9

Trial Judges J. 68 (1970), as reprinted in Robert Leflar,

Appellate Judicial Opinions 126, 127 (1974). As Justice Tate

explained, “[a] strong majority felt that the new principle

announced was the correct law. . . . To fail to apply the right

principle now, approving by inference the wrong or former

one . . . might cause injustice not only to present litigants, but

3

Sua sponte determination of an issue may be

especially appropriate where the matter involves more than

just the individuals, and addresses a matter of concern to the

courts and the judicial system. It is also proper where such

determination will neither require nor result in much great

additional work for the court or the parties.2

As lawyers and courts make more frequent use

of, and grow increasingly reliant on, the conveniences offered

by class actions (and particularly settlement class actions), it

becomes ever more incumbent on the appellate courts to

ensure that resort to these forms of mass litigation leads to

outcomes that reflect positively on the courts and the judicial

system. Cf. G.M. Trucks, 55 F.3d at 820 (court must “be

alert to the presence in the fee agreement of any actual abuse

or appearance of abuse capable of creating a public

misunderstanding”). Vigorous review of attorneys’ fee

awards by the appellate courts, to certify that such awards are

also to numerous others erroneously relying upon th[at]

principle.” Id.

2

The scope of appellate review in this area has been the

subject of spirited academic discussion. See Robert J.

Martineau, Considering New Issues on Appeal: The General

Rule and the Gorilla Rule, 40 Vand. L. Rev. 1023 (1987);

Rhett R. Dennerline, Pushing Aside the General Rule in

Order to Raise New Issues on Appeal, 64 Ind. L. J. 985

(1989); Allan D. Vestal, Sua Sponte Consideration in

Appellate Review, 27 Fordham L. Rev. 477 (1959), as

reprinted in Robert Leflar, Appellate Judicial Opinions 129,

130 (1974); B.E. Watkins, Manual of Appellate Court

Opinions 154 (1977).

4

neither incongruous with the work performed nor excessive in

light of the results obtained for class members, will reinforce

the public’s confidence in the judicial system.

I do not part ways with the result in the Pfeifer

case, because here there are two critical differences. First, on

the issue of attorneys’ fees, the class was not independently

represented in the district court or before this panel. Unlike

other items in the settlement agreement, where the self-

interests of both plaintiffs and defendants were in play, no

such constraints dominated the determination of a reasonable

fee award.

Second, we have adopted a policy of closely

monitoring fees in class actions. See In re Cendant Corp.

PRIDES Litig., 243 F.3d 722, 731 (3d Cir. 2001) (granting

standing to a non-intervening class member seeking to

challenge fee award on appeal because “reviewing courts

retain an interest -- a most special and predominant interest --

in the fairness of class action settlements and attorneys’ fee

awards”). Failing to raise reasonableness sua sponte would

undermine that commitment. See id. at 729-30 (“it would be

preposterous to hold that, even where a district court awarded

a fee of 75% of the recovery to class counsel, we would have

no power to review such an inappropriate and outrageous

award in the absence of an objector” ).

Furthermore, because this case will be

remanded to the trial court on other issues, remand for

determination of the propriety of the fee award would not

create much additional work for the trial court or class

counsel.

5

In view of the circumstances here, I have no

reservations about discussing the fee award even though the

parties have not briefed that matter. The class action

judgment as a whole is before the panel, and this Court has

assumed the responsibility of monitoring fee awards. The

parties may not thwart that policy by failing to brief the issue.

Accord G.M. Trucks, 55 F.3d at 801 (“Beyond their ethical

obligations to their clients, class attorneys, purporting to

represent a class, also owe the entire class a fiduciary duty

once the class complaint is filed”).

II.

The literature and court opinions discussing fees

in class actions are voluminous and need not be examined at

length here.3 Suffice it to say that, whether on its face a fee

of 31% -- or approximately $7.5 million -- of a recovery of

$24 million is reasonable requires more information than the

record discloses.

3

For a small example of appropriate scholarly commentary,

see Dennis E. Curtis & Judith Resnick, Contingency Fees in

Mass Torts: Access, Risk, and the Provision of Legal Services

When Layers of Lawyers Work for Individuals and

Collectives of Clients, 47 DePaul L. Rev. 425 (1998); John C.

