Court Opinion

ID: 3018970
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:20:07.317991+00
Date Added: 2024-06-11T18:11:34.228761
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                 ___________

                                 No. 96-3531
                                 ___________

Waymon Powell, Claudell Smith,        *
Willie Griffin, Hershel Ward, Odell   *
Lawson; International Woodworkers     *
of America, AFL-CIO, CLC; and         *
Local 5-475,                          *
                                      *
      Appellants,                     *   Appeal from the United States
                                      *   District Court for the Western
      v.                              *   District of Arkansas.
                                      *
Georgia-Pacific Corporation,          *
                                      *
      Appellee.                       *
                                      *
   __________________                 *
                                      *
International Woodworkers of          *
America, AFL-CIO, CLC, and Its        *
Local 5-475, Roy Matheny, Jr.,        *
and Others,                           *
                                      *
      Appellants,                     *
                                      *
      v.                              *
                                      *
Georgia-Pacific Corporation,          *
                                      *
      Appellee.                       *
                                     ___________

                               Submitted: April 17, 1997

                                    Filed: July 11, 1997
                                     ___________

Before LOKEN, MAGILL, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                           ___________
MORRIS SHEPPARD ARNOLD, Circuit Judge.

        The plaintiffs appeal from an order disposing of a large sum of money in the
district court's registry. The facts important to an understanding of the case are set
forth in detail in Powell v. Georgia-Pacific Corp., 843 F. Supp. 491 (W.D. Ark. 1994).
We affirm the district court.1

                                             I.
       The plaintiffs filed this class-action race discrimination case over twenty years
ago. After several years of litigation, the district court found that the Georgia-Pacific
Corporation (GP) had violated Title VII by systematically discriminating against the
class members at its Crossett, Arkansas, facilities. Id. at 492. The parties later settled
the remedy aspects of the lawsuit and entered into a consent decree that directed GP
to deposit $2,666,667 into the court's registry " 'in full and final settlement of the
money claims of the plaintiffs and members of the class.' " Id. The consent decree
further indicated that the class members were entitled to interest earned on this
settlement fund. Id. The parties set aside $350,000 as a "contingency fund for
'inadvertently excluded class members, underpayments, [and] computational errors.' "
Id. The plaintiffs' counsel was named as the trustee for the contingency fund and was
given the power to distribute funds from it, although court approval was required for

      1
        The Honorable H. Franklin Waters, Chief Judge, United States District Court
for the Western District of Arkansas.

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any distribution over $500. Id. Finally, the parties agreed that the court should
determine how to dispose of any money remaining in the registry after distribution. Id.
at 493.

       In the consent decree, the parties agreed that distribution should proceed
according to a "point system" designed to determine the amount of back pay due to
each class member. Id. at 492. They further agreed that GP would use its payroll
records to identify the eligible class, would calculate individual damages, and would
distribute the settlement fund accordingly. Id. at 492-93. By March, 1984, the amount
of money in the registry had grown to over $2.9 million. Id. at 493. At that time, the
parties agreed to distribute $2,461,400 according to the point system, an amount that
represented the total fund less the $350,000 contingency fund and "special
circumstances" damages to named plaintiffs. Id. By the time that distribution actually
occurred several months later, however, the settlement fund had accrued several
hundred thousand dollars more in interest. This additional interest and the $350,000
contingency fund were never distributed. Interest has continued to accrue on these
funds, and there is now nearly $1 million in the registry. Id.

        Nearly eight years after the initial distribution, the plaintiffs filed a motion
seeking distribution of the remaining funds. Id. The plaintiffs originally asked the
court to use the money for scholarships benefiting class members and their families, but
later changed their minds and sought to have the funds distributed directly to the class
members. Id. at 493-94. (Their change of heart was apparently motivated by tax
considerations. Id. at 493-94, 499.) Soon thereafter, GP filed a status report
(apparently at the court's request) seeking to have the money distributed to the Georgia-
Pacific Foundation, which would use it to establish a general scholarship fund for black
high school students. Id. at 494.

      The district court referred the case to a special master. Id. at 493; see also
Fed. R. Civ. P. 53(a). Following an evidentiary hearing, the master recommended that

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the court distribute the money to the class members pro rata. Powell, 843 F. Supp. at
497-98. The master concluded that the class members were entitled to the distribution
both because they were not fully compensated by the original distribution and because
most of the money remaining in the registry was attributable to interest and therefore
belonged to class members according to the terms of the consent decree. Id. at 498.

