The U.S. Supreme Court has reversed on technical grounds a ruling by the Ninth Circuit Court of Appeals that class action settlement agreements purporting to distribute monetary settlement proceeds to non-party charitable groups – but not to the victim class itself – comply with federal procedural requirements and are not, as the plaintiffs argued, categorically impermissible. 

While the High Court openly acknowledged that it agreed to hear the Frank v. Gaos case specifically to decide whether a class action settlement that provides a so-called “cy pres” award to third parties and not the victims themselves “satisfies the requirement that a settlement binding class members be ‘fair, reasonable, and adequate,’” the Court ultimately declined to reach that merits question.

Rather, it sent the case back down to the appeals court to resolve whether, as a threshold matter and based on Supreme Court precedent, any of the plaintiffs had standing to sue in the first place.

NT Lakis attorneys had filed a “friend-of-the-court” brief with the Supreme Court arguing that there are many laudable reasons for using cy pres mechanisms to settle class action claims in which victim-specific relief cannot be determined. With the Court’s ruling, however, and despite the fact that the lower courts are divided, the issue won’t be resolved this time around.

A copy of the Supreme Court’s opinion in Frank v. Gaos is available here.

Members of the Center for Workplace Compliance (CWC) can read more here.