There is an old saying, “Justice delayed is justice denied.” Well, I’ll do you one better and say, “Justice misdirected is justice denied.”
A case in point is the process of how money recovered in a class-action lawsuit is often misdirected. The members of the class on whose behalf the lawsuit was filed often times receive absolutely nothing.
The reason for this miscarriage of justice is that the attorneys for the class-action plaintiffs routinely fail to identify and locate class members.
When that happens, there is a jackpot of undistributed cash that is not distributed to class members. The undistributed cash is instead given to various different charities selected by the judge overseeing the case.
The end result is that large portions of settlement proceeds go to judge-appointed charities.
The idea behind a class-action lawsuit is to protect the public by offering a remedy for repeated, though often times small, civil wrongs.
Examples include things like mislabeling the amount of a product in a bottle or overcharging by a few pennies the amount of interest charged on your monthly bank statement. These small amounts add up to millions of dollars.
The practice of distributing class-action money to charities was the topic of a recent article in the New York Times titled “Doling Out Other People’s Money.” The article includes a particularly egregious example of this practice in which a judge awarded $1 million to an eating-disorder program from an award that was supposed to go to fashion models.
One of the problems with distributing the proceeds of a class-action award is that no one has any incentive to seek out the class members. The plaintiff’s lawyers could not care less because they have already been paid; the judge is ill-equipped to find the class members; and the defendant doesn’t care where the money goes.
One plan that has proven successful in an attempt to fix this problem is to withhold a portion of the plaintiff’s attorney’s fees until all or nearly all of the class members are located and their share of the award has been distributed to them.
In a class-action lawsuit, the plaintiff’s attorney’s fees are determined by the judge. Often times the attorney fee award can be in the millions of dollars. By withholding a reasonable portion of the fee, the attorneys are given an incentive to follow up on their case and locate as many of the class members as possible.
