What To Do With Left-Over Class Action Money
posted by Deven Desai
Adam Liptak has a nice piece in today’s New York Times about the growth of left-over money from class action suits. Judges are finding that after a case is complete there is often a large pool of money that is unclaimed, and the judge must then decide what to do with the money. In one case involving models the judge designated an eating disorder and a drug abuse charity as recipients of the money. The problem is that the Second Circuit and some academics think the plan to use cy pres as a way to dispose of the money has flaws. Judges are being lobbied for money which raises corruption concerns according to Professor Issacharoff of NYU. As Dean Levi of Duke notes, this role “is not a true judicial function and can lead to abuses,” and requests to give an instiution money as a cy pres award put judges in “uncomfortable” positions. The awards can be large. For example, according to the article, George Washington University Law School and The Illinois Institute of Technology have each received $5 million from law suit settlements. Whether judges are best-placed to dole out the money might merit some research and writing. In addition, some argue that the money must go to plaintiffs. Yet, if only a handful of plaintiffs end up filing the paperwork and receive a windfall the system is apparently flawed again. Nonetheless perhaps allowing such windfalls will provide incentives to others to claim their otherwise small payments. It seems that the system fails to provide a good way to get the money to the plaintiffs which alone suggests that judge should not be in this position in the first place. That alone might be worth some writing and thought.
November 26, 2007 at 10:43 am
Posted in: Wills, Trusts, and Estates
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Responses (1)
anonymous - November 26, 2007 at 12:52 pm
It’s a good article, and Prof. Issacharoff’s proposal (distribute the extra to the plaintiffs) seems to follow as a matter of common sense. Another option might be to treat the extra money similarly to the way the government treats civilly or criminally forfeited property and just keep it for the government.
My sole complaint with the article is that it gives no hint of how widespread this scenario is and how much is at stake. All we know is that Prof. Issacharoff is “shocked” at the magnitude.
The anecdotes in the article, though, seem pretty bad. I didn’t study cy pres much in law school. Perhaps someone who knows more about it can fill me in, but based just on the article, it seems to me that either (1) the whole doctrine is an invitation to the sort of corruption described there, or (2) the doctrine has gotten wildly out of control the “as near as possible” meaning of the words has gotten lost. What possible legitimate reason could a judge have for giving leftover class action settlement money to a law school?
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