(CN) - Western Union lacks standing to challenge a $40 million attorney-fee award in a $135 million settlement over unclaimed wire transfer funds, the 10th Circuit ruled.
Lead plaintiffs James Tennille, Adelaida Deleon, Yamilet Rodriguez and Robert Smet sued Western Union and Western Union Financial Services for conversion, unjust enrichment and breach of fiduciary duty, in 2009.
Western Union held on to money transfers that customers attempted to send, but that were not delivered, the plaintiffs claimed.
The Colorado-based financial services and communications company would allegedly return the funds, after deducting administrative fees and only when a customer requested a refund.
While Western Union was generally aware "within minutes" if a transfer failed, the class claimed, the sending customer was often unaware that the transfer failed and did not know to ask for a return.
Western Union earned interest on the unredeemed moneygrams, also called "unsettled money transfers" or "settlement assets," which ballooned to $135 million, the class added.
Aided by a 10th Circuit mediator, Western Union and the class negotiated a settlement with an interlocutory appeal pending in 2013.
Under the terms of the agreement, Western Union was to immediately notify customers when wire transfers failed and to help customers reclaim money from the relevant state.
The settlement was to be funded using customers' $135 million in unclaimed funds, court documents state.
On Tuesday, the 10th Circuit ruled Western Union lacked standing to challenge a $40 million attorney-fee award stemming from the case.
Writing for a three-judge panel, U.S. Circuit Judge Carolyn McHugh said Western Union "has not demonstrated any concrete and particularized and actual or imminent injury it will suffer as a result" of the attorney-fee award.
Western Union argued that it would be injured by the diminution of a class settlement fund, from which class members whose money had not yet escheated to states could receive a refund of their remaining principal, if class counsel was awarded "excessive" fees.
The 10th Circuit, in response, ruled Western Union lacked a "legally protectable" interest in the settlement fund.
"Western Union's purported 'reversionary' interest is merely a right to reimbursement of the expenses it actually incurs from litigation that may or may not be brought by third parties," McHugh wrote. "And the reimbursement of those expenses will come from a separate indemnity fund that is to be created from a cy pres fund that will be established with excess proceeds in the [class settlement fund]."
The balance of the settlement fund, the court noted, was dependent on a variety of factors other than the amount of attorney fees, including the number of class members who seek relief.
Western Union did not immediately respond to an emailed request for comment Wednesday afternoon.
Not all class members endorsed the settlement.
Sikora Nelson and Paul Dorsey argued that class representatives could not adequately represent all members, that the settlement was unfair because it used the class' money, and that the district court did not adequately notify absent class members.
The 10th Circuit in May rejected that argument, ruling the pair's "objections lack merit."
U.S. Circuit Judge David Ebel cited a settlement notice mailed by the district court, and said that class members were "adequately apprised" of the agreement.
"The notice informed putative class members how to obtain more information about the settlement, directing them to the class settlement website, where they could get a copy of the settlement agreement, which explained that, if class members did not opt out of the settlement, they would release Western Union from liability for any claim that class members could have asserted based on the subject matter of the class litigation and settlement," Ebel wrote.
Dorsey, who claimed he did not receive the notice via email, did not "establish that the entire notice plan was inadequate," Ebel added.
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