Fairbanks_Robin_Hood_standing_by_wall_w_sword

Why Allow Judges To Become Robin Hoods?

November 26, 2007

              
          [Image: Douglas Fairbanks as Robin Hood; a screenshot from the 1922 United artists film Robin Hood.]

          Writing in the ABA Journal Law News Now, Debra Cassens Weiss alerted me to an article in today\’s New York Times about the practice of judges becoming “Robin Hoods With Extra Settlement Money.”  Adam Liptak describes in “Doling Out Other People\’s Money” what often happens when class action settlements conclude with settlement funds going unclaimed.   It  appears that many judges presiding over class action settlements  have adopted the practice of awarding such “left over” funds to charities that carry out some purpose deemed consistent with the objective of the settlement.  Often, although these charities carry out good works, their connection to the  subject  matter of the case is tenuous at best.
          The notion that the cy pres doctrine supports such redistribution of funds is a stretch.  It would be far more consistent with that doctrine to pay the “extra” funds to those plaintiffs who did sign on for the settlement, at least up to the amount of their legitimate damages.  Alternatively the funds could be placed in trust for the benefit of similarly injured parties who have not been identified.  Of course, the funds also could be returned to the defendants who paid them.
          Maybe I am missing something (class action counsel jump in here), but why are these issues being left to a judge to decide?  The likelihood of residual funds being available at the end of a settlement should not be a surprise to the parties at the time a class action settlement is reached.  The disposition of such funds can and should be negotiated and settled by the parties in advance.  Essentially, the funds paid by the defendant in settlement should never become “excess” or “left over” in the first place, but simply directed by agreement to contingent beneficiaries.  The disposition of these potential funds can provide another item of value to be accounted for in structuring class action settlements, thus permitting greater flexibility and potential for a settlement to be reached.