Coffee, Jr., Rescuing the Private Attorney General: Why the

Model of the Lawyer as Bounty Hunter is not Working, 42

Md. L. Rev. 215 (1983); John C. Coffee, Jr., Understanding

the Plaintiff’s Attorney: The Implications of Economic

Theory for Private Enforcement of Law Through Class and

Derivative Actions, 86 Colum. L. Rev. 669 (1986).

6

In reviewing an award of attorneys’ fees, we

apply an abuse of discretion standard. See In re Rite Aid

Corp. Sec. Litig., 396 F.3d 294, 300 (3d Cir. 2005).

However, we require district courts “to clearly set forth their

reasoning for fee awards so that we will have a sufficient

basis to review” them. Id. at 301; see also Cendant PRIDES

Litig., 243 F.2d at 728 (district court must perform “extensive

analysis and inquiry before determining the amount of fees”

so court of appeals can exercise its “independent interest in

monitoring . . . awards”). Cf. Perdue v. Kenny A., ___ U.S.

___, 130 S. Ct. 1662, 1676 (2010) (in analogous statutory fee-

shifting case, remanding for re-calculation of attorneys’ fees

where district court’s methodology prevented appellate courts

from exercising “meaningful appellate review”).

There appears to be a perception in many

district courts that the twenty-five percent “benchmark” is an

appropriate place to begin the fee analysis for most common

fund purposes. Too often that is the end of the discussion,

rather than a beginning point for determining whether a

particular fee is reasonable. In Goldberger v. Integrated

Resources, Inc., 209 F.3d 43 (2d Cir. 2001), the Court of

Appeals noted the prevalence of routine fee awards during the

1970=s as being in the 20-30 percent area. That range,

however, was later considered “to yield too little for the

client-class,” id. at 48, and other methodologies to calculate

fees were adopted, id.

This Court is presented with a record that

essentially adopts plaintiff=s counsel=s petition without

adequate explication. The District Court carefully noted that

its consideration of the award was based upon what the class

attorneys put forth. I do not impugn the integrity and

7

diligence of counsel by requesting more information on the

subject.

Counsel=s efforts appear to have been expended

in three general areas: intensive negotiations and mediations

sessions with defense counsel; inspection of large quantities

of recalled goods to arrive at a stipulation for preservation of

evidence; and motions in the District Court to restrict

communications by a few defendants with punitive class

members.

An advocate for the reasonableness of the $7.5

million fee might wish to know approximately how many

lawyers for the class actually participated in the negotiations

with defense counsel and at the mediation sessions. The

plaintiffs’ petition refers to one meeting when sixty lawyers

appeared for the defendants. It seems unlikely that this was

typical of the mediation or bargaining sessions, although it

points out the difficulty in working out a settlement with a

large, unorganized group. But, for purposes of review, it

would be helpful to know, at least in general terms, what

amount of legal talent was needed -- and how many lawyers

actually were present -- at the negotiation and mediation

sessions.

Plaintiffs= counsel commendably notes their

obligation to avoid duplication in the division of legal work.

Yet, apart from this general acknowledgement, the petition is

vague in demonstrating the efficient use of the personnel

available.

8

For example, counsel discussed in general terms

proper efforts to delegate various tasks among the many

lawyers. However, there remains the possibility that, in light

of the large number of consolidated class actions -- and the

lawyers involved with each such action -- much time was

devoted to task assignment and coordination among the many

law firms. An appropriate inquiry would be whether that

organizational activity was a necessary and limited legal

function, and thus a reasonable expenditure that benefitted the

class as a whole.

The difficulty in proving liability in the

underlying suit is another factor to be considered in justifying

the size of a fee. When defendants’ culpability is clear, less is

required of plaintiffs’ counsel than when responsibility is

sharply contested. In this connection, the amount of spade

work done by government agencies bears on the

reasonableness of the fee.

Both the Federal Drug Administration and the

Justice Department investigated the tainted products at issue

here. Although no enforcement was undertaken by the FDA,

indictments were issued against some of the defendants.

