Cy Pres is from the French term “cy pres comme possible,” or “as near as possible.” It is a term used in the law of charitable trusts. For instance, if a charity that was specified in a will no longer exists, the law can allow the estate’s money to be used for a similar cause under the cy pres doctrine. In class action lawsuit, if there is to be a payment of damages to class members, a fund is created. After class members’ claims are paid, there is often an amount remaining. In the context of class action litigation, cy pres is a court approved method of distributing a damage fund when the original purpose cannot be achieved. Judges and class counsel can recommend that residual funds be distributed to the “next best” use.
It is also common for the cy pres remedy to be used for the entirety of the statutory damage award when the amount of damages to each class member is too small to warrant distribution. Or, the parties may agree that a case should be settled through payment to a representative third party (i.e., a charity).
Ohio Rules of Civil Procedure and Ohio Law do not codify the uses of cy pres funds from class action lawsuits, but there is precedent for and examples of cy pres distributions in Ohio.
Cy pres has evolved rapidly in the context of class action lawsuits (also known as the “fluid recovery doctrine”). The courts have broadened their discretionary powers beyond the narrow limits of a “next best use” notion. Today, courts allow distribution of cy pres funds for a wide variety of charitable or justice-related causes. Cy pres is also been expanded and used in the context of injunctive relief or punitive damages.
For leftover funds in a class action lawsuit, there are four choices a judge can make with the remaining funds:
- extra money is given back to defendants
- extra money goes to the government
- those who had claims who were located could receive a bit extra
- leftover funds could be designated to charitable programs that would indirectly help the entire class
Cy Pres: Instrument of Justice
With leftover funds designated to charitable programs, there is a societal benefit which develops for those class member who were entitled to the money which constitutes the residual fund, even though they could not be located.
The Supreme Court of California in State v. Levi Strauss & Co., 715 P.2d 564 (Cal. 1986), discussed the cy pres doctrine as a means to distribute litigation benefits to a class. As to residual funds, the court suggested that the best method of distribution would be to establish a consumer trust fund “which would engage in consumer protection projects, including research and litigation.” This method would put the funds to their “next best” use by providing indirect benefits to silent class members while promoting the statute under which the suit was brought. The court did recognize, however, that establishing and administering such a trust fund would be costly and that some courts avoided these costs by distributing residual money to established private organizations.
The Levi Strauss Court recognize the important policy concerns favoring the use of cy pres:
Fluid recovery may be essential to ensure that the politics of disgorgement or deterrence are realized. [citation omitted.] Without fluid recovery, defendants may be permitted to retain ill-gotten gains simply because their conduct harmed large numbers of people in small amounts instead of small numbers of people in large amounts.
The Levi Strauss holding was later codified, and expanded in California Code of Civil Procedure.
Since Levi Strauss, millions of dollars have been distributed to charitable programs through cy pres distributions. Additionally, some states have adopted legislation directing cy pres awards to be distributed to indigent criminal and civil legal services.
Cy Pres in Northeast Ohio
The Legal Aid Society of Cleveland has benefited from some significant cy pres awards, and works continually to educate the bench and bar about the impact these awards have on the community.
Cy pres funds directed to Legal Aid or other justice-related programs in Northeast Ohio support the unknown victims of the class action litigation and supports programming which benefits Legal Aid’s larger client-base. Legal Aid’s clients are low-income individuals. Low-income people are often victims of unfair, deceptive, discriminatory or predatory consumer practices. Legal Aid protects the elderly, immigrants, the working poor and other vulnerable populations against fraud and abuse. Legal Aid advises low-income people about their rights and responsibilities as consumers, and promotes fair banking and credit practices as well as investment in disadvantaged communities. Cy pres distributions to Legal Aid highlight justice issues and the benefit to the community is lasting.
Interested in learning more? Call 216-861-5217 to discuss a cy pres distribution to The Legal Aid Society of Cleveland!
Legal Aid is grateful for cy pres gifts coordinated by these law firms and groups:
- Benesch, Friedlander, Coplan & Arnoff LPP
- Calfee, Halter & Griswold LLP
- Dominion
- Dworken & Bernstein
- Gary, Naegele & Theado LLC
- The Honor Project
- Ohio Lawyers Give Back
- Ronald Frederick & Associates Co., LPA
- Law Office of Steven M. Weiss
- Weltman, Weinberg & Reis Co. LPA
- Wickens, Herzer, Panza, Cook & Batista Co.
Examples of cy pres gifts to Legal Aid include residual funds from:
- 10899 Shagawat v. North Coast Cycles (2012)
- Asset Acceptance LLC (2009)
- Bennett v. Weltman (2009)
- CNAC v. Claudio (2006)
- CRC Rubber & Plastic, Inc. (2013)
- FirstMerit Bank v. Clague Settlement (2006)
- Garden City Group (2005)
- Grange Insurance Charitable Fund (2008)
- Hamilton v. Ohio Savings Bank (2012)
- Hill v. Moneytree (2013)
- Hirsch v. Coastal Credit (2012)
- Honor Project Trust (2014)
- KDW/Copperweld Liquidating Trust (2011)
- Richardson v. Credit Depot Corporation (2008)
- Royal Macabees Settlement Fund (2010)
- Serpentini Class Action (2009)
- Setliff v. Morris (2012)
- United Acceptance, Inc. (2011)