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Class Actions

Judges Become Robin Hoods With Extra Settlement Money

Posted Nov 26, 2007 9:46 AM CDT
By Debra Cassens Weiss

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Law schools, legal aid groups and other charities are raking in leftover money from class-action settlements.

In just the past few months, George Washington University Law School got $5 million from an antitrust settlement and the Illinois Institute of Technology got $5 million from a settlement involving a diabetes drug, Adam Liptak writes in his Sidebar column for the New York Times. Also benefiting from the diabetes settlement were a Chicago hospital, which got $5 million, and a Jewish group, Lubavitch Chabad of Illinois, which got $2 million.

Judges hand out the money when too few plaintiffs step up to claim settlement money in class actions. Legal aid groups, a popular beneficiary, are increasingly relying on such money to finance their operations. The practice, known as cy pres, is becoming so entrenched that charities are hiring lobbyists to ask judges for the money.

But some observers are criticizing the practice. One of them is law professor Samuel Issacharoff of New York University, who says judges should not be grant administrators. It’s “an invitation to wild corruption of the judicial process,” he told the Times.

Issacharoff wrote a draft document for the American Law Institute that says class-action plaintiffs should receive the extra settlement money unless they cannot be found or the amount is trivial. “It’s their money,” he said.

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