Lillian Hayden v. Atochem North America, Inc.
2011 U.S. App. LEXIS 19650
5th Cir.2011Background
- A class action settlement resolved arsenic emissions claims against Arkema, Inc. with a three-subclass structure and a total fund of $41.4 million.
- Subclass A included injured individuals; Subclass B was nuisance-exposure with a medical-monitoring option funded by part of Subclass B’s allocation; Subclass C covered property damage and diminution in value.
- Medical-monitoring funds allocated to Subclass B were not fully drawn, leaving about $830,000 unused after monitoring concluded.
- The district court rejected proposals to reallocate the unused medical-monitoring funds to Subclass A and instead used cy pres to distribute the funds to charities selected by Arkema and the court.
- Klier, a Subclass A member, urged reallocating the unused funds to Subclass A (the most seriously injured) or, alternatively, to a Texas A&M arsenic-pollution research project.
- The court ordered the cy pres distribution in April 2010, distributing four equal shares to three charities and a local library, and did not reallocate to Subclass A.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether cy pres was permissible given the settlement terms | Klier argues funds belong to Subclass A per agreement. | Arkema contends cy pres authorized by Protocol to benefit the class as a whole. | Cy pres was an abuse; funds must go to Subclass A. |
| Whether the Protocol allowed cross-subclass reallocation | Funds could be reallocated to aid the most injured subclass. | Protocol allows changes for the class’s benefit; cross-subclass shifts are permissible. | District court erred; Protocol authorized cross-subclass reallocation, but not to charity absent feasibility/benefit to the class; here it favored charity improperly. |
| Whether feasibility and class interests supported cy pres | Further distributions to Subclass A were feasible and equitable. | Charities were needed due to the expense and limited reach of further class distributions. | Feasibility favored distributing to Subclass A; cy pres not justified. |
Key Cases Cited
- Wilson v. Southwest Airlines, Inc., 880 F.2d 807 (5th Cir. 1989) (return excess funds to defendant when proper equitable claim exists)
- In re Airline Ticket Comm’n Antitrust Litig., 307 F.3d 679 (8th Cir. 2002) (cy pres appropriate where unclaimed funds serve near-objective purposes)
- Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423 (2d Cir. 2007) (abuse of cy pres where not feasible to distribute to class members; consideration of economics)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (U.S. 1997) (class action settlement requirements and structure; opt-out and final approval concerns)
- Wilson v. Southwest Airlines, Inc., 880 F.2d 807 (5th Cir. 1989) (relevant to distribution of excess funds and equitable considerations)
- In re Holocaust Victim Assets Litig., 424 F.3d 158 (2d Cir. 2005) (reallocation of settlement funds to direct class members vs. charity; considerations of need)