Recalibrating Cy Pres Settlements to Restore the Equilibrium

Authors

Michael J. Slobom

Abstract

Class action settlement funds become “non-distributable” when class members fail to claim their share of the settlement or the cost of distribution exceeds the value of individual claims. Before 1974, parties had two options for disposing of non-distributable funds: escheatment to the state or reversion to the defendant. Both options undermine unique objectives of the class action—namely, compensating small individual harms and deterring misconduct.

To balance the undermining effects of escheatment and reversion, courts incorporated the charitable trust doctrine of cy pres into the class action settlements context. Cy pres distributions direct non-distributable settlement funds to charities whose work aligns “as near as possible” with the interests of the class. The class thus receives an indirect benefit from the distribution that it would not have received through escheatment or reversion.

Federal courts have struggled to delineate requirements for cy pres settlements, and as a result, inconsistent approaches to the issue have emerged. This Comment examines those inconsistencies in light of the theory behind the doctrine’s importation into the class action context. It argues that the inconsistent approaches to cy pres settlements reflect unspoken judicial preferences for one of the two class action objectives that cy pres preserves.

This Comment begins by examining the history and modern principles of cy pres settlements. Next, it explores four federal circuit courts’ approaches to cy pres settlements and considers how each approach reflects the respective court’s preference for one class action objective over the other. This Comment then argues that courts should recalibrate their methods of assessing cy pres settlements to account for the theory behind the doctrine’s importation into the class action settlements context. Finally, it proposes a framework for assessing cy pres settlements that accounts for that theory.

Recommended Citation

Michael J. Slobom, Recalibrating Cy Pres Settlements to Restore the Equilibrium, 123 Dick. L. Rev. 281 (2018).
Available at: https://ideas.dickinsonlaw.psu.edu/dlr/vol123/iss1/8