Finds Cy Pres Practice Okay, But Needs Monitoring.
The Third Circuit Court of Appeals in In re Baby Products Antitrust Litig., Case Nos. 12-1165 et al. (3d Cir. Feb. 19, 2013) (published as precedential) refused to sustain a $14 million fee award to class counsel in an antitrust case where only $3 million out of a potential $35.5 million settlement fund would go to class members and an $18.5 million remainder (less administrative expenses) would go to cy pres recipients. (So, in simple math, $3 million to class members, $18.5 million to cy pres recipients, and $14 million to class action attorneys–with the fee award being 39% of the settlement pie.)
In so doing, the federal appeals court did decide that cy pres recovery is acceptable as a feature of a class action settlement. (Cy pres is French Norman for “as near as possible.”) However, it needs to be monitored if it is a large percentage of a class action settlement unless the individual amounts due to class members are small and present administrative nightmares. The court even went so far as to suggest that the cy pres element might have to be backed out from the percentage of recovery fee calculations in some circumstances where that element was a large part of what was being distributed out of the settlement fund.