We posted not too long ago about a Seventh Circuit decision by Chief Judge Posner that we thought had favorable implications for reining in the steadily metastasizing concept of “cy pres” in class action litigation. That opinion, Redman v. RadioShack Corp., 768 F.3d 622 (7th Cir. 2014), prohibited any sum that did not “benefit the class” from being included in the calculation of attorneys’ fees in a class action settlement. Although a cy pres award was not at issue in Redman, the implications (to us at least) seemed obvious. Funds not paid to class members do not benefit the class.
Judge Posner made that explicit last week in Pearson v. NBTY, Inc., ___ F.3d ___, 2014 WL 6466128 (7th Cir. Nov. 19, 2014). Indeed, he thought it was “obvious,” just like we did:
The [trial] judge excluded, however, both the cy pres award of $1.13 million in calculating the benefit to the class, for the obvious reason that the recipient of that award was not a member of the class, and the injunction, which he valued at zero, which was proper too.
Id. at *2. So, in the Seventh Circuit at least, it’s improper to use funds paid to non-class members via cy pres to calculate the fee that class action plaintiff lawyers are allowed to receive under the “common fund” doctrine.
And there’s more.
Continue Reading Judge Posner Drops the Other Shoe on Cy Pres