Chancery Addresses Non-Disbursement of Class Action Settlement Funds
In Norberg v. Security Storage Co. of Washington, C.A. No. 12885-VCN (Del. Ch. Nov. 19, 2012), the Court of Chancery addressed the issue of how to deal with funds from a class action settlement–approved many years ago, that have not yet been fully disbursed.
Brief Overview: The class action settlement in this case was approved in 2008 based on a suit initially filed in 1993 to contest a freeze-out merger. (Yes, about 15 years earlier. New class representatives were approved in 2001.) Only about 25 percent of the aggregrate recovery of $145,000 for the class was disbursed when the motion that led to this letter ruling was filed to seek an accounting of the settlement proceeds.
The plaintiffs argue that the unclaimed funds should escheat to the State of Delaware and not remain with the company for its benefit. One of the ancillary issues was whether the company and others involved expended sufficient effort to find current addresses for the minority shareholders, some of whose shares were held in depository accounts. Many of the records with addresses that were used were of 1993 vintage, when the initial suit was filed, and did not reflect current information.
Bottom line: The court described the settlement as being based on a “claims-made arrangement” so that no fund was created that would be subject to escheat. Also, the affidavits submitted with the latest motion served the same net result as an accounting. The court realized that further follow-up was required by the parties and directed the parties to contact the court if additional intervention by the court was needed.