What is a cy pres distribution?
The term cy pres is derived from a French phrase meaning “as near as.” When class actions are settled or tried, there are times that it’s not possible to distribute all of the money recovered to some or all of the class members. They may be difficult to identify or find or it may not be economically feasible to distribute the funds to them. (For example, the cost of distributing 50 cents to each of 6 million class members may preclude individual distribution, even though the defendant has been held accountable for cheating the class out of $3 million.) When that is so, the cy pres doctrine allows the funds to be distributed to a nonprofit charitable organization to support work that indirectly benefits the class and advances the public interest.
What kinds of cy pres distributions are appropriate?
Where it is not possible to directly distribute all of the money to the class members, a cy pres distribution to a non-profit organization is often appropriate. The alternative, in some cases, is that parties may enter into settlements that allow all of the unclaimed money to simply back to the defendant. This has the effects of enormously reducing the benefit the settlement confers on the class and letting the defendant keep the benefit of much (and sometimes nearly all) of the money it wrongfully took from the class.
Because the concept of a cy pres distribution is that it should be “as near as” giving the money to the class members, cy pres distributions should relate to the purposes of the case. In a case that challenges predatory lending practices that result in many people losing their homes, for example, it might be appropriate for residual funds to be distributed to organizations that address housing problems. In a class action involving overcharges for pharmaceutical products, however, it would make little sense to distribute funds to such organizations.
What kinds of cy pres distributions are inappropriate?
Public Justice strongly takes the position that, when possible, monies recovered in class actions should go directly to the class members themselves. In some cases, Public Justice has objected to proposed class action settlements that have abused the cy pres mechanism. It is inappropriate for a settlement to pay out all or nearly all of the money in cy pres distributions when it is possible to distribute significant sums to the class members themselves.
It is also not appropriate for the settling parties to attempt to direct cy pres distributions to personal favorite charities (such as one’s alma mater) that have no relationship to the issues addressed by the underlying lawsuit. And it’s not appropriate to effectively make cy pres distributions to the defendant. (In one case, we successfully challenged a proposed settlement that had the Bank of America making a cy pres award to the Bank of America’s own ”Consumer Education Fund.”)
Cy pres distributions to the Public Justice Foundation
One reason that the Public Justice Foundation has been approved repeatedly as a cy pres recipient is the breadth of the law firm’s work. Because our precedent-setting litigation and special projects involve such diverse issues as consumer protection, workers’ rights, civil rights, and environmental protection, a cy pres award to the Public Justice Foundation can be appropriate in almost all class actions. In addition, our longstanding dedication to the public interest, including our success litigating class actions, preserving them, and preventing their abuse has prompted courts throughout the country to approve cy pres distributions to the Public Justice Foundation. Finally, our proven commitment to ensuring that cy pres awards are properly used, including our refusal to accept inappropriate cy pres awards, has made parties and courts understand that cy pres awards to the Public Justice Foundation will do what they should — serve the class and the public interest.
If you have any questions, need documents or information, or are interested in designating the Public Justice Foundation as a cy pres award recipient, please contact Chairman Arthur Bryant at (510) 622-8150 or abryant@publicjustice.net; or Executive Director F. Paul Bland at (202) 797-8600 or pbland@publicjustice.net.
