Third Circuit Rejects Class Settlement Because Class Fund Went To Class Counsel And Cy Pres Rather Than Class Members

Keywords: attorneys' fees, class settlement, cy pres, In re Baby Prods. Litig., Third Circuit

We've blogged before about federal courts' increasing reluctance to approve class settlements that involve a significant cy pres component. The Third Circuit's recent decision in In re Baby Products Litigation (pdf) is the latest example of this trend.

Class counsel often use the distribution of funds to handpicked charities in order to disguise the percentage of the class recovery that's actually going right into class counsel's pocket. That may have been what was going on in In re Baby Products Litigation. In that case, class counsel got almost five times as much money ($14 million in fees and expenses) as the members of the class ($3 million). But because $18.5 million (minus administrative costs of settlement) was to be distributed in cy pres, creating a total "class fund" of $35.5 million, class counsel appeared to be getting only one-third of the settlement