## Facts

- Securities-fraud class actions arose from the 1998 merger of NationsBank and BankAmerica, later consolidated in an MDL in the Eastern District of Missouri.
- The district court certified four classes: two NationsBank shareholder classes and two BankAmerica shareholder classes.
- The court approved a $490 million global settlement allocating $333.2 million to the NationsBank classes and the remainder to the BankAmerica classes.
- After a 2004 distribution and a court-ordered 2009 second distribution, about $2.44 million remained in the NationsBank settlement fund.
- In 2012, NationsBank class counsel moved to (1) terminate the NationsBank portion of the case, (2) obtain $98,114.34 in additional attorneys’ fees for post-2004 work, and (3) distribute the remaining funds cy pres to charities proposed by counsel.
- Over the class representative’s objection, the district court approved the supplemental fee request and ordered the remaining balance distributed cy pres to Legal Services of Eastern Missouri, Inc. (LSEM).
- The class representative appealed the cy pres order and the fee award.

## Issues

1. Whether the district court abused its discretion by ordering a cy pres distribution of the residual NationsBank settlement funds without first determining that further distributions to class members were not feasible.
2. Whether the district court abused its discretion by selecting LSEM as the cy pres recipient without ensuring a sufficient nexus to the class interests and the purposes of the underlying securities statutes.
3. Whether the district court abused its discretion by awarding additional attorneys’ fees that were tied to the disposition of the residual settlement funds.

## Decision

- The court of appeals vacated the cy pres distribution order and remanded.
- The court held the district court failed to make the required feasibility finding that another pro rata distribution to class members could not be efficiently or fairly accomplished.
- The court held that, even if cy pres were permissible, LSEM lacked the necessary nexus to the securities-fraud claims and the interests of NationsBank shareholders.
- The court vacated the $98,114.34 supplemental fee award because it was inextricably intertwined with the residual-fund disposition and required reconsideration on remand.

## Legal Principles

- Cy pres is subordinate to direct compensation; settlement funds should be distributed to class members to the extent possible.
- Before ordering cy pres, a court must determine that further distributions to class members are not feasible, supported by findings on efficiency, administrative costs, and fairness.
- Any cy pres recipient must have a sufficient nexus to the class members’ interests, the nature of the litigation, and the objectives of the underlying statutes.
- Courts must scrutinize cy pres proposals for conflicts or the appearance of self-dealing, particularly when class counsel recommends recipients.
- Supplemental fee awards from residual funds must be assessed in light of the ultimate fund disposition and the benefit conferred on the class.

## Conclusion

The Eighth Circuit required a feasibility-based inquiry favoring additional class distributions over cy pres and enforced a strict nexus requirement for any cy pres recipient; because those requirements were not met and the fee award depended on the same residual-fund disposition, both orders were vacated and remanded for reconsideration.


In re BankAmerica Corp. Sec. Litig., 775 F.3d 1060 (8th Cir. 2015)