Friday, June 24, 2011

Cy-Pres: Make 'em Pay What They Said They'd Pay


Dr. Edw. Michaelson at University Hospital Cleveland, Ohio

Cy-Pres is an equity doctrine (which I originally wrote about in November 2009) adopted and advanced by certain innovative plaintiffs' Class Action attorneys to benefit charities and make corporate defendants pay what they promised to pay when they settled claims for civil wrongs.

Yesterday, Dworken and Bernstein in Cleveland led by my long time friend, Patrick Perotti distributed millions from the settlement of a Wells Fargo and CITIFinancial Class Action cases. This is one of the good news stories and one of the really excellent examples attorneys "walking the walk" thereby accomplishing genuine social good.

Here's an excerpt from the Cleveland.com report:

Leaders of 13 local charities and seven more from throughout Ohio learned Thursday that they'll split more than $2 million in unclaimed funds from settlements in two class-action lawsuits.

"Oh my God, who knew?" exulted Agaytha Corbin, who received a check for $78,000 for her Dayton-based economic development group.

Corbin said that when she got the call inviting her to Thursday's reception for the announcement, she initially thought it was a prank.

The windfall came from settlements that the Painesville-based Dworken & Bernstein law firm secured earlier this year in cases involving Wells Fargo and CitiFinancial. Invoking a legal doctrine known as "cy pres," the law firm insisted that any funds unclaimed in the settlements be distributed to charities, rather than returned to the defendants.

[L]awyers do[nated . . . ] more than $2.1 million. Twelve local charities were selected by Dworken & Bernstein; the defendants' lawyers chose the other eight, including Neighborhood Housing Services of Greater Cleveland.

Cindy Norwood, executive director of The Arc of Greater Cleveland, cried softly after learning on Wednesday from a reporter that her organization would be given nearly $75,000.

Only three weeks ago, she had been hit with the devastating news that her agency, which serves people with disabilities, had lost out on $72,000 it had sought in United Way grants.   "I've been working so hard to replace that money," Norwood said. "To hear we're going to get almost the exact amount -- oh my God, I can breathe."

The gift amounts to a big chunk of The Arc's $300,000 annual budget.

For the Antioch Community Development Corp., which provides family outreach, free meals and HIV awareness and education, the timing couldn't have been better: State funding for its marriage enrichment program runs out June 30.   "The funds (more than $52,000) will help us to continue," said the agency's executive director, Kelvin Berry.


Patrick Perotti
The money distributed Thursday came from two Dworken & Bernstein class-action suits claiming mortgage liens on homes of borrowers were not released after the loans were paid in full. The settlement with CitiFinancial provided four charities with about $74,000 each: Project Love, The Arc, E Prep School and Society for Rehabilitation.
The Wells Fargo settlement generated varying amounts for: Malachi House, Trinity Episcopal Cathedral, University Hospitals, the Gathering Place, Cornerstone of Hope, Antioch Community Development, Ohio College of Podiatric Medicine and Gordon Square Arts District.

Dworken & Bernstein lawyers have been invoking the cy pres doctrine since 2002 and have won more than $22 million for charities. Nonprofit groups can apply for future distributions by going online to ohiolawyersgiveback.org   Lawyer Patrick Perotti, a vocal advocate for broader use of the doctrine, said that if more law firms specified that unclaimed funds should go to charity, as much as $60 million could be raised annually for Ohio nonprofits doing vital work.
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Way too often this blawg has been about Bad Lawyers and Judges, Prosecutors, and crooks it is relief to bring you news of lawyers doing actual social good. 

I understand that Cy-Pres is controversial, but as Perotti, one of the founders of LawyersGiveBack.org, says, Cy-Pres guarantees that when a corporate defendant agrees to settle a lawsuit the unclaimed class funds are not refunded to the wrong doer.  The defendant pays what they agreed to pay and our communities and charities benefit.

12 comments:

  1. This lawyer and his law firm that started this deserves major recognition which Im sure the charities give them but the law profession should wake up to the very important purpose of this, dont you think?

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  2. Thank you, thank you, thank you to Patrick Perotti and Dworken & Bernstein. Aside from helping organizations that support the less fortunate and troubled,an incredibly noble and altruistic gesture by itself, this initiative goes a long way to helping change the perception of lawyers and bar associations in Ohio. "Giving back" is one of the great precepts of all spiritual disciplines that will certainly result in far more blessings for this Firm and its lawyers than any investment portfolio could ever yield.

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  3. Lawyers with a conscience who would of figured?

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  4. Nothing is so hard for those who abound in riches to conceive how others can be in want.

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  5. If only cy pres awards were uniformly given only to the good and kind.

    Unfortunately, there are cases in which class actions lawyers use cy press to reward politicians or family members by donating the money to not-so-worthy causes.

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  6. JB--

    First off, let me observe that this post generated as many comments as it has. Secondly, you are correct that there are some situations like the fen-phen scandal where ostensible "charitable" foundations have been set up to steal settlement proceeds.

    That is not what the LawyerGiveBack.org people are doing. I urge you to check out ther website. Thanks to all for their comments on this wonderful effort.
    BL

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  7. Neighborhood Housing Services of Greater Cleveland was honored, humbled and appreciative to be present yesterday with our colleagues and others for this funding. The recognition of our efforts is good, but the most beneficial aspect of this is the impact that this will have on our clients, our neighborhoods and our communities. Thank you to Dworken, Pat and cy pres.

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  8. and of course Wells Fargo for choosing Neighborhood Housing Services of Greater Cleveland as one of its designated charities...

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  9. Not sure I understand how the money is "unclaimed" and why the plaintiffs lawyer decides who gets the money. Explain?

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  10. When a Class Action case settles with the defendant agreeing to pay a sum certain, monies set aside for person eligible to particpate in the proceeds are held in escrow. Money or other sorts of in-kind payments are made to those qualifying persons who respond to notices. After the cutoff period for payout, the unclaimed funds revert to the class defendant unless paid out under an alternative approved by the parties and the court.

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