Cy Pres Awards Don't Have to Be Complicated
Critics say damages awarded to third parties are unjust, but courts are clear on the issue.
February 09, 2015 at 06:06 PM
5 minute read
In some class actions for damages, it is impossible to get the money recovered from the defendant to some or all of the class members. They can't be identified or found, they may be dead, or the cost of getting it to them — say, $1 each to 5 million class members — may be prohibitive. For 40 years, the courts have held that, in these circumstances, the money can be given to appropriate others as cy pres awards to benefit those class members indirectly and advance the goals of the case. The name comes from the French term “cy pres comme possible,” meaning “as near as possible.”
In recent years, however, improper cy pres awards have raised questions about this practice. Class action critics and defendants who want the money back have even claimed that cy pres awards are inherently illegal or unconstitutional. One particularly egregious award prompted Chief Justice John Roberts to write, joining the U.S. Supreme Court's decision not to review the class action against Facebook Inc. in Marek v. Lane, “This court may need to clarify the limits on the use of such remedies.”
As the federal appeals courts' decisions reflect, the need for the court's intervention is unlikely. The circuits are essentially in agreement. So are most state courts, although cy pres awards in state courts are often governed by specific state laws or rules. (Disclosure: Public Justice has received, given, objected to and refused cy pres awards in appropriate cases.) The basic rules for the use of cy pres awards are clear.
THE BASIC RULES
First, cy pres awards should not be used when the funds recovered from the defendants can be effectively delivered to the class members. If money can automatically be credited to class members' credit card, bank, cellphone or other accounts, it should be. If that is not possible, but class members can be sent checks, they should be. If a claims process is necessary, one should be used, but the process needs to be simple enough, the money provided to each class member should be large enough, and the notice provided must be good enough so that claims will actually be made. If checks aren't cashed or not enough claims are made and it is reasonable to try again, that should be done.
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