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.

Cy-Pres Doctrine

One of my legal heroes is Cleveland attorney Pat Perotti who has pioneered the use of Cy-Pres, an equity doctrine, in the area of charitable giving.

Perotti, a plaintiff's attorney is a highly successful class action attorney, was troubled that large class action settlements and verdicts would go back to "wrongdoer" corporations when persons entitled to class action money failed to file for it.  He and others borrowed the concept of Cy-Pres (pronounced sigh-pray) a doctrine that allows equity courts to do the "closest thing" to what someone who set up an estate, trust or fund of money would have wanted done with their money when the original conception or plan becomes impossible, no longer relevant, or illegal.

Now according to Perotti, corporations and insurance companies are fighting to keep the money they were ordered or agreed to pay for doing legal wrongs.  Perotti and his allies are asking States to enact legislation allowing them to use this money for charitable giving in local communities.  Sounds like a no-brainer.

for more:  http://www.cleveland.com/opinion/index.ssf/2009/11/ohio_lawmakers_should_pass_bil.html