Blawgletter has noted concerns about awarding money from class action judgments and settlements to non-class members by way of "cy pres" awards. See "Does Cy Pres Have a Prayer?". These payments aim to do the next best thing to paying the funds to the members of the class.
Such efforts become necessary fairly often -- in consumer class actions especially -- due to the difficulties either of giving actual notice to class members (so that they can file a claim) or of getting proof of what class members paid or lost (so they can get their fair share of the available funds).
Cy pres distributions don't often raise big problems when they account for a small fraction of the money that the class receives as the result of judgment or settlement. But what if the cy pres piece dwarfs the payout to class members?
The Third Circuit ruled on Feb. 19 that district courts should require class counsel to work very hard to get settlement funds to class members. The court thus upset a $35 million settlement that promised to pay class members around $3 million while cy pres beneficiaries would get $18 million and the lawyers $14 million. Try again, the panel said. In re Baby Prods. Antitrust Litig., No. 12-1165 (3d Cir. Feb. 19, 2013).
The court gave class counsel a terrific reason to maximize awards to class members and to minimize cy pres distributions, saying:
Where a district court has reason to believe that counsel has not met its responsibility to seek an award that adequately prioritizes direct benefit to the class, we . . . think it appropriate for the court to decrease the fee award [to class counsel].
Id. at 27.