       The district court rejected the master's recommendation. Id. at 499. The court
reasoned that each class member had been fully compensated according to the terms
of the consent decree. Id. The court also noted that interest earned on the contingency
fund accounted for most of the money in the registry, that the parties set this money
aside to benefit unidentified class members, and that no new claimants had materialized
in ten years. Id. at 493, 499. The court made it clear, however, that its primary
concern was the fact that locating the individual class members for an additional
distribution would be very difficult and costly. Id. at 498-99.

       The court classified the money remaining in the registry as "unclaimed funds."
Id. at 495. After considering several equitable doctrines governing the disbursement
of unclaimed funds (including claimant fund-sharing, reversion to the defendant, and
escheat to the government), the court opted for a cy pres distribution. Id. at 495-99.
Because the court found that, at the time that they entered into the consent decree, the
parties all wanted to use for scholarships any funds that remained after distribution (but
were unable to agree on particulars), it ordered the parties to confer and to submit an
agreed-upon scholarship program to be administered by the Georgia-Pacific
Foundation. Id. at 499-500.

       In June, 1994, the court issued an order approving a scholarship program
outlined by the parties, and several months later the court issued an order disbursing
the funds. Under the court's plan, the Georgia-Pacific Foundation will provide
scholarships to 112 students over ten years, and any remaining money will go to the
United Negro College Fund. Only black high school students who live in three

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counties in Arkansas and three parishes in Louisiana are eligible for the scholarships.
(These areas were selected because most of the class members lived in these counties
while working at the Crossett facility.)

                                              II.
        The plaintiffs first assert that the district court erroneously characterized the
money in the registry as "unclaimed funds." They contend instead that they are simply
seeking an additional distribution according to the terms of the consent decree. The
plaintiffs reason that, because the remaining money is attributable entirely either to
interest or to the contingency fund, they are entitled to all of it. They support their
argument with two provisions in the consent decree: First, the consent decree provides
that interest is to be included in the settlement fund and distributed to the class; second,
it names the plaintiffs' counsel as the trustee for the contingency fund and gives him the
authority to distribute it. Id. at 492.

       We do not think that these provisions of the consent decree mean that the money
at issue in this case is not "unclaimed." See 2 H. Newberg and A. Conte, Newberg on
Class Actions § 10.13 at 10-35 (3d ed. 1992) (defining "unclaimed funds" as the
balance of a class recovery remaining after individual distribution). As we read the
consent decree, the parties did not intend for the provisions upon which the plaintiffs
rely to apply after the initial distribution of the settlement fund. In fact, a separate
provision was included to govern the current situation. Paragraph 9(h) of the decree
provides that as to "any monies still in the registry of the Court either as a surplus in the
Settlement Fund or a surplus in the Contingency Fund, disposition shall be approved
by the Court." Powell, 843 F. Supp. at 493. We therefore conclude that the court
correctly found that the money in the registry was "unclaimed" and that neither party
has a legal right to it.

                                            III.

                                            -5-
       Because neither party has a legal right to the unclaimed funds, the court correctly
turned to traditional principles of equity to resolve the case. There are four ways in
which courts have distributed unclaimed funds of this sort: Pro rata distribution to the
class members, reversion to the defendant, escheat to the government, and cy pres
distribution. See generally 2 Newberg and Conte, Newberg on Class Actions § 10.15
at 10-38, 10-39. Because neither party challenges the court's decision not to allow a
reversion of the funds to GP or to escheat them, we need determine only whether the
court correctly settled on a cy pres distribution or, alternatively, whether the money
should have been distributed pro rata.

       We note at the outset that this is not an easy case. Because of the difficulties
inherent in administering a settlement involving a class of over 2,000 members
(particularly in light of the number of years that have passed since the original
distribution), the district court's determination is entitled to a great deal of deference.
Accordingly, we will reverse only if the court's resolution was a clear abuse of
discretion. See, e.g., In re Folding Carton Antitrust Litigation, 744 F.2d 1252, 1255
(7th Cir. 1984), cert. dismissed, 471 U.S. 1113, 1120 (1985), and In re Equity Funding
Corp. of America Securities Litigation, 603 F.2d 1353, 1362-63 (9th Cir. 1979).

