By F. Paul Bland, Jr. and Arthur H. Bryant
The Public Justice Foundation, which supports the work of Public Justice, has been the recipient of significant cy pres awards from class action settlements that have greatly supported its public interest work.
The publicity surrounding these awards has prompted many people to contact us and ask what cy pres awards are, and when they are appropriate. This article will attempt to give a brief overview of these important issues.
WHAT IS A CY PRES DISTRIBUTION?
The term cy pres is derived from a French phrase meaning "as near as." In a class action settlement where it is not possible to directly distribute all of the money to the class, a cy pres distribution to a non-profit charitable organization whose work indirectly benefits the class members and advances the public interest is often the next best use of the monies. In short, cy pres distributions can be a way of solving one of the most vexing problems in class action litigation: how to make sure that the case serves the class and the public interest, not the wrongdoing defendant, when it isn't possible to directly distribute money to all of the class members.
WHAT CY PRES DISTRIBUTIONS ARE APPROPRIATE?
Where it is not possible to directly distribute all of the money recovered in a class action 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 revert back to the defendant. This has the effect of enormously reducing the benefit the class action confers on the class members, and it also has the effect of letting a wrongdoing defendant keep the benefit of much (and sometimes nearly all) of the money it illegally obtained.
Because the concept of a cy pres distribution is that it should be the "next best use" of money on behalf of a class, 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.
One reason that the Public Justice Foundation has been approved as a cy pres recipient by a number of courts is the breadth of the law firm's work. Because our precedent-setting litigation and special projects involve such diverse issues as consumer protection, civil rights, and environmental enforcement, the Public Justice Foundation has received cy pres awards from courts in class actions involving a wide variety of underlying issues.
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. In many class action settlements, however, it is just not possible for the settling parties and the court to directly distribute all or even most of the funds to the class members.
In a case involving deceptive statements about some modestly priced consumer product, for example, the companies may not have any identifying information about who bought the product. In some cases, many of the class members cannot be found or it may not be economically feasible to distribute the small amount recovered per class member. In still others, a claims process is appropriately created, but many reasonable class members will not want or be able to go through the entire claims process. In all of these cases, proper cy pres distributions can serve the class and the public interest.