The judge found fault with a cy pres diversion of funds to charity. Ted Frank had criticized the settlement as leaving consumers in arguably a worse position than if the lawyers hadn’t sued. [Point of Law, earlier]
Consumer Action, the San Francisco-based nonprofit advocacy and education group, takes issue with our August 1 post on its receipt of cy pres awards from class action settlements. You can read the letter from Linda Sherry, its DC office director, here, along with the original post, which we have edited in response to the objections.
A San Francisco nonprofit named Consumer Action is in the habit of pocketing cy pres moneys — leftover funds that are supposed to go “as nearly as possible” to class relief — from class actions against credit card companies and other mass marketers. Does Consumer Action have any connections to lawyers who file class action suits, and if so, are those connections significant? [Ted Frank, Point of Law] (Bad link fixed now; text edited August 5 per discussion below.)
[A Consumer Action executive has been in touch to take issue with this post, pointing out, among other things, that the two personages mentioned in the Point of Law post are no longer married to each other, and arguing that the group's work is independent of class action lawyers. I have reworded the post to reflect these concerns.]
August 6 update: Letter from Consumer Action’s Linda Sherry follows, continued after jump:
Dear Mr. Olson,
I am writing to you to clarify certain points made in your recent blog post, “Consumer Action, chez Sturdevant” (http://overlawyered.com/2012/08/consumer-action-chez-sturdevant/) based on a post by PointofLaw.com (http://www.pointoflaw.com/archives/2012/07/damned-if-you-do-files-chase-bank-credit-card-class-action.php).
Patricia Sturdevant, currently the president of Consumer Action’s Board of Directors, is employed as Deputy Commissioner for Policy and Planning at California Department of Insurance. She has been divorced from attorney James Sturdevant since 1996. Mr. Sturdevant’s firm has no formal connection to Consumer Action, however we admire of Mr. Sturdevant’s track record as a consumer attorney and consider him one of many valued supporters. These supporters also include corporations, foundations, public interest groups and individuals.
[click to continue…]
A three-judge panel of the Ninth Circuit led by Judge Stephen Trott has rejected a settlement between class action lawyers and Kellogg over allegedly misleading promotion of its Frosted Mini-Wheats cereal. The settlement involved a smallish refund offer for the class of consumers, an unrelated food giveaway (so-called cy pres relief, given to beneficiaries other than the class initially wronged), and $2 million to the plaintiff’s lawyers, or roughly $2,100 an hour. [Hans von Spakowsky/PJ Media, Ted Frank/PoL, ABA Journal]
Martin Redish (Northwestern) and John Beisner (Skadden Arps) were among the panelists at the June 1 hearing, and cy pres slush funds were a particular focus of interest [John O'Brien/Legal NewsLine, Ted Frank/PoL]
Further on stories we’ve noted in the past:
- Objectors including CCAF and CEI challenge Cobell Indian trust settlement [Legal Times, PoL, earlier]
- Post-mortems continue on Ohio S.B. 5 labor measure [Daniel DiSalvo, Christian Schneider, earlier]
- More on divorced man’s dogged pursuit of case against wedding photographer [Above the Law, earlier]
- Arkansas AG McDaniel: I’ll stop steering cy pres funds to charities [Arkansas Project, PoL, earlier]
- Rochester: “Police Union Punishes DA’s Office for Not Illegally Charging Woman Who Recorded Cops” [Radley Balko, earlier]
- “Men at Work lose appeal over Kookaburra riff” [Guardian via Legal Blog Watch, earlier here, etc.]
- Wash. Supreme Court overturns woman’s horn-honking conviction [Seattle Times, opinion PDF, earlier here, here]
It’s surprising there isn’t more controversy over state AGs’ frequent practice of using moneys from lawsuit settlements for their own favored causes (as opposed to, say, handing it over to the state treasury). Now Arkansas AG Dustin McDaniel is drawing criticism for his funneling of cy pres funds to politically advantageous causes that don’t happen to have been voted appropriations by the state legislature [John Brummett, Arkansas News; Dan Greenberg, The Arkansas Project, and followup]
P.S. Related on cy pres in private class actions: Dan Popeo, WLF (Google Buzz settlement); Michael Tremoglie, LNL; Ted Frank.
Ted Frank’s class action settlement reform group, the Center for Class Action Fairness, has announced “multiple victories” in ongoing cases arising from settlements by Apple, Classmates.com, Toyota, HP, and gasoline retailers. Among the topics addressed in objection: exaggeration of benefits supposedly provided for the class, excessive attorney fees, and diversion of proceeds to groups unrelated to the class. Details here.
Among its most insidious features, notes Ira Stoll, is a $2.5 million cy pres fund earmarked for “corporate governance programs at 12 universities across the country,” and which will predictably encourage such academic programs, at law schools and elsewhere, to align themselves further with the agenda of the plaintiff’s securities bar and against the interest of actual shareholders at companies like Apple. I’ve got much more about cy pres law school slush funds in Schools for Misrule, forthcoming. [Future of Capitalism; Jim at PoL]
Arkansas Attorney General Dustin McDaniel has bestowed $100,000 to assist in construction of the Arkansas Fallen Firefighters Memorial on the grounds of the state Capitol. The money came from the settlement of a lawsuit against the Pfizer drug concern, the connection of which to the cause of fallen firefighters is at best obscure. [Arkansas Online]