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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.
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