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July 29, 2010 |
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| January 20, 2010 |
By: Special to the Review |
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ozens of charities and the University of Miami School of Law have benefited from the settlement of a class-action lawsuit that challenged overcharging American Express cardholders for overseas purchases.
A multi-state case pursued against the credit-card company in the name of Edward LiPuma, an anthropology professor at the University of Miami, ended in 2005 with a $75 million settlement. About $2 million was designated for so-called cy pres contributions, which are granted in class-action litigation when payments become unfeasible or funds remain after the claims process ends.
Beneficiaries included the law school, Legal Services of Greater Miami and several children’s advocacy groups.
The final contribution of $100,000 was handed out last month to the Lawyers for Children America, a nonprofit that provides bro bono legal representation for children who are the victims of abuse, abandonment and neglect. Another $100,000 was given to the Community Habilitation Center, a special education school in Miami.
“That was the highlight of my experience with this case,” said Adam Moskowitz, co-lead attorney for plaintiffs and managing partner of Kozyak Tropin Throckmorton in Coral Gables. “About 70 people were told they could no longer come to the center” because of budget constraints. But after the donation, “all 70 people were told they could come back.”
Some legal experts say cy pres awards are not intended to spread the wealth. Corporations like them because they have the potential to bring positive publicity from a negative situation. Critics say the money should go to claimants.
Cy pres is a doctrine that dates back thousands of years, translated from the French term for “as near as possible.” Cy pres was originally used to distribute trust funds when the intended purpose no longer existed.
For instance, a Stetson University School of Law professor explained, if a trust was created for the “eradication of polio, and polio is gone, the money would be dispersed to promote health.” In recent years, cy pres awards have become more prevalent in class-action settlements.
Because not every member of a class can be located, leftover funds are distributed by agreement of parties. Plaintiff attorneys often consider the practice preferable to letting the defendant “keep the change,” which in some cases can run into millions of dollars.
In the American Express case, more than 800,000 cardholders claimed the company didn’t disclose a 2 percent charge on oversees transactions from 1997 to 2004. If someone bought a sweater in England, the company added a fee for the currency conversion, Moskowitz said.
U.S. District Judge Cecilia M. Altonaga in Miami expressed misgivings about the strength of the claims.
In a 48-page order issued in 2005, she wrote her decision to accept the settlement was bolstered by the “very real possibility that American Express would move to compel arbitration if the case were to proceed.”
In determining whether the settlement met the standards for being “fair, reasonable and adequate,” the judge noted, “a low percentage of objections points to the reasonableness of a proposed settlement.”
Plaintiff lawyers were awarded $11 million.
Some plaintiffs complained their recovery was too low, while others were thrilled to receive anything.
Giving the extra money from the settlement to charities “was a wonderfully creative way to do good,” Moskowitz said.
In court papers filed after the settlement was approved by Altonaga, the court was informed of the first donations, including $100,000 to the Consumer Federation, $75,000 to the Children’s Home Society and $50,000 to the National Consumer League.
“During the past three months, class lead counsel and counsel for American Express have extensively discussed and researched various charities and institutions that would be best for this distribution,” a notice for contribution to charities said.
Moskowitz said the list of recipients was negotiated, with some of the money going to institutions that deal with consumer protection.
“You don’t want the money to go back to the defendant,” he said. “The defendant should have to pay.”
Michael Allen, a law professor who specializes in complex litigation at Stetson University College of Law, said cy pres distributions can create the appearance of a conflict of interest in deciding who gets the money.
American Express did not admit wrongdoing in the settlement, which had critics among plaintiff lawyers in 10 other class-action lawsuits that were resolved with a LiPuma settlement. Critics said in court documents that the settlement let American Express off the hook too easily and was the result of “tainted collusion and uninformed negotiations.”
“The settlement of the class action has been fully administered, including certain charitable contributions,” said company spokeswoman Sarah B. Meron. “The court has closed the case.”
Cecilia M. Altonaga photo by A.M. Holt |
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