Judges Express Unease in Distributing Cy Pres Award
The decision didn’t come easily, though, as the judges expressed their concern with the idea that they were called on to determine the ultimate disposition of settlement funds in the underlying case.
The determination of the charitable recipient of a settlement award, after all, is not part of the job description of a federal appellate judge. (Or so the panel of three expressed in the written opinion.)
The donation came about through something known as a "cy pres award." The underlying case involved a bio-pharmaceutical case with TAP Pharmaceuticals and their cancer drug, Lupron.
In 2001, TAP was charged with improper billing and Medicare fraud. TAP pled guilty and agreed with the Department of Justice to a criminal fine of $290 million. TAP also agreed to civil restitution in an amount close to $600 million to Medicare and Medicaid, with another $25.5 million divided among the 50 states.
Following the criminal settlement came nine class actions brought by consumers, health care plans and insurers. A settlement was reached in 2004.
According to that settlement agreement, any unclaimed funds would be given to charity, at the discretion of the court, in what was called a cy pres award.
Judge Sandra Lynch expressed criticism of the cy pres award in her opinion.
"It is one thing for the district court to exercise its traditional judicial function to approve class action settlement agreements. It is quite another for the parties to abandon the task of agreement over the assignment of residual funds and just hand that task to the court."
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