                              In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 03-1069
MAV MIRFASIHI, individually and on behalf
 of all others similarly situated,
                                       Plaintiff-Appellee,
                              v.

FLEET MORTGAGE CORPORATION,
                                                  Defendant-Appellee.

APPEAL OF: ANGELA PERRY and MICHAEL E. GREEN,
                                                Objectors-Appellants.
                           ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
            No. 01 C 0722—Charles R. Norgle, Sr., Judge.
                           ____________
   ARGUED SEPTEMBER 5, 2003—DECIDED JANUARY 29, 2004
                     ____________


 Before BAUER, POSNER, and ROVNER, Circuit Judges.
  POSNER, Circuit Judge. Class members have appealed,
challenging the class-action settlement approved by the
district judge. The judge ordered the challengers to post a
$3.15 million appeal bond on the ground that if the settle-
ment were delayed Fleet would lose the ability to pay the
amounts that it had agreed to pay in the settlement. There
was no basis for this concern, and we vacated the bond.
2                                                  No. 03-1069

   The suit was brought on behalf of approximately 1.6
million persons whose home mortgages were owned by
Fleet Mortgage Corporation. It charges that without their
permission Fleet transmitted information about their finan-
cial needs that it had obtained from their mortgage papers
to telemarketing companies which then, in conjunction with
Fleet, used that information and deceptive practices to sell
those customers financial services they didn’t want. The
unauthorized transmission of the information to the market-
ers is alleged to have violated the federal Fair Credit
Reporting Act along with state consumer protection laws
plus state common law protections against invasion of
privacy, while the use of the information to trick people into
buying from the telemarketers is alleged to have violated
both the federal Telemarketing and Consumer Fraud and
Abuse Prevention Act and state consumer protection laws.
There are thus two plaintiff classes, a “pure” information-
sharing class of 1.4 million customers of Fleet whose
financial information Fleet transmitted to the telemarketers
but who did not buy anything from them, and a telemar-
keting class (technically a subclass, but nothing turns on
that refinement) consisting of the 190,000 members of the
first class who were victims of the telemarketers. As far as
we can determine, no lawyer represents only members of
the first class.
   As is common, the suit was filed after a variety of smaller
class action and individual suits, testing the legal waters as
it were, had been filed against Fleet complaining of the
practices that we have outlined. The hope doubtless shared
by class counsel and Fleet alike was that a settlement ap-
proved by the judge in this comprehensive class action
would lead the judge to enjoin the other suits, Williams v.
General Electric Capital Auto Lease, Inc., 159 F.3d 266, 275 (7th
Cir. 1998); In re VMS Securities Litigation, 103 F.3d 1317,
No. 03-1069                                                  3

1325-26 (7th Cir. 1996); Flanagan v. Arnaiz, 143 F.3d 540, 545-
46 (9th Cir. 1998); In re Agent Orange Product Liability
Litigation, 996 F.2d 1425, 1432 (2d Cir. 1993), thus bringing
the dispute between Fleet and its 1.6 million customers to a
definitive end except for litigation instituted by opt-outs
from the settlement. Even without an injunction, the issu-
ance of a judgment based on the settlement would unless
vacated extinguish further litigation by those bound by the
judgment by operation of res judicata. But as the citations
indicate, injunctions against other litigation are occasionally
issued to terminate parallel litigation more quickly and
securely than would be the case if the defendant had to
interpose a res judicata defense in separate suits.
   A settlement was negotiated that the judge approved and
this appeal challenges. The challenge focuses on the fact that
one of the classes, namely the pure information-sharing
class, received absolutely nothing, while surrendering all its
members’ claims against Fleet. Of course, if their claims
were worthless (more precisely, worth too little to justify a
distribution—a qualification that we elaborate on below),
they lost nothing. But the district judge did not find that
their claims were worthless, and it would be surprising if
they were. The allegedly unauthorized transmittal of
information to the telemarketers may have violated state
consumer protection statutes that authorize the victims of
the violation to obtain damages; it may also have infringed
state common law protections of privacy, including finan-
cial privacy. Fleet’s “privacy policy” assures its consumers
that Fleet “share[s] the minimum amount of information
necessary for that company [i.e., the company with which it
is sharing the information] to offer its product or service,”
and this statement, which if false as alleged may well be
fraudulent, might support a claim under state consumer
protection or privacy law. Such a claim would not be a sure
bet, but colorable legal claims are not worthless merely
4                                                  No. 03-1069

