The Competitive Enterprise Institute (CEI) today appealed a ruling in the Citigroup Inc. Securities Litigation that allows class action settlement funds to be distributed to groups engaged in political advocacy that is against the interests of people in the class.
“Lawyers representing people in class action litigation are supposed to act in the best interest of the people they represent,” said Ted Frank, director of CEI’s Center for Class Action Fairness. “But in the Citigroup settlement, lawyers directed $374,000 to organizations that either litigate against the company in which class members own shares or take controversial political stands opposed by many class members.”
“The Second Circuit previously has said that settlement dollars that cannot be distributed to class members should instead go to groups that reflect the interests of the class as near as possible and are the next best recipients after the class members themselves,” said Frank.
CEI is asking the U.S. Court of Appeals for the Second Circuit to review an August, 2016 ruling by the U.S. District Court, Southern District of New York approving class attorneys’ selection of three third party groups as cy pres recipients. A cy pres distribution is a distribution of settlement money that remains unclaimed or cannot readily be distributed to individual class members, sent instead to a third party that serves the interests of the class as near as possible.
In this appeal, CEI argues that not only do the cy pres groups not reflect the interests of the class, but class counsel gave no notice to the class that a cy pres distribution was proposed; nor did they disclose that the law firm had a preexisting relationship as a donor to one of the groups.
At an earlier stage in the case, CEI had challenged the excessive attorney fees sought by class counsel. The district court in August, 2013 ruled in favor of CEI. The court criticized and reduced the fee request, returning $26.7 million to the class.
The original class action lawsuit was brought in 2010 on behalf of a nationwide class of Citigroup shareholders over investment losses.
The Competitive Enterprise Institute’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Originally founded by Ted Frank in 2009, the center has won millions of dollars for consumers and shareholders, and won landmark precedents that safeguard consumers, investors, courts, and the general public.