The Use of Principles of Aggregate Litigation by Courts: The Early Returns

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The American Law Institute gave final approval to the Principles of Aggregate Litigation in May, 2009. Drafts of the Principles had been published for several years before final approval, and some courts have been aware of the substance of the ALI’s views for some time. We have searched available opinions to determine the influence, if any, that the Principles have exerted on the law to this point.

Almost all citations to the Principles have been in federal court, predominantly in the First and Second Circuits. By far the most common subject for which the Principles have been cited is cy pres settlements. Some courts have approved settlements where the primary beneficiaries are not class members but third parties, such as charities. The rationale for such settlements is that they provide some punishment to the defendant (or disgorgement of ill-gotten gains) while avoiding difficult problems in identifying and compensating specific class members.

The Principles of Aggregate Litigation is generally unenthusiastic about cy pres settlements and expresses a preference for distribution of settlement proceeds to class members as opposed to third parties, such as charities, unless such a distribution is not economically feasible. The Second Circuit relied upon a draft of the Principles in a leading case (see Masters v. Wilhelmina Model Agency, Inc. .pdf) and the Principles’ position on this subject seems to have real traction in the federal courts.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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