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In re BankAmerica Corp. Sec. Litig.

United States Court of Appeals, Eighth Circuit

January 8, 2015

In re: BankAmerica Corporation Securities Litigation;
Green Jacobson, P.C., Appellee, David P. Oetting, Class Representative, Plaintiff - Appellant National Legal Aid and Defender Association; Association of Pro Bono Counsel; Missouri Lawyer Trust Account Foundation, Amici on Behalf of Appellee

Submitted September 10, 2014.

Page 1061

Appeal from United States District Court for the Eastern District of Missouri - St. Louis.

For David P. Oetting, Class Representative, Plaintiff - Appellant: Theodore H. Frank, CENTER FOR CLASS ACTION FAIRNESS, Washington, DC; David Prange Oetting, Saint Louis, MO; Frank Hilton Tomlinson, TOMLINSON LAW, LLC, Birmingham, AL.

For Green Jacobson, PC, Appellee: Jonathan F. Andres, Martin M. Green, Joe David Jacobson, GREEN & JACOBSON, Saint Louis, MO.

For National Legal Aid and Defender Association, Association of Pro Bono Counsel, Amicus on Behalf of Appellee(s): Wilber H. Boies, Latonia Haney Keith, Timothy Michael Kennedy, MCDERMOTT & WILL, Chicago, IL; Eric John Magnuson, ROBINS & KAPLAN, Minneapolis, MN.

For Missouri Lawyer Trust Account Foundation, Amicus on Behalf of Appellee(s): Anthony Wayne Bonuchi, Jon R. Dedon, William E. Quirk, POLSINELLI, PC, Kansas City, MO.

Before WOLLMAN, LOKEN, and MURPHY, Circuit Judges. MURPHY, Circuit Judge, dissenting.


Page 1062

LOKEN, Circuit Judge.

Following the 1998 merger of NationsBank and BankAmerica to form Bank of America Corporation, shareholders filed multiple class actions around the country alleging violations of federal and state securities laws. The cases were transferred by the Judicial Panel on Multidistrict Litigation to the Eastern District of Missouri. That court certified four plaintiff classes, two classes of NationsBank shareholders and two classes of BankAmerica shareholders. The transferred cases were resolved when the court approved a $490 million global settlement, overruling an objection by NationsBank class representative David P. Oetting that allocating $333.2 million to those classes was inadequate because their claims had greater merit than the claims of the BankAmerica Classes. In re BankAmerica Corp. Secs. Litig., 210 F.R.D. 694, 704-05, 714 (E.D. Mo. 2002), and 227 F.Supp.2d 1103 (E.D. Mo. 2002).

After an initial December 2004 distribution, approximately $6.9 million remained in the NationsBank settlement fund. The district court ordered a second distribution of $4.75 million to NationsBank claimants in April 2009. After that distribution, $2,440,108.53 remained. In September 2012, class counsel for the NationsBank Classes, appellee Green Jacobson, P.C., filed a motion to terminate the case with respect to the NationsBank Classes, to award class counsel $98,114.34 in attorneys' fees for work done after the distribution in December 2004, and to distribute cy pres the remainder of the " surplus settlement funds" to three St. Louis area charities suggested by class counsel. The district court granted the motion over Oetting's objections and ordered " that the balance of the NationsBank Classes settlement fund shall be distributed cy pres to the Legal Services of Eastern Missouri, Inc." (LSEM). In re Bank of America Corp. Secs. Litig., No. 4:99-MD-1264, 2013 WL 3212514, at *5-6 (E.D. Mo. June 24, 2013) (" Bank of America" ).

Oetting appeals the cy pres distribution and the award of attorneys' fees. As to the former, he argues the district court abused its discretion in ordering a cy pres distribution because a further distribution to the classes is feasible, and in any event LSEM is unrelated to the classes or the litigation and is therefore an inappropriate " next best" cy pres recipient.[1] We

Page 1063

agree and therefore reverse. As our disposition results in the case not being terminated, we vacate the award of additional attorneys' fees as premature, leaving that issue to be resolved, consistent with this opinion, when administration of the NationsBank Classes settlement fund can be terminated.


In recent years, federal district courts have disposed of unclaimed class action settlement funds after distributions to the class by making " cy pres distributions." [2] Such distributions " have been controversial in the courts of appeals." Powell v. Ga.-Pac. Corp., 119 F.3d 703, 706 (8th Cir. 1997). Indeed, many of our sister circuits have criticized and severely restricted the practice. See, e.g., Ira Holtzman, C.P.A. v. Turza, 728 F.3d 682, 689-90 (7th Cir. 2013); In re Baby Prods. Antitrust Litig., 708 F.3d 163, 172-73 (3d Cir. 2013); In re Lupron, 677 F.3d at 29-33; Nachshin, 663 F.3d at 1038-40; Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 473-82 (5th Cir. 2011); In re Katrina Canal Breaches Litig., 628 F.3d 185, 196 (5th Cir. 2010); Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 434-36 (2d Cir. 2007); Wilson v. Sw. Airlines, Inc., 880 F.2d 807, 816 (5th Cir. 1989). These contrary authorities were not even acknowledged by Green Jacobson in urging a cy pres distribution in this case, nor by the district court in ordering the requested distribution. Recently, echoing these views, Chief Justice Roberts noted " fundamental concerns surrounding the use of such remedies in class action litigation" while nonetheless agreeing with the denial of certiorari in Marek v. Lane, 134 S.Ct. 8, 9, 187 L.Ed.2d 392 (2013).

The American Law Institute addressed the issue of Cy Pres Settlements in § 3.07 of its published Principles of the Law of Aggregate Litigation (2010). The ALI recommended:

A court may approve a settlement that proposes a cy pres remedy . . . . The court must apply the following criteria in determining whether a cy pres award is appropriate:
(a) If individual class members can be identified through reasonable effort, and the distributions are sufficiently large to make individual distributions economically viable, settlement proceeds should

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be distributed directly to individual class members.
(b) If the settlement involves individual distributions to class members and funds remain after distributions (because some class members could not be identified or chose not to participate), the settlement should presumptively provide for further distributions to participating class members unless the amounts involved are too small to make individual distributions economically viable or other specific reasons exist that would make such further distributions impossible or unfair.
(c) If the court finds that individual distributions are not viable based upon the criteria set forth in subsections (a) and (b), the settlement may utilize a cy pres approach. The court, when feasible, should require the parties to identify a recipient whose interests reasonably approximate those being pursued by the class. If, and only if, no recipient whose interest reasonably approximate those being pursued by the class can be identified after thorough investigation and analysis, a court may approve a recipient that does not reasonably approximate the interests being pursued by the class.

We have approved cy pres distribution of unused or unclaimed class action settlement funds in two cases. In both, the distributions met each of the criteria in ALI § 3.07, even though our decisions antedated the ALI's work. See Powell, 119 F.3d at 706-07; Airline Tickets I, 268 F.3d at 626; In re Airline Ticket Comm'n Antitrust Litig., 307 F.3d 679, 682-84 (8th Cir. 2002) (" Airline Tickets II" ). Similarly, the First Circuit approved a substantial cy pres distribution, concluding it was appropriate in part because the district court's actions were " entirely congruent" with the then-proposed ALI § 3.07. In re Pharm. Indus. Avg. Wholesale ...

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