COLUMBUS, Ohio - Ohio lawmakers have no plans to reintroduce a bill that could make millions of dollars available to charities and non-profit organizations.
"We've been told we shouldn't waste our time on something that's dead on arrival," said Pat Perotti, an attorney with the northeast Ohio law firm Dworken & Bernstein, who helped draft the legislation.
The legislation would change state rules regarding settlement funds from class actions lawsuits.
"We asked for the legislation to be passed in the state of Ohio that would require that every single class action settlement have specific language that indicates what happens to unclaimed funds, and if it does not say what happens to them, then they automatically revert to charity," said Perotti.
Currently, when class members cannot be located, unclaimed settlements funds revert to the defendant. For example, International Precious Metals Corporation, a commodity futures brokerage firm, paid approximately $22 million out of a $40 million settlement resulting from a 1990 lawsuit that accused the firm of defrauding its customers.
"That's simply not fair, it's not right and it's not honest -- because that's not what the court understood and intended," said Perotti about defendants keeping unclaimed funds.
When the legislation to spell out what happens to the funds was introduced in 2010, Perotti was optimistic. The bill had bipartisan support. But HB 427 went nowhere. There were no house or senate committee votes.
Former Ohio Rep. Mark Okey (D) was chair of the house committee reviewing HB 427. Okey said members liked the idea, but disagreed on the details, like which charities would be eligible to receive funds.
"I couldn't get a majority of votes. I certainly wasn't going to bring it to a vote and then just have it fail," he said.
There was also strong opposition from the Ohio Chamber of Commerce.
"They did not want to see the bill go forward at all," said Okey.
During a two week period in December, NewsChannel5 tried repeatedly to schedule an interview with Linda Woggon, the Ohio Chamber of Commerce executive vice president who lobbied against the bill, but she declined our requests to talk on camera.
Perotti said he believes some of the chamber's members feared the legislation would affect their bottom lines.
"Certain of their members were parties in our lawsuits, they were defendants, and they had committed fraud against our customers and they frankly didn't want to pay the money out," said Perotti.
Dworken & Bernstein avoids allowing unclaimed class action settlement funds to revert back to defendants by using a little known legal rule called cy pres.
"It's a legal doctrine which means 'as nearly as possible' and it makes sure that when there's an intent to pay out a certain amount of money that if you can't give it to the intended recipient, as nearly as possible, you give it to that person's benefit," said Perotti.
Dworken & Bernstein founded Ohio Lawyers Give Back in order to promote cy pres. The organization has given more than $24 million to dozens of charities and non-profits operating in northeast Ohio.
The Arc of Greater Cleveland, an advocacy group for developmentally disabled individuals, was on the verge of shutting down when it unexpectedly received a $74,000 donation from Ohio Lawyers Give Back in 2011.
"I was looking at becoming unemployed and so were the rest of my staff. I mean, it was that dire of a situation," said Cindy Norwood, the executive director.
Rainbow Babies & Children's Hospital Division of Pediatric Plastic & Reconstructive Surgery received a $250,000 donation.
The donation helped the hospital maintain the team of specialists that treated Westlake resident Meredith Farrow's 2-year-old daughter, Presley. Presley was born with a cleft lip and palate.
"It was very difficult. I cried. I wasn't prepared for that," said Farrow.
"The pediatric plastic surgery unit at Rainbow Babies made me feel like it's going to be OK," she said.
"About three months of age, she was operated on for almost four hours to correct her nose, her lip and her gumline. She's a completely normal, healthy child now," said Farrow.
Both Farrow and Norwood were surprised no Ohio lawmakers plan to reintroduce HB 427.
"I'm here to say, as a charity, that people don't always choose to give to charity," said Norwood.
"There would be so many more people helped. Just seems like a no-brainer," said Farrow.
For more information on the class action settlement law and how it could help charities, watch NewsChannel5 Investigator Sarah Buduson's story Tuesday on NewsChannel5 at 11 p.m.
Charities Receiving Cy Pres Donations
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