because they may not prevail at trial. A colorable claim may
have considerable settlement value (and not merely nui-
sance settlement value) because the defendant may no more
want to assume a nontrivial risk of losing than the plaintiff
does.
  The members of the telemarketing class received some-
thing in the settlement. Fleet agreed to disgorge the profits
of its allegedly unlawful conduct. These profits, it appears,
had actually come from the members of the information
class, but because the total profits were only $243,000, so
that the per capita recovery for the 1.4 million members of
the class would amount to less than 20 cents, the settlement
transferred the profits to the telemarketing class. Fleet
further agreed to set aside $2.4 million (roughly 10 times the
profits) for payments ranging from $10 to a maximum of
$135 per transaction with a telemarketing class member,
depending on the character of his transaction with the tele-
marketers. The part of the $2.4 million that is not claimed
will revert to Fleet, and it is likely to be a large part because
many people won’t bother to do the paperwork necessary to
obtain $10, or even a somewhat larger amount. In re Mexico
Money Transfer Litigation, 267 F.3d 743, 748 (7th Cir. 2001);
Martin H. Redish, “Class Actions and the Democratic
Difficulty: Rethinking the Intersection of Private Litigation
and Public Goals,” 2003 U. Chi. Legal Forum 71, 103-04; Gail
Hillebrand & Daniel Torrence, “Claims Procedures in Large
Consumer Class Actions and Equitable Distribution of
Benefits,” 28 Santa Clara L. Rev. 747, 751-53 (1988). The
district judge has approved a handsome fee for the class
lawyers, $750,000, despite the meagerness of the relief
agreed to in the settlement.
  Fleet, joined by the class counsel, argues that the members
of the pure information-sharing class didn’t really receive
nothing in exchange for giving up their claims; they re-
No. 03-1069                                                    5

ceived the emotional satisfaction of knowing that Fleet had
been forced to give up its profits. That is a preposterous
argument. Supposing that each of the 1.4 million members
of the information-sharing class could expect a damages
award of, say, $25, the total damages of the class would be
$35 million. The idea that a rational fiduciary would
surrender a claim worth $35 million in exchange for the
satisfaction of knowing that his wrongdoer had been forced
to pay $243,000 to members of another class staggers the
imagination.
  The lawyer for plaintiff Mirfasihi, a representative of
the information-sharing class who for his service as repre-
sentative will receive $250 if the settlement is approved
even though the settlement is worth nothing to the people
he supposedly is representing, tells us that although the
information-sharing class did not obtain a “formal” in-
junction against Fleet’s unlawful sharing of personal fi-
nancial information, it obtained injunctive relief “in effect”
because several months after this suit was filed Fleet sold its
mortgage business. But at argument the lawyer repeatedly
disclaimed any suggestion that the suit had induced the
sale. According to press reports, Fleet sold because “it
wasn’t thrilled with the mortgage business, which operates
in a cutthroat market and offers narrow profit margins.”
John Hechinger & Nikhil Deogun, “Washington Mutual
Nears a Deal to Buy Loan Unit of FleetBoston,” Wall St. J.,
p. B8, Apr. 2, 2001. Nor would the sale as such provide any
prospective relief to the information-sharing class, since the
buyer is free to continue the same practices that the seller
engaged in. No retrospective relief, no prospective relief,
and no “emotional balm” relief.
  Fleet and the class counsel contend that the information-
sharing class obtained a “cy pres” remedy. The reference is
to the trust doctrine that if the funds in a charitable trust can
6                                                 No. 03-1069

