United States District Court, District of Columbia
MEMORANDUM OPINION AND ORDER
PAUL
L. FRIEDMAN, UNITED STATES DISTRICT JUDGE.
This
matter is before the Court on an appeal [Dkt. No. 505] by the
Black Belt Justice Center (“BBJC”) of Class
Counsel's second review recommendation to deny the
BBJC's Phase I cy pres application. The BBJC
asks the Court to set aside the second review recommendation
of Lead Class Counsel and to authorize full cy pres
Phase I grant funding to the BBJC in the amount of $400, 000.
The
BBJC's Phase I cy pres application was first
denied on January 10, 2018, when the Court issued a
Memorandum Opinion (“Mem. Op.”) [Dkt. No. 501]
and Order [Dkt. No. 500] granting Lead Class Counsel's
motion [Dkt. No. 496] to designate cy pres
beneficiaries and to approve partial distribution of cy
pres funds pursuant to the Settlement Agreement. The
Court's Memorandum Opinion and Order approved Class
Counsel's proposal to distribute $4, 108, 000 to
twenty-five non-profit organizations selected as Phase I
grantees under Section V.E.13(b) of the Settlement Agreement.
See Mem. Op. at 1. In its Memorandum Opinion, the
Court explained that it had received an informal objection to
Class Counsel's proposal from the BBJC, an organization
that Class Counsel did not recommend receive funding as part
of Phase I. See id. at 1-2. The Court reiterated its
confidence in Class Counsel's vetting process and, upon
finding Class Counsel's recommendations reasonable, the
Court concluded that it would not undertake a de
novo review of Class Counsel's determinations. It
granted Class Counsel's motion to designate the
beneficiaries recommended by Class Counsel as the Phase I
grantees. See id. at 2.
In the
same Memorandum Opinion, the Court nevertheless directed
Class Counsel to undertake a second review of the BBJC's
application to determine whether it might be eligible for
Phase I funding despite Class Counsel's initial
recommendation. See Mem. Op. at 2. After conducting
a second review of the BBJC's application for Phase I
cy pres funding, Class Counsel confirmed its
original findings: (1) the BBJC is ineligible under the terms
of the Settlement Agreement to receive Phase I cy
pres funds because it is primarily a “legal
services entity” and (2) “even if the [BBJC] were
eligible to receive Phase I cy pres funds, the particular
program proposal by the [BBJC] is not a program that . . .
should receive Phase I cy pres funds.” See
Response of Class Counsel to January 10, 2018 Order [Dkt. No.
504].
Following
Class Counsel's second review, the BBJC filed an appeal
(“BBJC Appeal”) [Dkt. No. 505] of Class
Counsel's second review recommendation, alleging that
Class Counsel “failed to adequately explain to the
Court why the [BBJC] falls beyond the scope of Cy Pres I
funding.” See BBJC Appeal at 1. The Court
subsequently ordered [Dkt. No. 506] Class Counsel and the
government to respond to the BBJC's appeal. Class Counsel
filed its response (“Class Counsel Response to BBJC
Appeal”) on April 13, 2018 [Dkt. No. 507]; the
Government submitted a response (“Gov. Response”)
on April 27, 2018 [Dkt. No. 508]; and the BBJC filed its
reply (“BBJC Reply”) on May 17, 2018 [Dkt. No.
509]. The BBJC has asked the Court to set aside Class
Counsel's second review recommendation and authorize full
funding for the BBJC's proposed project under Phase I of
the cy pres funds disbursement. See BBJC
Appeal at 7.
The
Court has already ruled that it would enforce the cy
pres provision of the Settlement Agreement as modified.
See April 8, 2016 Memorandum Opinion & Order
(“Apr. 8, 2016 Mem. Op. & Order”) [Dkt. No.
