Making fair funds fairer

The PENNumbra website (online companion to the Pennsylvania Law Review) is spotlighting a recent article by Adam Zimmerman and David Jaros which proposes building class-action-like protection into the high-profile criminal restitution actions that have dominated the news in recent years. In The Criminal Class Action, Zimmerman and Jaros examine cases such as Bernie Madoff, noting that,

The past decade has witnessed the rise of new, massive settlements forged not out of civil litigation but on the periphery of the criminal justice system. Since 2003, prosecutors have demanded that defendants in a variety of high-profile corporate scandals set up multimillion-dollar restitution funds for victims to settle criminal charges. Yet few rules exist for the prosecutors who create and distribute these complex settlements.

After setting out the concept of the criminal class action, the authors argue that “when prosecutors compensate multiple victims in a criminal class action, prosecutors should adopt rules similar to those that exist in private litigation to ensure that the victims receive fair and efficient compensation,” and they set out some specific proposals including coordination rules, stakeholder representation, a court review of settlements. It’s an excellent article, pointing out an important and undertheorized topic, and proposing sensible fixes. (Available online via SSRN or the Penn. L. Rev. website.)

This dovetails with Adam Zimmerman’s other recent article, Distributing Justice (SSRN link), which discusses how to build better safeguards into the distribution of “fair fund” assets recovered by agencies. As in his other article, Adam highlights an important issue — statutes such as Sarbanes-Oxley have resulted in vastly increased agency power to use fair funds to distribute money to victims, but these funds lack oversight and consistency — and once again, he proposes a set of pragmatic solutions:

“I propose three solutions to give victims more voice in their own redress, while preserving an agency’s flexibility to enforce the law: (1) that agencies involve representative stakeholders in settlement discussions through negotiated rulemaking; (2) that courts subject agency decisions to hard look review; and (3) that courts and agencies coordinate overlapping settlements before a single federal judge.”

Adam has been a friend since our clerkships with Judge Weinstein which briefly overlapped. He’s a perceptive and creative scholar with a real knack for noticing gaps in the law, and his recent work is really good — his articles tend to point out important gaps and suggest sensible and pragmatic ways to address them. If you haven’t yet taken a look at Adam’s scholarship, you are missing out.

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