(Reuters) - A federal district judge abused her discretion in awarding a nonprofit money left over from a $490 million securities class-action settlement concerning the 1998 merger of BankAmerica and NationsBank that created Bank of America Corp, a divided federal appeals court ruled on Thursday.
Judge Posner agreed with little of what the lower court determined, but he found the trial judge's refusal to consider the cy pres amount in calculating the class benefit correct "for the obvious reason that the recipient of that award was not a member of the class."
Posner, ruling in favor of objectors in Pearson v. NBTY, outlines a series of conflicts and deceptions that any class-action lawyer worth her salt would sue over in an instant. But in this case it was the lawyers who perpetrated them, with the help of a judge who was all too willing to overlook the economic realities of the consumer class-action business.
Today, Washington Legal Foundation published a short and useful working paper authored by James M. Beck and Rachel B. Weil titled "Cy Pres" Awards: Is the End Near for a Legal Remedy With No Basis in Law?
See the opening brief for what "is perhaps the best 13,000-word summary of CCAF philosophy."
Ted Frank, a lawyer who also represented a couple in the case, was happy with the court’s decision. He went further to say that the beneficiaries should be the class members, and any settlement should be based on actual recovery and not inflated figures that won’t benefit the class.
CCAF won a tremendous victory for class members in Redman v. Radioshack, just eleven days after oral argument!
The judge allowed the plaintiff lawyers to submit their fee request after the objection period ended, hamstringing objectors including Ted Frank's Center for Class Action Fairness, which nevertheless scored a big win here.
Ted Frank, a critic of what he considers excessive legal fees and who represented a couple opposing the RadioShack settlement, in a phone interview welcomed the decision.
"The big question was this: 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? The judge in this instance is U.S. District Judge Carol Jackson. The lawyers are from the firm of Green Jacobson."
