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]
3 Comments
Of course not. 100% is more reasonable, don’t you think?
If you have, say, a million people in your class that each should get $10, and you can only find 10000 of them, then it might make sense to give the remaining $9.9 million to a charity – the class members don’t deserve the extra money since they weren’t injured by more than $10, and they’re ill-gotten profits so the company doesn’t deserve to keep the money.
However, this should NOT count as part of what was paid to the class when it comes to determining fees. This change might result in some real incentives for the plaintiff’s attorneys to actually find the members, for one thing. And it stands to reason that a $9.9 million donation to a charity does not result in a $9.9 million benefit to the class. The attorneys should be paid on the basis of what they got for their clients, not for forcing a company to donate to charity.
I have a better solution. If the value of a settlement is X dollars, then the defendant must disgorge that money. Pay those who want to be paid and put the remainder of the money in a trust for the benefit of society. Or put the money in the US or state coffers and reduce taxes. Then, if the lawyers want 5%, we really know the value they are basing it on.
What we have now is, essentially, some companies lying and cheating their way to millions of dollars, or being extorted by class-action lawyers where there was no lying and cheating, with a wealth transfer to those lawyers and without acknowledgement of the wrongdoing by the companies.
I would rather have a system that punishes the bad companies and protects the good ones. I don’t know how we can distinguish that, though.