Geanacopoulos v. Philip Morris USA Inc. (Lawyers Weekly No. 12-070-17)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
9884CV06002-BLS1
____________________
THOMAS GEANACOPOULOS, on behalf of himself and a class
v.
PHILIP MORRIS USA INC.
____________________
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR DISPOSITION OF RESIDUAL FUNDS
Judge Leibensperger found after a lengthy bench trial that, “for more than twenty-eight years until 1999,” Philip Morris USA, Inc., “knowingly and willfully marketed Marlboro Lights as a cigarette less harmful or safer than Marlboro Reds without sufficient evidence to substantiate that claim.” Judge Leibensperger concluded that in so doing Philip Morris deliberately deceived Massachusetts consumers in violation of G.L. c. 93A. He awarded statutory damages of $ 25 per class member, or an estimated total of $ 4,942,500, plus prejudgment interest. The parties then entered into a settlement agreement to govern the distribution of this award to eligible class members. Philip Morris paid $ 15,273,815 to fund the settlement.
Given the number of class members who have been identified, the parties expect that residual funds totaling roughly $ 6.8 million will be left in the settlement fund after the distribution of the statutory damages plus interest to each class member and the payment of all authorized expenses.
Plaintiffs have asked the Court to approve distribution of the residual funds. The distribution of such residual funds in a class action is governed by Mass. R. Civ. P. 23(e). It provides that any such residual funds “shall be disbursed [a] to one or more nonprofit organizations or foundations (which may include nonprofit organizations that provide legal services to low income persons) which support projects that will benefit the class or similarly situated persons consistent with the objectives and purposes of the underlying causes of action on which relief was based, or [b] to the Massachusetts IOLTA Committee to support activities and programs that promote access to the civil justice system for low income residents of the Commonwealth of Massachusetts.” Rule 23(e)(2). This rule is similar in aim to common law cy pres doctrine, which governs the disposition of property dedicated for
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charitable purposes where the original purposes had become impossible or impracticable.1
In their original motion, Plaintiffs asked that $ 1.6 million be distributed to each of four non-profit organizations or sets of programs—the Campaign for Tobacco-Free Kids, the Massachusetts General Hospital Tobacco 21 and CEASE Programs, the University of Massachusetts Medical School Center for Tobacco Treatment and Research and Training, and Northeastern University’s Public Health Advocacy Institute—and that any remaining residual funds (which Plaintiffs estimated would amount to roughly $ 383,500) be distributed to the Massachusetts IOLTA Committee.
After the Massachusetts IOLTA Committee objected to this proposal, the Plaintiffs and the Committee agreed upon an alternative recommendation.
Plaintiffs and the Committee now jointly request that forty percent of the residual funds be paid to the Massachusetts IOLTA Committee. Plaintiffs recommend that the remainder be distributed in equal shares of fifteen percent each to the four public health organizations listed above. The Committee no longer takes any position as to whether distributing money to any or all of those organizations would be proper.
Distribution of a portion of the residual funds to the Massachusetts IOLTA Committee is permissible and appropriate because it is specifically authorized by Rule 23(e)(2).
The Court finds that it would also be proper and appropriate to distribute a portion of the residual funds to the Campaign for Tobacco-Free Kids, the Massachusetts General Hospital Tobacco 21 and CEASE Programs, the University of Massachusetts Medical School Center for Tobacco Treatment and Research and Training, subject to the condition that each organization used any such funds for their charitable activities in Massachusetts. For the reasons stated in Plaintiffs’ written submissions, the Court finds that such use of residual funds by these three organizations or programs will benefit Massachusetts residents who are members or
1 See generally Board of Selectmen of Provincetown, 15 Mass. App. Ct. 639, 646 (1983) (summarizing cy pres doctrine).
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the plaintiff class or are similarly situated, and will do so in a manner consistent with the objectives and purposes of this class action.
The Court declines to authorize the distribution of any portion of the residual funds to Northeastern University’s Public Health Advocacy Institute in order to avoid any appearance that the selection of funding recipients was not made on the merits. One of the lead attorneys representing the plaintiff class in this lawsuit serves as PHAI’s litigation director and as director of PHAI’s Center for Public Health Litigation. The Court fully credits PHAI’s showing that this individual will not benefit personally from any residual funds that may be distributed to PHAI. Nonetheless, the Court is convinced that it should not authorize any distribution to PHAI in order to avoid any appearance of impropriety.2
In the exercise of its discretion, the Court will order that the Massachusetts IOLTA Committee receive 55 percent of the residual funds and that other three organizations or programs discussed above, other than the PHAI, each receive 15 percent of the residual funds.
ORDER
Plaintiffs’ motion for disposition of residual funds is ALLOWED IN PART. The Court hereby orders that any residual funds available in the Settlement Fund after paying or accounting for all permissible distributions to class members and all allowable expenses shall be distributed as follows: (1) 55 percent of the total residual funds shall be paid to the Massachusetts IOLTA Committee to support activities and programs that promote access to the civil justice system for low income residents of the Commonwealth of Massachusetts; (2) 15 percent shall be paid to the Campaign
2 Cf. Weeks v. Kellogg Co., No. CV 09-08102(MMM)(RZx), 2013 WL 6531177, *19 (C.D. Cal. 2013) (Morrow, J.) (declining to approve cy pres distribution to local food bank that had a “preexisting relationship with certain of plaintiffs’ counsel”); In re Linerboard Antitrust Litigation, MDL No. 1261, 2008 WL 4542669, *5 (E.D. Pa. 2008) (DuBois, J.) (declining to approve cy pres distribution to Public Interest Law Center of Philadelphia because attorney that appeared in case “currently serves in a lead role at PILCOP”); see generally American Law Institute, draft Principles of the Law of Aggregate Litigation, § 3.07, comment b (2009) (“a cy pres remedy should not be ordered if the court or any party has any significant prior affiliation with the intended recipient that would raise substantial questions about whether the selection of the recipient was made on the merits”).
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for Tobacco-Free Kids, to be used only for programs or activities in Massachusetts; (3) 15 percent shall be paid to the Massachusetts General Hospital’s Tobacco 21 and CEASE Programs, to be used only for programs or activities in Massachusetts; and (4) 15 percent shall be paid to the University of Massachusetts Medical School’s Center for Tobacco Treatment and Research and Training, to be used only for programs or activities in Massachusetts.
June 9, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court