no longer be devoted to the purpose for which the trust was
created, they may be diverted to a related purpose; and so
the March of Dimes Foundation was permitted to reorient
its activities from combating polio to combating other
childhood diseases when the polio vaccine was developed.
The doctrine, or rather something parading under its name,
has been applied in class action cases, In re Mexico Money
Transfer Litigation, supra, 267 F.3d at 748-49; Six (6) Mexican
Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1305 (9th
Cir. 1990); 4 Alba Conte & Herbert B. Newberg, Newberg on
Class Actions § 11:20 (4th ed. 2002), but for a reason unre-
lated to the reason for the trust doctrine. That doctrine is
based on the idea that the settlor would have preferred a
modest alteration in the terms of the trust to having the
corpus revert to his residuary legatees. So there is an
indirect benefit to the settlor. In the class action context the
reason for appealing to cy pres is to prevent the defendant
from walking away from the litigation scot-free because of
the infeasibility of distributing the proceeds of the settle-
ment (or the judgment, in the rare case in which a class
action goes to judgment) to the class members. There is no
indirect benefit to the class from the defendant’s giving
the money to someone else. In such a case the “cy pres”
remedy (badly misnamed, but the alternative term—“fluid
recovery”—is no less misleading) is purely punitive.
  The class counsel and Fleet point out that if the $243,000
in restitution due the members of the information-sharing
class were spread evenly across the 1.4 million members of
that class, each member would receive an amount smaller
than the cost of postage; therefore the telemarketing class
should receive it (as part of the $2.4 million) because it has
fewer members. The argument founders on the fact that
restitution is merely an alternative remedy to damages. The
aggregate damages of the information-sharing class might,
as we said, be as high as $35 million (or even higher), and
No. 03-1069                                                  7

then there would be no reason for thinking distribution to
the class members infeasible. See Mace v. Van Ru Credit
Corp., 109 F.3d 338, 345 (7th Cir. 1997); Molski v. Gleich, 318
F.3d 937, 945-55 (9th Cir. 2003). Remember that the $10
minimum entitlement of the telemarketing class members
will be distributed to them. Of course the per capita dam-
ages of the information class might turn out to be too low to
cover the costs of distribution (not 20 cents, but not $10
either), or might cover them so thinly as to be dispropor-
tionate to the net distribution. And then the question would
arise whether a punitive remedy is appropriate in a suit in
which the plaintiffs might never have been able to claim
punitive damages. We needn’t try to answer that question.
   Would it be too cynical to speculate that what may be
going on here is that class counsel wanted a settlement that
would give them a generous fee and Fleet wanted a set-
tlement that would extinguish 1.4 million claims against it
at no cost to itself? The settlement that the district judge
approved sold these 1.4 million claimants down the river.
Only if they had no claim—more precisely no claim large
enough to justify a distribution to them—did they lose
nothing by the settlement, and the judge made no finding
that they had no such claim.
  Because class actions are rife with potential conflicts of
interest between class counsel and class members, Reynolds
v. Beneficial National Bank, 288 F.3d 277, 279-83 (7th Cir.
2002); In re General Motors Corp. Pick-Up Truck Fuel Tank
Products Liability Litigation, 55 F.3d 768, 801-05 (3d Cir.
1995); Weinberger v. Great Northern Nekoosa Corp., 925 F.2d
518, 524 (1st Cir. 1991); John C. Coffee, Jr., “Class Action
Accountability: Reconciling Exit, Voice, and Loyalty in
Representative Litigation,” 100 Colum. L. Rev. 370, 385-93
(2000), district judges presiding over such actions are
expected to give careful scrutiny to the terms of proposed
8                                                 No. 03-1069

settlements in order to make sure that class counsel are
behaving as honest fiduciaries for the class as a whole. Uhl
v. Thoroughbred Technology & Telecommunications, Inc., 309
F.3d 978, 985 (7th Cir. 2002); Culver v. City of Milwaukee, 277
F.3d 908, 915 (7th Cir. 2002); In re Cendant Corp. Litigation,
264 F.3d 201, 231 (3d Cir. 2001); Grant v. Bethlehem Steel
Corp., 823 F.2d 20, 23 (2d Cir. 1987). Unfortunately the
district judge’s decision approving the settlement does not
discuss the settlement’s questionable features—not only the
one we’ve stressed, namely the denial of any relief to an
entire class, the kind of thing that led to rejection of the
settlements in Crawford v. Equifax Payment Services, Inc., 201
F.3d 877, 880-82 (7th Cir. 2000), and Molski v. Gleich, supra,
318 F.3d at 953-54; cf. In re General Motors Corp. Engine
Interchange Litigation, 594 F.2d 1106, 1133-34 (7th Cir. 1979),
but also the reversion of unclaimed refunds to the putative
wrongdoer and the fact that the class that was denied relief
did not have separate counsel from the counsel for the
favored class. Ortiz v. Fibreboard Corp., 527 U.S. 815, 852-
53 (1999); Culver v. City of Milwaukee, supra, 277 F.3d at 912-
13; In re General Motors Corp. Pick-Up Truck Fuel
Tank Products Liability Litigation, supra, 55 F.3d at 800-01;
cf. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 625-28
(1997). Also not discussed is the failure of the notice of
settlement to inform members of the information-sharing
class (who, remember, were being told that their share of
the settlement was a big fat zero) of a pending case in a
Massachusetts state court seeking monetary relief on behalf
of Massachusetts residents who were members of the infor-
mation-sharing class and whose rights would be extin-
guished if the settlement in the present case was approved,
unless they opted out of it.
  All these were warning signs, no more; we do not suggest
that deletion of the reversion provision, or notice of the
No. 03-1069                                                     9

