(CN) - The 5th Circuit rejected a $21 million settlement deal between victims of Hurricane Katrina and the levee districts, finding that the class might not benefit at all from the settlement once administrative costs are deducted.
"Here, we are unable to definitively state, based on the record below, that the class will receive any benefit from the settlement," the ruling released Thursday states.
All of the lawsuits filed in connection to the levee and floodwall failures were consolidated in a Louisiana federal court, but the $21 million settlement marked the conclusion of just the claims against three levee boards and their insurers.
The proposed $21 million, which would be paid entirely by the insurers, represents the limits of the available insurance proceeds. The New Orleans-based appeals court found, however, that the lower court did not ensure that the money would be distributed fairly.
"Without quarreling with the district court's findings, we nevertheless conclude that this settlement is not fair, reasonable and adequate ... because there has been no demonstration on the record below that the settlement will benefit the class in any way," Circuit Judge Carolyn King wrote for the three-judge panel.
The appeals court criticized the plan's silence on how much each class member will get from the settlement.
"The class members in this case suffered a wide variety of injuries, ranging from property damage to personal injury and death, and no method is specified for how these different claimants will be treated vis-à-vis each other," King wrote.
Many proposals were discussed in the district court, but the court simply punted the big decision to the special master, the ruling states.
Attorneys representing the class agreed not to deduct their fees from the settlement, but reimbursement for their expenses as well as other administrative costs could swallow up the entire settlement fund, the appeals court found.
King wrote that there is no estimate of a figure for any of the costs.
"At the certification and fairness hearing, class counsel could not provide any estimate of the costs incurred thus far, other than to admit that litigation had been 'expensive,'" the ruling states.
"We hold that the district court erred by approving the settlement without any assurance that attorneys' costs and administrative costs will not cannibalize the entire $21 million settlement," King wrote.