Every once in a while, I read an opinion that is so surprising that I have to stop and say, "Where's Allen Funt?! I must be on Candid Camera!" This is one of them: In re San Juan Dupont Plaza Hotel Fire Litigation, 2010 WL 60955 (D. P.R. Jan. 7, 2010).
Frankly, I printed this decision and put it in my "to read" pile for the name alone. The litigation over the Dupont Plaza fire, which killed almost 100 guests in 1987, was one of the defining mass torts when I was a greenhorn. I wondered as I printed the decision what could possibly be going on in that case more than 20 years since the fire.
It turns out that the court has distributed all of the settlement funds that it can, but there are still some class members or their heirs who cannot be located. In fact, the court is sitting on $126,977.49 of unclaimed funds. This decision shuts the books on the litigation and disburses the remaining funds.
How, you might ask? Well, first the court makes itself comfortable that it can ignore the unclaimed property statutes. Sitting in equity over a pot of class action proceeds, the court decides that it can disburse the money as it sees fit, without having the funds escheat to the government. Id. at *1.
Then, it introduces the cy pres doctrine, which originally was created by courts presiding over trusts where achieving the original purpose was no longer possible. The good folks over at Drug and Device Law previously have posted an excellent discussion of why cy pres recovery is incompatible with class action litigation. Nevertheless, the court in the Dupont Hotel Fire was determined to use the cy pres doctrine to distribute the money remaining in its coffers.
As Judge Raymond Acosta observed, "cy pres" actually means "as near as possible." Id. So what "as near as possible" charity did Judge Acosta pick to receive the unclaimed settlement funds from the hotel fire litigation?
Was it, perhaps, the National Fire Protection Association -- a non-profit organization that, since 1889, has been advocating consensus fire codes and standards and promoting fire education? Maybe the International Association of Fire Chiefs, which helps educate and advocate for career and volunteer fire safety personnel? The American Red Cross, which provides domestic disaster relief in situations like hotel fires? The Disaster Relief Fund at the Corporation for National and Community Service, which coordinates volunteers from across the country to assist in disaster relief efforts in response to fires? Or even a local fire service organization or disaster relief organization in Puerto Rico?
None of the above. Instead, the nearly $127,000 went to . . .
Notably, the court appeared to expect criticism for not giving the money to a charity in Puerto Rico, and conceded that its distribution may not have been the best one:
[W]e conclude that, while use of funds for purposes closely related to their origin might be the best application, the cy pres doctrine and the courts' broad equitable powers now permit use of these funds for other public interest purposes by either educational, charitable, or other public service organizations, both for current programs or to constitute an endowment and source of future income for long-range programs.
Id. at *2. And, the court notes, it had an application from the ALDF asking for the funds. So, voila! ALDF -- headquartered in California -- gets the money.
Now don't get me wrong. I looooove animals. In fact, here is a gratuitous picture of my dog, Ted:
But what the Sam Hill does the ALDF have to do with a hotel fire?!!! Surely the laudable work done by the ALDF is not "as near as possible" to the purpose of class action funds that were collected to compensate people injured in a hotel fire.
This decision is destined to be cited by some advocates as yet another instance of class action cy pres distribution gone terribly wrong.