Supreme Court Cy Pres Update

Possibly foreshadowing the Supreme Court’s decision on a petition for certiorari we recently chronicled here, last Monday the Court declined to review two separate appeals (Tingle v. Perdue and Mandan v. Perdue) of a substantial cy pres settlement award.  The award is part of a 1999 settlement resolving a class action filed in the District of D.C. on behalf of Native American farmers and ranchers who alleged systematic racial discrimination by the USDA.  The final settlement agreement yielded $680M to pay claims of class members and also contained a provision which would form a cy pres fund from any residual money after disbursements to class members.  Pursuant to the agreement, residual funds would be paid to unnamed third-party charities under the supervision of a board of trustees.

Surprisingly, after disbursements to 3,600 class members, the fund still contained $380M, which was then earmarked for distribution to third-party charities without any judicial oversight.  Believing the $380M rightfully belonged to the aggrieved class members, the petitioners sought recourse from the D.C. Circuit, but were rebuffed in May 2017.

In their petitions to the Court, the petitioners raised many of the same arguments advanced by sixteen state Attorneys General in a recently filed amicus brief in support of the Court’s review of a cy pres-only award.  The petitioners similarly argued that cy pres settlement awards inadequately compensate class members, and heighten the risk of collusion between class counsel and defense counsel.  In the face of these risks, a direct distribution to class members is far preferable.  But, the petitioners’ cries of injustice fell on deaf ears as the Court denied both petitions without comment.

Interestingly, the Justice Department opposed both petitions despite its new policy affirmatively prohibiting use of cy pres in settlements with the federal government.  Pursuant to the new policy issued in June 2017, Department attorneys may not enter into settlement agreements that “direct[] or provide[] for a payment or loan” by the government “to any non-governmental person or entity that is not a party to the dispute” including “cy pres agreements or provisions.” Attempting to reconcile the policy with its disposition in this case, the Department asserted that the new policy diminishes the need for review in this case because “it effectively eliminates any ongoing practical importance that the challenges petitioners raise here might otherwise have in future settlement agreements involving the government.”

This argument, of course, conveniently ignores the troubling use of cy pres in class action settlements not involving the Department.

Leave a Reply

Your email address will not be published. Required fields are marked *