Class Action Abuse in the News: Scandalous Cy Pres

by Hans Bader on December 17, 2007 · 1 comment

In the D.C. Examiner, Mark Tapscott has an interesting column about class action lawsuits. A common outcome of such suits is that the lawyers who bring them receive millions of dollars in attorney fees. Meanwhile, the consumers in whose name the lawyers sued receive only coupons that are worthless for most consumers.

When consumers don’t even bother to claim the money or coupons that they are entitled to receive in class-action lawsuit settlements (owing to factors such as complicated paperwork requirements or inadequate notice), the leftover money is instead given to charities, which often are left-wing advocacy groups, rather than groups that serve the general public or the needy.

The Washington Post today has a story about how federal judges like Harold Baer give leftover money from class action suits to charity instead of the allegedly victimized consumers. Baer gave money from a class-action lawsuit by models alleging they were ripped off by agencies to programs for women with eating disorders. Charities even hire lobbyists now to encourage judges to give them money from settlements. That’s odd, but it’s not half as odd as what goes in state courts.

In California state court, leftover money from a consumer class action settlement is commonly given not to consumer groups, but to groups that have nothing to do with consumers, like the left-wing La Raza Legal Center; the politically correct Employment Law Center of the San Francisco Legal Aid Society (which seeks to curb employers’ First Amendment rights); the ever-litigious Lawyers’ Committee; and groups that specialize in advocating affirmative action, broader definitions of “hate crimes” (at the expense of civil liberties), or expanded access to welfare programs for illegal aliens. This ripoff of consumers is magnified as a result of practices like “fluid recovery.”

If money is left over from a consumer class action settlement (which should not be allowed to happen in the first place), it should not go to groups that do not focus on helping consumers. And the consumer groups that receive any such money ideally ought to be ideologically balanced, including not only left-wing consumer groups (as usually happens), but also non-ideological groups like the American Council on Science and Health, which has battled special interests of all ideological persuasions (including tobacco companies) in the course of its efforts to promote consumers’ health.

Comments on this entry are closed.

{ 1 trackback }

Previous post:

Next post: