Gormley v. Nike, Inc.

Filing 38

ORDER DENYING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S CLAIM FOR CY PRES RECOVERY(SI, COURT STAFF) (Filed on 10/5/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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DUSTIN GORMLEY, individually and on behalf
of all others similarly situated,
Plaintiffs,

United States District Court
For the Northern District of California

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No. C 11-893 SI
Consolidated cases: C 11-1588 SI and C 112451 SI
ORDER DENYING DEFENDANTS’
MOTION TO DISMISS PLAINTIFF’S
CLAIM FOR CY PRES RECOVERY

v.
NIKE USA, INC., et al.
Defendant.

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Defendants’ motion to dismiss plaintiff Hartman’s request for cy pres recovery is scheduled for
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a hearing on October 7, 2011. Pursuant to Civil Local Rule 7-1(b), the Court determines that the matter
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is appropriate for resolution without oral argument, and VACATES the hearing. For the following
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reasons, the Court DENIES defendants’ motion.
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BACKGROUND
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Plaintiffs in these consolidated cases have brought class actions on behalf of themselves and a
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class of consumers, alleging that defendants Nike USA Inc. and Nike Retail Services, Inc. (“Nike”) “are
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engaging in a pattern of unlawful and deceptive business practices by utilizing an ‘Information Capture
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Policy’ whereby Defendants’ cashiers both request and record personal identification information, in
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the form of zip codes, and credit card numbers from customers using credit cards at the point-of-sale
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in Defendants’ retail establishments.” Hartman Compl. ¶ 2. Plaintiffs allege that defendants use the
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zip codes and additional information obtained from customers’ credit cards, including names and credit
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card numbers, to obtain customers’ home addresses. Id. ¶ 3. Plaintiffs allege that defendants’ policy
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violates California Civil Code § 1747.08.

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Hartman’s complaint requests, inter alia, “an award to Plaintiff and to each member of the Class

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the civil penalty to which he or she is entitled” under section 1747.08(e), and “distribution of any

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moneys recovered on behalf of the Class of similarly situated consumers via fluid recovery or cy pres

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recovery where necessary to prevent Defendant from retaining the benefits of their wrongful conduct.”

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Hartman Compl. at Prayer for Relief ¶¶ 2-3.

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DISCUSSION
Defendants have moved to dismiss plaintiffs’ “claim” for cy pres recovery on the ground that

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United States District Court
For the Northern District of California

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Section 1747.08(e) limits a plaintiff’s relief solely to statutory penalties. Plaintiffs counter that the

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prayer for cy pres distribution is not a separate form of “damages” sought, but rather that it is merely

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a method of distributing awards in a class action when a court finds it “essential to ensure that the

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policies of disgorgement or deterrence are realized.” State of California v. Levi Strauss & Co., 41 Cal.

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3d 460, 472 (1986).

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Defendants primarily rely on Haug v. Petsmart, Inc., No. 2:10-cv-00990-MCE-KJM, 2010 WL

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2925069 (E.D. Cal. July 23, 2010), in which the court struck a claim for “cy pres damages” as

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unauthorized under Section 1747.08. Id. at *1. In contrast, plaintiffs have submitted a recent decision

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by Judge White of this district in which he denied the defendants’ motion to dismiss a request for cy

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pres distribution in a case alleging violations of Section 1747.08. Davis v. Cole Haan, Inc., C 11-1826

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JSW (Docket No. 37, Ex. A). In denying the defendants’ motion to dismiss, Judge White stated, “The

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Court need not determine at this time whether distribution of any unclaimed statutory damages to the

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purported class through cy pres would be appropriate. The issue of cy pres distribution is premature

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until a class is certified, damages are awarded, and there are funds that remain unclaimed.” Id. at 2:20-

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23 (emphasis in original) (citing Rodgriguez v. West Publ’g Corp., 563 F.3d 948, 966 (9th Cir. 2009)

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(finding cy pres distribution “becomes ripe only if the entire settlement fund is not distributed to class

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members” and declining to determine propriety of cy pres at that time)). Judge White also disagreed

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with Haug’s characterization of cy pres funds as damages, finding instead that they are a form of

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distribution of damages. Id. at 2 n.1.

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The Court agrees with Judge White’s analysis in Davis, and finds that the request for cy pres

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distribution is not properly characterized as a claim for recovery, but rather a method of distribution.

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The Court also agrees with Judge White that the issue is not yet ripe, and that defendants may challenge

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the use of cy pres distribution if and when this issue becomes ripe. Accordingly, the Court DENIES

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defendants’ motion to dismiss.

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United States District Court
For the Northern District of California

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CONCLUSION
For the foregoing reasons, the Court DENIES defendants’ motion to dismiss. Docket No. 34.

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IT IS SO ORDERED.

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Dated: October 5, 2011
SUSAN ILLSTON
United States District Judge

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