458]; see also Klier v. Elf Atochem N. Am., Inc.,
658 F.3d 468, 475-76 (9th Cir. 2011) (“[W]hile the
settlement agreement must gain the approval of the district
judge, once approved its terms must be followed by the court
and the parties alike. The district judge must abide the
provisions of the settlement agreement, reading it to
effectuate the goals of the litigation.”). In relevant
part, Section V.E.13 of the amended Settlement Agreement
provides that:
Class Counsel may . . . move the Court to designate ‘Cy
Pres Beneficiaries' and propose an allocation of the
available cy pres funds among such proposed Cy Pres
Beneficiaries. A Cy Pres Beneficiary must be . . . (b) a
tax-exempt non-profit organization, other than a law firm,
legal services entity, or educational institution, that is
providing agricultural, business assistance, or advocacy
services, including assistance under Pigford and the
Consolidated Case, to African American farmers . . . .
Following any payment to a Subparagraph (a) Beneficiary, the
Court shall designate the Subparagraph (b) Cy Pres
Beneficiaries and determine how much of the available cy pres
funds each such beneficiary shall receive.
See
April 7, 2014 Order at 2 [Dkt. No. 405]; September 3, 2015
Memorandum Opinion & Order [Dkt. No. 430].[1] In initially
deciding to enforce these terms, the Court ordered Class
Counsel to “identify[] potential cy pres
beneficiaries as contemplated by Section V.E.13, giving
thought to how the process can (1) be as transparent as
possible, and (2) involve the parties and the Court or its
designated agents in assuring that the necessary due
diligence is done with respect to the background and
appropriateness of potential cy pres
beneficiaries.” See Apr. 8, 2016 Mem. Op.
& Order. The question before the Court now, therefore, is
whether it should reverse Class Counsel's designation of
some grant applicants as beneficiaries, while excluding
others - and in particular, its decision not to recommend the
BBJC for Phase I cy pres funding.
Class
Counsel has determined that the BBJC is ineligible as a Phase
I beneficiary under the express terms of Section V.E.13 of
the Settlement Agreement. Section V.E.13 of the Settlement
Agreement excludes “law firm[s], legal services
entit[ies], or educational institution[s]” from
eligibility as Section V.E.13(b) cy pres
beneficiaries. See April 7, 2014 Order at 2. Based
on the information presented in the BBJC's funding
application and on its website, Class Counsel concluded that
the “BBJC had failed to demonstrate that its principal
purpose was something other than the provision of legal
services.” See Class Counsel Response to BBJC
Appeal at 3.[2]
Class
Counsel further concluded that even if the BBJC were an
eligible institution, the BBJC's proposed project was not
suitable for funding because it did not match the priorities
that Class Counsel had identified for Phase I. See
Class Counsel Response to BBJC Appeal at 4. Specifically,
with limited Phase I funds available, Class Counsel aimed to
“stabilize and/or grow the capacity of nonprofit
organizations . . . rather than to fund new programs or
initiatives.” See id. at 4; see also
Request for Proposal - Grant Application Form, Ex. A at 21
[Dkt. No. 496-1]. Class Counsel also explained that it had
recommended to applicants that “the maximum funding
request for project support [should] not exceed one-third of
the annual project budget or projected annual project (for a
new project) per year for two years.” See
Class Counsel Response to BBJC Appeal at 4, 6; see
also Request for Proposal - Grant Application Form, Ex.
A at 4 [Dkt. No. 496-1]. The BBJC, however, proposed a new
initiative and requested that it receive 100% of the
project's budget through Phase I funding. With respect to
its due diligence responsibilities, Class Counsel also
expressed concerns about the financial capability of the
BBJC, pointing to the fact that the BBJC had approximately
$980 in total assets as of December 31, 2016 and earned
approximately $26, 670 in total income between January 1,
2015 and December 31, 2017. See Class Counsel
Response to BBJC Appeal at 6. Class Counsel further noted
that the BBJC was unable to comply with Class Counsel's
informational requests, explaining that “[d]ue to
financial hardships, the BBJC has never achieved an
actualized fully funded budget.” See id. at 6.
