$2.3 Million Returns to Class Members after CEI Opposes Cy Pres Distribution in Wal-Mart Online DVD Settlement

The Competitive Enterprise Institute’s Center for Class Action Fairness won a victory for consumers when a court in the Northern District of California entered an order this week agreeing with CEI’s position that more than $2.35 million in uncashed checks in the Online DVD Rental Antitrust Litigation settlement should go to consumers rather than to third-party charities unrelated to the litigation, such as the Geena Davis Institute on Gender in Media.

Cy pres is the practice of awarding class-action settlement money to third parties, but all too often it prioritizes the interests of the attorneys or defendants over the interests of class members. CEI senior attorney and Center Director Ted Frank opposed class counsel’s proposed cy pres distribution in this case, and in response, the settling parties agreed not to oppose distributing money from the settlement fund to existing class claimants.

“One of the leading ways class action attorneys benefit themselves at the expense of the class is through cy pres settlements,” said Frank. “It exacerbates existing conflicts of interest in class action settlements and gives attorneys an incentive to breach their fiduciary duties to the class.”

CEI has previously won landmark appeals in four federal courts of appeals limiting abuse of the cy pres mechanism, resulting in consumers and shareholders receiving millions of dollars more in benefits. CEI currently has three appeals pending in the United States Court of Appeals for the Second and Ninth Circuits on the appropriateness of cy pres awards or recipients in other class-action settlements, such as the zero-dollar Gaos v. Google settlement that paid attorneys more than $2 million.

  • Frank has testified before federal and state legislative subcommittees multiple times about the cy pres problem. Read his House Judiciary Committee testimony here.
  • The New York Times covered the coupon aspect of the Online DVD settlement here