§ 382.4.Notification of Connection of Relationship With Nonparty Recipient of Distribution

Class action settlements sometimes send leftover money to a nonparty — a nonprofit, a charity, a research fund — rather than back to class members. Section 382.4 addresses a specific risk that arrangement creates: what if the nonprofit chosen happens to have ties to the lawyers negotiating the settlement?

The section applies whenever a proposed settlement in a class action under § 382, including a consent judgment, decree, or settlement agreement, directs money or anything of value to someone who is not a party to the case. At the preliminary approval hearing required by rule 3.769(c) of the California Rules of Court, an attorney for a party must tell the court about any connection or relationship with the nonparty recipient that could reasonably create the appearance of impropriety between how the recipient was picked and the interests of the class.

This disclosure duty gives the judge reviewing preliminary approval the information needed to ask hard questions about a distribution to an outside recipient before signing off on it, rather than learning about a conflict after the settlement has already been approved.