      Cy pres (sometimes called fluid-class) distribution has traditionally been used
in cases in which class members are difficult to identify or where they change
constantly, as when a utility is found liable for overcharging its customers. See, e.g.,
2 Newberg and Conte, Newberg on Class Actions § 10.17 at 10-44, 10-45, and Market
Street Railway v. Railroad Commission, 171 P.2d 875, 881 (Cal. 1946), cert. denied,
329 U.S. 793 (1946) (ordering streetcar company to use unclaimed funds to improve
transportation facilities.). In these cases, the court, guided by the parties' original
purpose, directs that the unclaimed funds be distributed "for the indirect prospective
benefit of the class." See 2 Newberg and Conte, Newberg on Class Actions § 10.17
at 10-41. Cy pres distributions of unclaimed funds have been controversial in the
courts of appeals. See, e.g., Six Mexican Workers v. Arizona Citrus Growers,

                                           -6-
904 F.2d 1301, 1307-09 (9th Cir. 1990) (disapproving cy pres distribution to
Inter-American Foundation "for distribution in Mexico," id. at 1307); Wilson v.
Southwest Airlines, Inc., 880 F.2d 807, 809 (5th Cir. 1989) (rejecting cy pres
distribution to general charitable organization); and Folding Carton, 744 F.2d at 1254
(holding that the district court abused its discretion in using cy pres distribution of
unclaimed funds to establish an antitrust foundation).

         In this case, however, we agree with the district court that a cy pres distribution
is potentially appropriate. The court found that it would be extremely difficult to
distribute the funds pro rata, and we cannot say that this factual finding is clearly
erroneous. Over a decade has elapsed since the initial distribution, and many class
members have probably relocated. (In fact, when the initial distribution occurred, over
125 checks were returned as undeliverable. Powell, 843 F. Supp. at 498.) A pro rata
distribution would be further complicated by the fact that GP (the party entirely
responsible for conducting the first distribution) is no longer responsible for locating
class members and distributing the funds. Id. at 498-99.
         After carefully reviewing the record, we also conclude that the cy pres remedy
fashioned by the court was not an abuse of discretion. We emphasize that, partly
because the plaintiffs waited many years to seek distribution of the funds, the district
court was faced with a choice among "second bests." In this difficult situation, the
court carefully weighed all of the considerations and tailored its remedy to reflect the
parties' original intention regarding unclaimed funds. Although the plaintiffs may object
to some of its particulars, the scholarship program balances the equitable interests
involved in the case with the need to conserve judicial resources. It is clear that at the
time of the consent decree, both sides of this dispute wanted to use for scholarships any
money remaining after distribution, and the district court took care to preserve that
initial intention. Furthermore, because the scholarships will be made available only to
black students in the vicinity of Crossett, Arkansas, the program will likely also

                                            -7-
promote the plaintiffs' desire to have the scholarships benefit the class members'
younger relatives.

                                            IV.
       The plaintiffs also challenge the district court's denial of their motion for
attorneys' fees. In denying the motion, the court relied on a provision in the consent
decree that provides class counsel with fees for ninety days following the initial
distribution. The plaintiffs assert, however, that this provision does not apply here and
that they are equitably entitled to additional fees because they have expended a great
deal of time and money to ensure that this final distribution reflects the purpose of the
consent decree. We agree.

       In our view, the work performed in this proceeding is analogous to
"postjudgment monitoring of a consent decree," which is "a compensable activity for
which counsel is entitled to a reasonable fee." Pennsylvania v. Delaware Valley
Citizens' Council, 478 U.S. 546, 559 (1986). Although the amount of fees requested
may be subject to reduction for factors such as those discussed in St. Louis Fire
Fighters Association v. City of St. Louis, 96 F.3d 323, 332 (8th Cir. 1996), and
Association for Retarded Citizens v. Schafer, 83 F.3d 1008, 1011-12 (8th Cir. 1996),
cert. denied, 117 S. Ct. 482 (1996), the complete denial of a fee award is not
appropriate.

                                        V.
     For the foregoing reasons we affirm the judgment of the district court, but
remand the case with direction to award appropriate fees to the plaintiffs' counsel.

                                          -8-
A true copy.

      Attest:

         CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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