February 15, 2007

Class action settlements often require donations to public-interest groups. Defendants are amenable to this, because it means that the punishment is a meaningless shift of money that would have been spent on charity anyway; plaintiffs' attorneys like this, because it increases the size of the apparent "relief" that justifies high attorneys' fees; judges go along, sometimes because they like the causes their money is supporting. (And those causes are often allies of the trial bar, thus encouraging more litigation down the line.) Little wonder that trial lawyer Michael Hausfeld spoke of the importance of cy pres at yesterday's Federalist Society Panel.

Another problem that may well be more common if investigated more fully: kickbacks. In the now infamous Kentucky fen-phen settlement, millions were diverted to a new charity that then paid the judge as a board member (OL Mar. 6). And now it is revealed that another $1 million of the settlement (negotiated by plaintiffs' bar star and top Democratic Party donor Stanley Chesley, who received $20 million for his troubles) went to Florida A&M Law School—which agreed to pay one of the lawyers, Shirley Cunningham, $100,000/year for a no-show professorship. A Florida state investigation calls evidence of criminal activity "inconclusive," but suggests the school seek its money back. (Andrew Wolfson, "Ky. lawyer's Florida A&M pay 'not earned'", Louisville Courier-Journal, Feb. 8). (Similarly: Peter Lattman on Richard Epstein on a donation to Seton Hall; for a general overview relatively sympathetic to trial lawyers, see Geoffrey P. Miller & Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp. Probs. 97 (1997).)

More on Kentucky fen-phen scandal: OL Feb. 14 and links therein.