Massachusetts suit, or even the award of some relief for the
information class, were per se requirements of an acceptable
settlement. A reversion provision might encourage a more
generous settlement offer. Notice of a pending suit that
might offer only remote prospects of success might confuse
class members and precipitate imprudent opting out. Even
the denial of all relief to the information class might be
justified if careful scrutiny indicated that the class had no
realistic prospect of sufficient success to enable an actual
distribution to the class members. But these were matters to
be considered, not assumed. The last is the most important,
especially in view of the fact that the information class did
not have separate counsel. In Reynolds v. Beneficial National
Bank, supra, 288 F.3d at 284-85, we emphasized the district
judge’s duty in a class action settlement situation to estimate
the litigation value of the claims of the class and determine
whether the settlement is a reasonable approximation of
that value. Id.; see also Mars Steel Corp. v. Continental Illinois
National Bank & Trust Co., 834 F.2d 677, 682 (7th Cir. 1987);
In re General Motors Corp. Engine Interchange Litigation, supra,
594 F.2d at 1132 n. 44; In re General Motors Corp. Pick-Up
Truck Fuel Tank Products Liability Litigation, supra, 55 F.3d at
806; In re Traffic Executive Association-Eastern Railroads, 627
F.2d 631, 633 (2d Cir. 1980). The district judge in this case
made no estimate of the value of the legal claims of the
information-sharing class.
  So the settlement cannot stand. But we disagree with the
objectors that the members of the information-sharing class
are entitled to individual notice. Such notice is preferable to
newspaper or other collective notice but it was impossible
here because Fleet has no record of those customers whose
financial information it gave the telemarketers but who did
not buy anything from the latter. (Those who did buy, the
members of the telemarketing class, received individual
notice.) Maybe Fleet should have such a record, but it
doesn’t and so individual notice is impossible. Nor could it
10                                                No. 03-1069

have enclosed a notice with the monthly statements that it
sends all its mortgage customers (necessarily including the
members of the information class, or at least members
current as of the date the notice would have been mailed),
because it sold its mortgage business before it was ordered
to notify the class.
  When individual notice is infeasible, notice by publication
in a newspaper of national circulation (here USA Weekend,
a magazine that is included in hundreds of Sunday newspa-
pers) is an acceptable substitute. Fed. R. Civ. P. 23(c)(2);
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306,
317 (1950); In re Agent Orange Product Liability Litigation, 818
F.2d 145, 167-69 (2d Cir. 1987); Montelongo v. Meese, 803 F.2d
1341, 1351-52 (5th Cir. 1986). Something is better than
nothing. But in this age of electronic communications,
newspaper notice alone is not always an adequate alterna-
tive to individual notice. (See Brian Walters, “ ‘Best Notice
Practicable’ in the Twenty-First Century,” 2003 UCLA J.L. &
Tech. 4, discussing N.D. Cal. Civ. L.R. 23-2, which requires
that notice of securities class actions be posted to an online
clearinghouse maintained by Stanford Law School.) The
World Wide Web is an increasingly important method of
communication, and, of particular pertinence here, an in-
creasingly important substitute for newspapers. Although
Fleet did not post a notice on its own website, a firm that
was hired to administer the settlement maintained a website
with details of the case, and so far as appears that was an
acceptable substitute.
  The question of the adequacy of the notice is separate
from whether the settlement should have been approved. It
should not have been, given what was before the district
judge. The judgment is therefore reversed and the case is
remanded for further proceedings consistent with this opin-
ion. Circuit Rule 36 shall apply on remand.
                                  REVERSED AND REMANDED.
No. 03-1069                                           11

A true Copy:
 Teste:

                     _____________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit




               USCA-02-C-0072—1-29-04
