Nonprofit Newswire | New Fundraising Tip: Befriend a Judge!

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March 2, 2010; Wall Street Journal | If you think that class action lawsuits overly enrich lawyers or fill the pockets of victims who weren’t as grievously harmed as claimed, would it make you feel better to learn that in many cases the aggrieved get little or no award and instead most of of the money goes to a charity? A Wall Street Journal examination of a pending class-action settlement in a privacy violation suit against Facebook, Inc. reports that, if approved, plaintiff’s lawyers will receive 30 percent with the balance of the $9.5 million award going to a foundation that promotes privacy rights. The paper notes that such settlements that reward charities are on the rise. Between 2001 and 2008 some 65 charities received grants from 65 class action cases, triple the number of charitable donations in the preceding nine yeas. The Journal says laws permit judges to award settlements to charities in cases where it is “difficult to find the class members who stand to recover funds, or in cases where the costs of distributing would exceed each plaintiff’s per-capita recovery.” These actions are drawing scrutiny and criticism from legal experts. Some say judges shouldn’t agree to settlements that leave the injured parties out in the cold. Others say the proposals end up making those accused of wrongdoing looking good by proposing damages go to charity.  In some cases, because judges do little do diligence, awards are made to groups that aren’t either the obvious or best choices or that do work that has nothing to do with the underlying suit. For instance, the Animal Defense Fund received $127,000 last year as part of a settlement from a hotel-fire lawsuit. Puerto Rico federal judge Raymond Costa told the Journal, “it didn’t occur to me” to research fire-related charities as potential settlement beneficiaries. Meanwhile, the proposed Facebook settlement isn’t sitting well with everyone either. One group is upset with the social networking company’s proposal that a bulk of the settlement go to a foundation that it will help establish, assist in drawing up bylaws, and take part in choosing at least one board member of a new charity. Public Citizen, a Washington, D.C.-based consumer-rights organization, has filed court papers objecting, arguing that, “In essence, Facebook is paying itself money to gain a broad release of its users’ legal claims.”—Bruce Trachtenberg