The House Judiciary Committee, by an 18-6 vote, has given its approval to the Stop Settlement Slush Funds Act of 2016, which would curtail the Department of Justice’s practice of using legal settlements to funnel money to favored groups [Rep. Bob Goodlatte press release, Nicholas Quinn Rosenkranz, Dan Lungren testimony, U.S. Chamber] Earlier here (Randal John Meyer), here, etc.
Following the 2008 crash, government enforcement action extracted $110 billion from lenders and other players over a variety of alleged sins relating to the rise and collapse of the mortgage bubble. Where did it go? Governments held on to a lot of it, a lot went to the government-sponsored Fannie and Freddie mortgage enterprises, favored “housing-related community groups” got some, some went to homeowners with mortgage struggles or to new low-interest loans. In New York, money is going to rebuild the Tappan Zee bridge and “the annual state fair is using bank-settlement money to build a new horse barn and stables.” But no one has kept track of where a lot of the money went, there being no overall effort to account for it. [Christina Rexrode and Emily Glazer, WSJ]
“A member of a class-action lawsuit received a Walmart gift card as part of a settlement, but because of a legal ambiguity, the real gift may be for the lawyers.” With bonus Ted Frank interview quotes [David Segal, “The Haggler,” New York Times] And more on the mentioned Duracell case as showing why the Supreme Court should police class action settlements, as Cato has urged in a brief [Ilya Shapiro]
The Eleventh Circuit approved the settlement of a class action suit over Duracell batteries: “The four plaintiffs law firms that brought the case were together awarded $5.7 million, while the 7.26 million class members they represented divvied up just $345,000 between them.” Ted Frank, well known to our readers, is asking the Supreme Court to review the case, which presents, among other issues, a chance to offer guidance about the cy pres diversion of settlement money to charities and good causes. [Roger Parloff, Fortune, earlier]
- Yikes: Nevada supreme court is nearly broke because it relies on traffic ticket revenue and cops are writing fewer [Las Vegas Review-Journal]
- Forced marriage in immigrant communities happening not just in places like English Midlands, but in U.S. as well; those who assist resistant teenage girls risk “aiding delinquent minor” charges [Washington Post]
- “Posner informs pro se litigant that the queen of England did not absolve him of need to pay taxes” [ABA Journal]
- Panel at Federalist Society on president’s power not to enforce the law [Randy Barnett, background on panel]
- Inside grand jury’s investigation of Pennsylvania Attorney General Kathleen Kane [Philadelphia Inquirer] “Referral fees paid to wife of former Pa. Supreme Court justice questioned” [Harrisburg Patriot-News]
- Have you or a loved one been attacked by a Zebra? [Arkansas Matters] “Louisiana Man on Trial for Murder Says He Thought the Victim Was an Alligator” [People]
- Sneaky Oregon law will divert unclaimed class action dollars to legal aid and not incidentally boost legal fees [Sen. Betsy Johnson, East Oregonian]
Former Overlawyered contributor Ted Frank, in his more recent capacity as class-action objector, has done much to direct judicial attention to the abuses and problems of cy pres settlement provisions that channel supposedly leftover settlement moneys to third parties, often nonprofits to which the parties, their lawyers, or the judge is sympathetic. Last month a split Eighth Circuit panel, agreeing with his arguments, disallowed a deal by which money from the settlement of a class action over the NationsBank/BankAmerica merger would be sent to Legal Services of Eastern Missouri [Ted Frank/CCAF; Alison Frankel/Reuters; David Oetting v. Green Jacobson, ruling in PDF; Bill McClellan, St. Louis Post-Dispatch in September (“Why should money belonging to the class members be given to a charity — no matter how much the judge and the class-action lawyers like the charity?”); Sean Wajert] Per James Beck:
The Court explained, “Because the settlement funds are the property of the class, a cy pres distribution to a third party of unclaimed settlement funds is permissible only when it is not feasible to make further distributions to class members, except where an additional distribution would provide a windfall to class members with liquidated-damages claims that were 100 percent satisfied by the initial distribution.” … The Court disagreed with the district court’s finding that further distributions (including the search for class members whose checks had been unreturned) would be too “costly and difficult”, emphasizing that “that inquiry must be based primarily on whether the amounts involved are too small to make individual distributions economically viable.” …
The Court also “flatly rejected” class counsel’s argument that further distribution would be inappropriate because “it would primarily benefit large institutional investors, who are less worthy than charities such as LSEM,” … In other words, class counsel can’t use legal French to take a class’ money.
Meanwhile, “despite the growing controversy, the Rules Advisory Committee is considering formalizing the use of cy pres” in Rule 23 class actions, a step that not all will welcome [Andrew Trask]
House Republicans want answers on how federal agencies’ mega-settlements with issuers of mortgage-backed securities came to include tens of millions of dollars in payments to “housing counseling” groups allied with the Obama Administration [DS News] Earlier on banks’ payments to activists here, here, etc.
“Judge Richard Posner of the Seventh Circuit Court of Appeals has unleashed another zinger at class-action attorneys, trashing a settlement over joint-pain pills that would have paid attorneys $2 million in fees, more than double what their clients got.” [Daniel Fisher, Forbes, whose own writing gets cited; opinion in Pearson v. NBTY] From the ABA Journal:
The opinion was a victory for Ted Frank of the Center for Class Action Fairness, who objected to the settlement as a class member. He told the Am Law Litigation Daily he will be citing the case in new objections to class-action settlements. So far, he says, his group has persuaded courts to wipe out $271 million in attorney fees in the 39 cases in which the center achieved some success.
“This is the best opinion out there” on class settlement issues, Frank told the Litigation Daily. “I think it will have a dramatic effect on class action settlements negotiated.”