Today’s case, In re Universal Serv. Fund Telephone Billing Practices Litig., 2013 U.S. Dist. LEXIS 80204 (D. Kan. Jun. 7, 2013), provides an unusual situation for a class action. First of all, it involves a verdict in a class action trial. Second, it is one of the first trial court opinions to pay attention to the ALI Principles of Aggregated Litigation.
In this case, the plaintiffs challenged certain billing practices by AT&T, which are not important to this discussion. All you need to know is that the plaintiffs got a class certified, won at trial, and conceded that each class member was entitled to approximately $5 per landline they owned. After the verdict was reduced (because some charges had been billed but never collected) and the damages had been distributed to the class, there was still more than $1 million left over.
So the question arose: what to do with remainder?
The plaintiffs’ original trial plan called for a cy pres distribution (that is, a distribution to a closely related charity). Consistent with that plan, one class member filed a motion asking for a distribution to a single organization. The plaintiffs’ attorneys argued for an additional $142 distribution to each class member. But the court worried that the additional money would constitute too much of a windfall to justify giving it to the class members:
Implicit in class plaintiffs’ proposal that unclaimed funds be distributed through a cy pres award, then, is the recognition that if unclaimed funds remained, then each claimant necessarily received a $1000 award–an amount that significantly exceeded class members’ individual damages, which were estimated to be less than $5.00 per landline. It appears to the court, then, that class plaintiffs, at the time they proposed their distribution plan, realized that any distribution beyond the $1000 per landline (an amount that overcompensated class members for their injuries) would constitute a windfall such that a cy pres distribution was appropriate.
So the court decided that a cy pres distribution was appropriate. The final cy pres distribution went to three different organizations, the one suggested by the class member, and two others suggested by the attorneys. (The court declined to suggest anywhere, since it believed doing so was not consistent with its Article III powers.)
This particular case is notable for a reason aside from the rarity of determining what to do with a class action jury verdict: in making their arguments, the plaintiffs relied on the ALI’s Principles for Aggregated Litigation. While the court found that they had misread the appropriate Principles, it too referred to the Principles in deciding what to do with the leftover funds. So the biggest takeaway from this particular case is: pay attention to the ALI Principles. Courts are starting to.