$10 Million Unclaimed--Who Will Get It?

Despite 10 years of litigation and a major ruling by the California Supreme Court, a sharp dispute still remains over what to do with perhaps half of a $20-million antitrust settlement granting refunds to purchasers of allegedly overpriced Levis jeans in the 1970s.

The justices last March approved an agreement that provides refunds to more than a million California households and endorsed a proposal to use what eventually may be $10 million in unclaimed refunds for creation of a novel trust fund for consumer protection projects.

State officials are hoping to begin sending refund checks--averaging about $13 per household--to claimants later this fall.

But, as another round of hearings resumes today in San Francisco Superior Court, attorneys are split over what to do with what they expect will be millions of dollars in unclaimed refunds.

If that issue is not resolved, more court action--including months or years of appeals--may lie ahead. And, according to attorneys, it is possible that the refunds could be further delayed while the dispute is thrashed out in court.

More than five years have elapsed since claims were filed--and authorities believe perhaps half of the claimants have moved and left no forwarding address and will be nearly impossible to locate.

Lawyers representing consumer and civil rights groups want the court to establish an independent nonprofit corporation to administer a trust fund supporting a special consumer education and litigation program aimed at protecting children.

Contending that the amount of individual refunds is trivial, the lawyers also want claimants to be given the choice of directing their refunds to the trust fund. Informal surveys they have conducted indicate wide support for the idea, they say.

“That kind of program would be in keeping with the Supreme Court’s decision,” said Robert L. Gnaizda of Public Advocates, an attorney for the groups. “It would present a golden opportunity for the next generation of Californians to be the best educated and protected consumers ever.”

But the state controller’s office contends that the somewhat ambiguous ruling by the justices reflected only a suggestion--but not an order--that a consumer trust fund be established. The unclaimed refunds, by law, should revert to the state general fund as does other “unclaimed property,” the office said.

“This would best serve the interests of those who don’t cash their checks or those whose checks never catch up with them,” said D. Robert Shuman, staff counsel for the controller. “It would benefit everyone--including the taxpayers.”

The case emerged from allegations by the Federal Trade Commission that Levi Strauss & Co. had illegally fixed the price of men’s and boy’s jeans between 1972 and 1976.

Then-California Atty. Gen. Evelle J. Younger brought an antitrust suit against Strauss in 1976. The company, without admitting wrongdoing, agreed to a settlement providing for refunds to purchasers of the jeans. Consumer groups brought an action challenging the terms of the agreement and urging creation of a trust fund, and the case has been in state courts ever since.

The original $12 million that the firm agreed to pay under the settlement has grown with interest to more than $20 million. About $1.2 million of that amount will go to the attorney general’s office in fees for bringing the case--and perhaps another $1 million is to be spent in administering the settlement and sending out refund checks to claimants.

In its 5-2 ruling in March, the state Supreme Court approved the settlement but left it up to a trial court here to decide what to do with unclaimed refunds. A consumer trust fund, used to “effectuate the aims” of state antitrust law, has considerable merit, the court majority said.

As conceived by lawyers for the consumer and civil rights groups, a trust fund would be used to combat questionable business practices aimed at children, such as misleading advertising.

Compromise Sought

The state attorney general’s office has not joined with the controller in advocating that the unclaimed refunds be held in the general fund, nor is it committed yet to the proposed trust fund.

Deputy Atty. Gen. Peter K. Shack said he hopes that some kind of compromise can be made on that issue, perhaps when officials have a more specific estimate on the amount of unclaimed refunds.

But meanwhile, Shack said, the state hopes to send out refund checks in mid-November. “We want to make sure that the initial distribution of money goes forward as soon as possible,” he said.

M. Laurence Popofsky, the attorney representing Levi Strauss, agrees that the proposal for a consumer trust fund should be considered, but that first the refund checks should go in the mail.

“The quicker we distribute the checks, the better,” Popofsky said. “That was the goal of the original settlement--and remains the goal today.”