Lastly,
in reviewing Phase I applicants, Class Counsel considered
“the historic work that applicant organizations had
done in support of the Pigford and/or In re
Black Farmers Discrimination cases.” See
Class Counsel Response to BBJC Appeal at 5. Class Counsel
concluded that “unlike virtually all of the other
organizations applying for Phase I funding, [the BBJC] had no
involvement in and provided no support for the
Pigford case.” See id. at 6-7. Any
work that the BBJC's Executive Director, Tracy Lloyd
McCurty, or its Deputy Director, Dania Davy, contributed to
the In Re Black Farmers Discrimination cases was
performed in their individual capacities or on behalf of
another non-profit organization, not in the course of their
leadership of the BBJC. See id. at 7; see
also BBJC Reply at 2-4.
The
BBJC asserts that it is an eligible recipient under the terms
of the Settlement Agreement and that its proposed project
should qualify for funding. First, the BBJC disputes Class
Counsel's determination that the BBJC is primarily a
legal service entity. See BBJC Appeal at 2. It
explains that it has never received funding from the Legal
Services Corporation, and while it does “provide[] a
range of legal services to African American farmers,
landowners, and cooperatives, the nonprofit organization also
provides a range of effective business assistance and
advocacy services.” See id. at 2-3. The BBJC
further contends that it meets the criteria described on
Class Counsel's website, which explained that
“organizations that provide eligible legal
services/educational services as part of their work but are
not law firms, legal service entities, or educational
institutions may be eligible for Cy Pres Phase I
grants.” See id. at 3 (quoting Response No. 13
of the Frequently Asked Questions, In re Black
Farmers Discrimination Litigation Settlement,
https://www.blackfarmercase.com/cypres.aspx (last visited
Dec. 4, 2018)); see also BBJC Reply at 4-7.
Second,
the BBJC maintains that the project proposal it submitted -
entitled “Dirt Rich: Preserving Black Family Land
Initiative, a five-pillar approach to preserving Black-owned
farmlands and ensuring land access for next generation
farmers” - complies with the cy pres project
funding requirements. See BBJC Appeal at
4-5.[3]
The BBJC explains that its project proposal matches a
description of advocacy services eligible for funding listed
on Class Counsel's website, which “include, but are
not limited to . . . legal service projects.” See
id. at 5 (quoting Response No. 9 of the Frequently
Asked Questions, In re Black Farmers Discrimination
Litigation Settlement,
https://www.blackfarmercase.com/cypres.aspx (last visited
Dec. 4, 2018)). The BBJC also contends that its inability to
submit an annual operating budget can be attributed to
funding cuts to historic federal agricultural programs that
have caused financial hardship for “many African
America-led rural community-based nonprofit
organizations.” See BBJC Reply at 8. Moreover,
the BBJC argues that Class Counsel selectively omitted
financial information that shows that the BBJC received a
large grant from a different source in 2017 and failed to
consider the BBJC's alternative funding proposal that did
not require 100% Phase I cy pres funding. See
id. at 7.
The
Court concludes that Class Counsel's decision not to
recommend the BBJC for Phase I cy pres funding is
not unreasonable. The Court's role is to “assur[e]
that the necessary due diligence is done with respect to the
background and appropriateness of potential cy pres
beneficiaries, ” not to personally involve itself
directly in the selection of cy pres beneficiaries.
See Apr. 8, 2016 Mem. Op. & Order at 1. Class
Counsel has given adequate and reasoned explanations for its
decision to include the BBJC among the 13 organizations not
recommended for Phase I funding. See Class Counsel
Response to BBJC Appeal at 4. Class Counsel has undertaken a
careful review of the BBJC's eligibility and project
proposal - not once, but twice - and come to the same
conclusion. An organization that meets the criteria outlined
in the Frequently Asked Questions on Class Counsel's
website is not guaranteed to be selected by Class Counsel as
a beneficiary, nor does that fact obligate Class Counsel to
so decide. As Class Counsel explains, 39 applicants applied
for Phase I cy pres grants and only 26 received
funding. See id. at 4. Phase I cy pres
funding was limited to approximately $4 million of the $12
million cy pres funds available in this Settlement,
the remainder to be awarded later in Phase II. See
id. at 4. Class Counsel was tasked with evaluating grant
applications, and it decided not to recommend the BBJC as ...