Today the Competitive Enterprise Institute (CEI) filed a supplemental brief with the Supreme Court, arguing the Ninth Circuit’s decision in the EasySaver case earlier this month underscores the need for its proposed standard governing cy pres settlements in class action suits when the court decides Frank v. Gaos.
“EasySaver is a disturbing example of how the Ninth Circuit’s lenient approach to cy pres in class action settlements creates an incentive for class attorneys to favor sending money to their preferred causes and institutions even when distribution of funds to the class is feasible,” said CEI director of litigation Theodore H. Frank. “This case illustrates the need for the Supreme Court to adopt the proportionality standard used by other circuit courts of appeal to align the interests of class counsel with the class members they supposedly represent.”
In the EasySaver case, CEI’s Center for Class Action Fairness (CCAF) objected to and then appealed the approval of a nationwide class settlement where the class received a $225,000 cash benefit and low-value coupons with absurd restrictions on their use. In the same settlement, the plaintiff’s lawyers requested more than $8 million in fees for themselves and $3 million in cy pres distributions went to local universities in San Diego, including the alma mater of several attorneys on the case.
While the Ninth Circuit reversed the lower court’s decision to assign the coupons the same value as a cash settlement, it approved the use of cy pres despite the court’s acknowledgement it would be “technically feasible” to distribute that money to the class members, who actually claimed harm in the case.
“This abuse of the cy pres process is nothing more than an unfair wealth transfer of millions of dollars from injured consumers to attorneys supposedly representing their interests,” said Frank.
In Frank v. Gaos, CEI objected to a class action settlement negotiated by plaintiff’s attorneys and defendant Google because it provided zero dollars to class members, but divided the $8.5 million settlement fund among class counsel, administrative costs, and cy pres recipients, including class counsel’s alma maters and many organizations the defendant already supports.
You can read the full filing here.
ABOUT: CEI’s Center for Class Action Fairness (CCAF) represents class members against unfair class action procedures and settlements. Since 2009, the center has secured millions of dollars for consumers and shareholders, winning landmark precedents that safeguard consumers, investors, and the courts.