What Happens to Undistributed Funds from a Consumer Class Action?
Have you ever received a notice in the mail informing you that you are eligible to receive proceeds from a class action settlement? Many people simply ignore these notices and never bother to claim the money that they are entitled to by law. Which begs the question: What happens to the settlement funds that are never claimed?
In many cases, the lead plaintiffs who brought the original class action will ask the court to make what is known as a cy pres distribution of any unclaimed funds. “Cy pres” refers to an ancient legal principle meaning “as near as possible.” Essentially, when some of the class members cannot be located or identified, their settlement proceeds are instead distributed to charitable organizations whose “purpose reasonably approximates” the interests pursued in the underlying lawsuit.
The use of cy pres distributions is not without controversy. Chief Justice of the United States John Roberts is a noted critic. In a 2013 statement declining to review the use of a cy pres distribution in a consumer class action settlement involving Facebook, Roberts said he hoped the Court would have the opportunity to “clarify the limits on the use of such remedies.”
Pennsylvania Judge Approves New Checks to 5 Consumer in Prudential Class Action
But for now, cy pres distributions remain a feature of class action settlements. At the same time, federal courts here in Pennsylvania and throughout the country have made it clear that directly compensating consumers should always be the priority in resolving a class action. This may include honoring requests to reissue settlement checks that were lost or misplaced for some reason.
For example, a Philadelphia federal judge recently approved the reissue of settlement checks to five members of a class action against Prudential Insurance Company. The original class action alleged that Prudential violated federal and state laws governing the distribution of life insurance proceeds. Prudential eventually agreed to settle the allegations for a total of $9 million.
A court-appointed administrator conducted two distributions of settlement checks from the $9 million fund. For some reason, five of the class members were unable to cash their original checks. The lead plaintiffs therefore asked the court to (belatedly) approve new checks, while also agreeing to a proposed cy pres distribution of any remaining settlement funds. The judge agreed to both requests.
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It should be noted that if you are identified as a member of a class action, you do have the right to reject any proposed settlement. In some situations, you may have suffered a significant injury and wish to file your own individual lawsuit. Or you might take issue with the specific use of a cy pres distribution, as in the Facebook case mentioned above, in which case you have the right to file an objection with the court overseeing the settlement.
If you would like to learn more about your rights as a consumer in any current or potential class action, contact Philadelphia consumer attorney Louis S. Schwartz at CONSUMERLAWPA.com today to schedule a free confidential consultation.