Class-action plaintiffs object to distribution of settlement funds to nonprofits

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Petitions of the week
A courier drops off a package at the Supreme Court

The Petitions of the Week column highlights a selection of cert petitions recently filed in the Supreme Court. A list of all petitions we’re watching is available here.

When a class-action lawsuit settles, courts generally distribute the money paid by a defendant to the class, or group of plaintiffs on whose behalf the suit was brought. But what happens when paying every member of the class is infeasible? This week, we highlight cert petitions that ask the court to consider, among other things, whether courts can direct leftover class-action settlement funds to charities or nonprofits supposedly aligned with class members’ interests.

The French phrase cy pres originally denoted a legal doctrine that courts applied when the instructions from the founder of a trust for distributing the money could no longer be carried out. Courts instead direct the funds toward a purpose cy pres – or “as near as possible” – to the trust’s original terms. In the 1980s, courts also began approving cy pres settlements in class action suits where distributing all of the funds to the class proved too difficult.

In 2020, the consumer-goods conglomerate Monsanto settled a class-action lawsuit alleging false and misleading advertising used to sell RoundUp, a commonly used weed killer. Only 3% of eligible RoundUp purchasers signed up through the claims process to receive funds from the $39 million settlement. As a result, the district court approved a cy pres agreement to distribute $12 million to the enrolled class members, $10 million to the plaintiffs’ attorneys, and $16 million to three consumer-protection nonprofits.

Objecting to one of the chosen nonprofits – the Center for Consumer Law and Economic Justice at the University of California, Berkeley – class member Anna St. John challenged the settlement. Under Federal Rule of Civil Procedure 23(e)(2), courts may only approve a class-action settlement if it is “fair, reasonable, and adequate.” St. John argued that the court’s failure to consider feasible tactics used in other class actions to identify additional class members rendered the cy pres settlement invalid under Rule 23.

The U.S. Court of Appeals for the 8th Circuit disagreed. Monsanto had argued that further outreach efforts would cost hundreds of thousands of dollars and discover no more than a handful of additional affected purchasers of RoundUp. Based on that finding, the 8th Circuit held, the district court acted appropriately in approving the cy pres settlement.

In St. John v. Jones, St. John asks the justices to curtail the practice of channeling large portions of cy pres settlements to nonprofit organizations. Chief Justice John Roberts expressed “fundamental concerns” regarding nonprofit class-action payouts in a case the court declined to review in 2013, and Justice Clarence Thomas did the same in a case the court ducked on procedural grounds in 2018. St. John hopes that a majority of the court shares their interest.

The same legal team contesting the RoundUp settlement has also filed an additional cert petition, Yeatman v. Hyland, raising similar issues in the context of a cy pres settlement for student-loan borrowers.

A list of this week’s featured petitions is below:

Lewis v. Akron Board of Zoning Appeals
22-545
Issue: Whether, when a person wants to exercise the deeply and objectively rooted right to use liberty and property for the non-economic purpose of saving lives, the standard of review amounts to “not utterly arbitrary.”

St. John v. Jones
22-554
Issue: Whether, or in what circumstances, a court may approve a settlement as “fair, reasonable, and adequate” under Federal Rule of Civil Procedure 23(e)(2) when it pays a substantial cy pres award to third parties from the settlement fund.

NetChoice, LLC v. Paxton
22-555
Issue: Whether the First Amendment prohibits viewpoint-, content-, or speaker-based laws restricting select websites from engaging in editorial choices about whether, and how, to publish and disseminate speech—or otherwise burdening those editorial choices through onerous operational and disclosure requirements.

Yeatman v. Hyland
22-566
Issue: Whether, or in what circumstances, a court may approve a settlement as “fair, reasonable, and adequate” under Federal Rule of Civil Procedure 23(e) or certify a class under Rule 23(b) when it pays a cy pres award to third parties from the settlement fund.



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