Opinion ID: 796443
Heading Depth: 2
Heading Rank: 2

Heading: Of the Distribution of Remaining Funds.

Text: 56 The Settlement Agreement approved by the District Court clearly contemplated the need to provide for the distribution of any Excess Funds that might remain after all class members were fully compensated for their actual losses. If those losses, designated as Total Recognized Losses, were less than the amount of the Net Settlement Fund, the Agreement provided for the Court to determine the disposition of the amount representing the differences between the two figures, after hearing the views of the parties hereto as to such disposition. Of course, it was not certain at the time the Agreement was entered into whether there would be Excess Funds, and the Agreement accordingly provided that if Total Recognized Losses exceeded the Net Settlement Fund, the class members would receive distribution on a pro rata basis. 57 In support of their contention that the Excess Funds should be applied toward treble damages rather than allocated to charities under the Cy Pres Doctrine, plaintiffs bring to our attention the Supreme Court's observation that the antitrust private action was created primarily as a remedy for the victims of antitrust violations. Treble damages `make the remedy meaningful by counter-balancing the difficulty of maintaining a private suit' under the antitrust laws. Am. Soc'y of Mech. Eng'rs, Inc. v. Hydrolevel Corp., 456 U.S. 556, 575, 102 S.Ct. 1935, 72 L.Ed.2d 330 (1982) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485-86 & n. 10, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977)) (citations and internal quotation marks omitted). We have noted that [f]ull restitution of plaintiffs' losses is a no less central objective of the treble damage provision than the encouragement of private antitrust enforcement. Hydrolevel Corp. v. Am. Soc'y of Mech. Eng'rs, Inc., 635 F.2d 118, 127 (2d Cir.1980). 58 The defendants contend that the Letter Agreements that preceded the Settlement Agreement established the District Court as the final authority for the resolution of any disagreement as to the distribution of the Excess Funds, since they provide that [a]ny future disagreements as to the form or content of the formal settlement agreement ... will be resolved by the [district court] without right of appeal. Assuming that the Letter Agreements are binding at this point, the defendants' contention is based on a misreading of the Agreements. The parties that signed the Letter Agreements (and not all of them did) do not disagree as to the form or content, both of which are plain. The District Court, after hearing the views of the parties, is vested with discretion as to the disposition of the Excess Funds. Defendants argue that the District Court acted reasonably in applying the Cy Pres Doctrine and that plaintiffs were among those who recommended specific charitable organizations. They find support for their position in the fact that the Settlement Agreement makes no provision for treble damages and that one of the counsel for plaintiffs said that [t]reble damages are only achieved if you go through, you win your trial, you win your appeal everything becomes final and you actually collect the money. They contend that the Settlement Agreement refers only to actual losses. 59 While it is true that the Settlement Agreement reposes discretion in the District Judge as to the disposition of Excess Funds, that discretion is not absolute. Where we find an abuse of discretion in our review of the allocation of funds derived from class settlements, the scheme adopted by the District Court will not be upheld. In re Agent Orange Prod. Liab. Litig. VI, 818 F.2d 179, 181 (2d Cir.1987). We have concluded that a district court abuses its discretion when (1) its decision rests on an error of law (such as application of the wrong legal principles) or a clearly erroneous factual finding, or (2) its decision — though not necessarily the product of a legal error or a clearly erroneous factual finding — cannot be located within the range of permissible decisions. Zervos v. Verizon New York, Inc., 252 F.3d 163, 169 (2d Cir.2001). In its original Opinion approving settlement, the District Court considered only the following dispositions: (i) the return of excess settlement funds to the defendants on a pro rata basis; or (ii) in the exercise of its equitable powers, distribution of the funds to charitable organizations. The court stated: Having adopted the charitable route for these funds, it is my view that wherever possible, the cy pres doctrine should be invoked. Fears, 2005 WL 1041134, at . The court then went on, in accordance with the Cy Pres Doctrine, to allocate the funds to those charities thought to benefit the class, either directly or indirectly. Id. at  12. 60 We are not yet prepared to say that the District Court abused its discretion in allocating the Excess Funds under the Cy Pres Doctrine. It does appear, however, that the District Court was not aware of the extent of its discretion, failing to recognize that it was empowered to allocate funds to the members of the class as treble damages. The District Court ultimately held that the terms of the Settlement Agreement barred it from even considering such an alternative. Responding to the motion for reconsideration, the court stated: 61 Here, the Settlement Agreement lacks any mention of either treble damages or pre-judgment interest. The thirty-page agreement is noticeably silent as to damages, treble or otherwise. As such, the Court did not insert treble damages or prejudgment interest into the four corners of the Settlement Agreement, and it would have been wrong to do so. 62 Fears, 2005 WL 1325297, at . 63 While it is true that the Clayton Act does not allow for prejudgment interest in the absence of a finding of bad faith on the part of defendants causing a material delay in the adjudication of the dispute, 15 U.S.C. § 15(a), a finding not made here, a treble damages award did lie within the ambit of the District Court's discretion and should be considered on remand. See, e.g., In re Folding Carton Antitrust Litig., 557 F.Supp. 1091, 1104-07 (N.D.Ill.1983) (recognizing the district court's discretion to consider whether excess funds in antitrust class action settlement could be awarded equitably as treble damages after claimants were paid in full), aff'd in part, vacated in part on other grounds, 744 F.2d 1252 (7th Cir.1984). 64 In exercising its discretion, the District Court should bear in mind that the purpose of Cy Pres distribution is to put[] the unclaimed fund to its next best compensation use, e.g., for the aggregate, indirect, prospective benefit of the class. 2 HERBERT B. NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS § 10:17 (4th ed.2002) (emphasis supplied). Cy Pres means as near as possible, and [c]ourts have utilized Cy Pres distributions where class members are difficult to identify, or where they change constantly, or where there are unclaimed funds. Id. at § 10:16 n. 1. In this connection, we take note of the recent Draft of the Principles of the Law of Aggregate Litigation by the American Law Institute. With respect to the approval of settlements providing for a Cy Pres remedy, the Draft proposes a rule limiting Cy Pres to circumstances in which direct distribution to individual class members is not economically feasible, or where funds remain after class members are given a full opportunity to make a claim. Draft § 3.08, entitled Cy Pres Settlements. This proposed rule is consonant with the observation of our sister circuit that [f]ederal courts have frequently approved [the Cy Pres] remedy in the settlement of class actions where the proof of individual claims would be burdensome or distribution of damages costly. Six (6) Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1305 (9th Cir.1990). In the case before us, neither side contends that a Cy Pres distribution is appropriate because it would be onerous or impossible to locate class members or because each class member's recovery would be so small as to make an individual distribution economically impracticable. We are confident that the district court, fully aware of the breadth of its discretion, will see to an appropriate distribution of the funds remaining after the models have been compensated for their actual losses. 65