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$60 million from unclaimed lawsuit funds could go to Ohio charities

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By William Hershey, Staff Writer 8:26 PM Sunday, December 6, 2009

COLUMBUS — When Gov. Ted Strickland signed the budget last July, the Children’s Hunger Alliance lost the $3.8 million from the state that it had been using to help make sure youngsters across Ohio get the nutritious food they need to stay healthy.

That made the $450,000 the group received earlier from unclaimed funds in a class action lawsuit settlement a timely godsend.

“I would say it was unexpected and very beneficial,” said Stephen Lilly, the hunger alliance’s vice president of marketing and media.

With state support withering and private contributors tightening their pocketbooks, Sens. Tim Grendell, R-Chesterland, and Bill Seitz, R-Cincinnati, have proposed legislation that backers say would provide more than $60 million annually to charities and nonprofits at no cost to taxpayers.

It would make the legal doctrine of “cy pres” the official policy of Ohio. Pronounced “sigh pray,” it means as nearly as possible. In Ohio, it would require that all leftover funds from class action lawsuit settlements be distributed to charities, unless a court order provided otherwise.

The $60 million represents what now goes undistributed in such settlements because not all those affected by the settlements can be found, said Cleveland-area lawyer Patrick Perotti, a class action lawyer and a key backer of the proposal.

Class action lawsuits are filed on behalf of a group of people who claim they have been injured by a product or policy.

Under current law, a judge presiding over a class action lawsuit may distribute any money remaining in a settlement fund as happened when the Children’s Hunger Alliance got the $450,000.

Unless the judge takes such action, however, the remaining money goes back to the company being sued.

Grendell said his proposal, Senate Bill 157, “keeps the class action process honest.”

If a company agrees to pay $1 million to settle a lawsuit, “they ought to pay the million” rather than getting some of it back, Grendell said.

Distributing the remaining money to charities wouldn’t increase the amount of the settlement that goes to lawyers representing the plaintiffs, said Grendell.

The Ohio Chamber of Commerce, the state’s largest business advocacy group, strongly opposes the bill, said Linda Woggon, vice president, governmental affairs.

“Our feeling is that codifying the doctrine of cy pres in class action is going to cause more lawsuits. It’s going to discourage the settlement of lawsuits,” said Woggon. “It doesn’t make sense to discourage settlements and this does.”

In some cases, lawsuits are settled without a company admitting wrongdoing, Woggon said.

“What you’re doing is trying to punish someone who may not have done anything wrong,” she said.

Gov. Ted Strickland’s original state budget proposal included a similar provision, with all undistributed money going to legal aid for the poor. The House-passed budget included this but it didn’t make it in the final budget signed by Strickland.

Strickland does not believe the undistributed money should return to the company and hopes the Legislature would work on a consistent statewide policy to benefit those in need, said Amanda Wurst, the governor’s spokeswoman.

Grendell said he hopes to make a start by voting the bill out of committee by the end of the year.

Contact this reporter at (614) 224-1608 or whershey@DaytonDailyNews.com.

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