Plaintiffs do not adequately discuss the benefits that the class

derived from the government’s action but merely point out

that it did not solve all of the liability problems. Counsel

should not charge the class for acquiring evidence of

culpability by piggy-backing on the criminal and agency

proceedings. Although the liability here may well not have

been foolproof, seeking recovery for loss caused by a recalled

contaminated product is hardly an insurmountable task. A

demonstration of the benefits derived by the class from the

9

government’s investigation would be of assistance for

purposes of our review.

Generally, we allow lead counsel to distribute

the total fee award to other participating lawyers. However,

no explanation here has been given for the difference in fees

requested for the American lawyers (25%), and the Canadian

lawyers (6%). There may well be sound reasons for asking

approval of this allocation. However, the Court should have

been given the basis for that sharp difference in distribution

and been permitted to review its reasonableness.

Plaintiffs’ counsel asserted that, prior to MDL

consolidation, some defendants had contacted putative

members of the class, attempting to secure information about

the potential value of their claims and, in some instances,

directly or indirectly attempting to settle claims. Counsel

brought this to the attention of the District Court and, with

entry of a consent order, resolved the matter amicably. To

what extent those proceedings were helpful to the class -- as

contrasted to the interests of class counsel -- is not discussed

in the record, nor is the relative amount of the total fee award

attributed to this issue analyzed.

In another phase of the case, counsel inspected

the recalled food at several warehouses, leading to

agreements allowing defendants to dispose of most of this

contaminated material, leaving enough for evidentiary

purposes if necessary at a trial. On the surface, this appears

to be a straightforward task, not requiring extensive activity

by highly experienced lawyers. There may be justifiable

reasons for the fee charged to that work, but the lack of record

information forecloses a robust review.

10

It may be that, on remand, plaintiffs’ counsel

could develop an adequate record to demonstrate the

reasonableness of the $7.44 million fee. At this stage,

however, I believe that further explanation is warranted

before this Court puts its imprimatur on the award.

III.

The settlement agreement also provides that any

funds remaining after administration of the settlement and

payment of all valid claims will be distributed to animal

welfare-related organizations in the United States and

Canada. The size of this charitable gift is immeasurable at

this point and may indeed be insignificant at the conclusion of

all proceedings. However, I do not believe that application of

the cy pres doctrine is appropriate in litigation of this nature.

Cy pres was historically used in testamentary

trusts where it was not possible to distribute funds in precise

accordance with the testator’s wishes. In such cases, the

money was distributed in a manner that came as close as

possible (in Norman French, “cy pres comme possible”) to the

testator’s original intent. That doctrine is well established in

the law.

Applying cy pres to the class action before us,

however, is quite another matter. Certainly, this law suit is

not charitable. There are no individuals whose wishes need

be considered and there is no intent to benefit charitable

purposes that can be attributed to the class members or the

lawyers who established the fund.

11

Traditionally, unclaimed monetary awards have

escheated to the state. The application of that rule seems

reasonable and in accordance with general legal and equitable

principles. Here, the parties benefitted by the action of the

state in providing a forum to resolve their differences and, in

that light, repayment to the government to defray some of the

costs of the court system would be in the nature of a user fee.

We deal here with charitable contributions to

which members of the class never voiced any interest or

approval and a procedure subject to criticism as an

inappropriate judicial function. 4

I would require the District Court to reconsider

the disposition of any funds remaining at the conclusion of

this litigation. Distribution to the class members who have

not received complete compensation should be considered

first. If such payments are not feasible or are unduly difficult,

the fund should escheat to the government.

4

See Adam Liptak, Doling Out Other People’s Money, N.Y.

Times, Nov. 26, 2007, at A14; Editorial, When Judges Get

Generous: A Better Way to Donate Surpluses from Class-

Action Awards, Wash. Post, Dec. 17, 2007. Cf. Am. Law

Inst., Principles of the Law: Aggregate Litigation, § 3.07, at

218-19 (2010) (rejecting “the position . . . that a cy pres

remedy is preferable to further distributions to class

members” and recommending that courts make numerous

inquiries as to the viability of additional payments to the class

before consideration of the cy pres remedy).

12