Slipchenko v. Brunel Energy, Inc. et al

Filing 188

ORDER entered GRANTING IN PART and DENYING IN PART 186 MOTION for Approval of Residual Settlement Funds. (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
TAMARA SLIPCHENKO, on behalf
of herself and all other persons
similarly situated,
Plaintiffs,
v.
BRUNEL ENERGY, INC., et al.,
Defendants.

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CIVIL ACTION NO. H-11-1465

ORDER TO DISTRIBUTE RESIDUAL SETTLEMENT FUNDS
Class Counsel have moved for an order approving distribution of residual settlement funds.
(Docket Entry No. 186). They ask the court to: (1) authorize distribution of the unclaimed
settlement funds; (2) authorize payment by the Settlement Administrator, Gilardi & Co., LLC, of
$9,278.41 from the Settlement Fund, plus additional costs incurred in distributing the money funds;
and (3) confirm that Counsel may be paid fees and expenses from the Attorney’s Fees Fund. (Id.
at 1). The motion is granted in part and denied in part.
On March 20, 2015, in accordance with the court’s distribution order, the Settlement
Administrator, Gilardi, mailed sixty-six checks to the class members. Sixty of those checks were
cashed by the July 18, 2015 deadline. (Docket Entry No. 187, Gilardi Decl. ¶¶ 3, 5). Gilardi made
significant efforts to contact each of the six class members whose checks were not cashed. (Id., ¶
6). The uncashed checks left $14,146.81in the settlement fund. (Id., ¶ 5). Class Counsel moved for
authorization to distribute the unclaimed money either in escheat to the states where the six class
members who did not cash their checks reside or, for funds that cannot be escheated now, by cy pres

to three charities identified by Class Counsel. (Docket Entry No. 186, 4-7). The court agrees that
the money should be distributed but does not believe that either escheat or cy pres is necessary.
The court is reluctant to use an escheat of the unclaimed funds, in part because the Settlement
Agreement did not contemplate it. (Docket Entry No. 158). Although the Agreement did
contemplate cy pres under limited circumstances, it is not a favored approach, in part because it
confers only an indirect benefit—at best—on class members. See In re BankAmerica Corp. Sec.
Litig., 775 F.3d 1060, 1063 (8th Cir. 2015) (“[M]any of our sister circuits have criticized and
severely restricted the practice” of making cy pres distributions. (citing cases)). The Fifth Circuit
recently held that the district court “abused its discretion by ordering a cy pres distribution in the
teeth of the bargained-for terms of the settlement agreement, which required residual funds to be
distributed within the class.” Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 471 (5th Cir. 2011).
The Settlement Agreement states that “the Settlement Fund will be distributed to Settlement
Class Members pursuant to the Court-approved Plan of Allocation.” (Docket Entry No. 157, ¶
VIII.3). The Plan of Allocation provides that:
[i]n the event that monies remain in the Net Settlement fund after Distribution and
after all taxes and other expenses have been paid and the time to cash any checks has
passed, any remaining amounts may be Re-Allocated among Class Member whose
Recognized Claim is based on Total Weighted Days on the same pro rata formula
as set forth above, or if in the judgment of Class Counsel such reallocation is not
cost-effective, those residual amounts will be distributed to non-sectarian, non-profit
501(c)(3) charitable organization(s) recommended by Class Counsel and approved
by the Court.
(Docket Entry No. 158, ¶ 6).
“Because the settlement funds are the property of the class, a cy pres distribution to a third
party of unclaimed settlement funds is permissible only when it is not feasible to make further
distributions to class members.” Klier, 658 F.3d at 475. “Where it is still logistically feasible and

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economically viable to make additional pro rata distributions to class members, the district court
should do so, except where an additional distribution would provide a windfall to class members
with liquidated damages claims that were 100 percent satisfied by the initial distribution.” Id. at 475
(citation omitted). Distributing the remaining amount on a pro rata basis to the class members who
cashed their checks will not provide a windfall because the settlement award of $375,000 is less than
the statutory damages the class was potentially entitled to receive.

(Docket Entry No. 158,

Memorandum Opinion,19) (explaining that potential class damages were estimated to be as high as
$3 million).
Class Counsel asserts that distributing the money to the class members who did cash their
checks is not feasible because the minimum check value would be $3.58 and the maximum check
value would be $3,117.08. (Id., ¶ 7). The court agrees that distributing very small amounts is not
economically feasible. But it is economically sensible to distribute the remaining sum to the class
members who did cash their checks, on a pro rata basis, if the checks are for more than $20.00.
This is consistent with the Settlement Administrator’s recommendation that if residual class funds
are distributed to class members who did cash their checks, the court should eliminate checks for
less than $20 from the pro rata distribution and reallocate the amounts between $62.34 and
$3,157.44 to the forty-five class members entitled to receive larger sums. (Docket Entry No. 187, ¶
7). The court agrees.

The remaining funds are to be distributed on a pro rata basis to the forty-five class members
who did cash their checks and whose second checks will be for more than $20, in accordance with
the Plan of Allocation. Class Counsel is authorized to pay Gilardi $9,278.41 from the Settlement
Fund, plus additional costs incurred to distribute the money. Finally, Class Counsel may be paid

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its fees and expenses from the Attorney’s Fees Fund.
SIGNED on September 14, 2015, at Houston, Texas.
______________________________________
Lee H. Rosenthal
United States District Judge

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