CY PRES/Class Action Residuals and Other Court Awards
Cy Pres/Unpaid Residuals in Class Action Litigation in North Carolina
In 2005, the NC General Assembly passed a statute stating that the unpaid residuals in class action litigation (unless otherwise ordered by the court) shall be divided and sent equally to the NC State Bar for the provision of civil legal services for indigents and to the Indigent Person’s Attorney Fund, N.C.G.S. §1-267.10. Effective October 1, 2005, the statute applies to causes of action that arise on or after that date.
The State Bar has asked NC IOLTA to administer the funds sent to the State Bar for civil legal aid. Those funds should be sent to:
PO Box 25996
Raleigh, NC 27611-5996
What is Cy Pres?
The cy pres doctrine (from the French term cy pres comme possible meaning as near as possible) is a court approved method for distributing a damage fund when the original purpose cannot be achieved. This common law doctrine was developed in the trusts and estates context as a means to distribute funds from a charitable trust or probated estate when the original purpose for which the testator’s gift was established was impossible or impractical to perform.
Cy Pres in the Class Action Context
At the conclusion of a class action where damages have been awarded to class members, a fund is created. After class members' claims are paid, there is often an amount remaining because members of the class could not be located, not all members of the class collect their portion of the award, or it is not possible to determine each plaintiff’s actual damages or share of the settlement fund. Under the doctrine of cy pres, judges and counsel can direct that residual funds be put to their next best use for the aggregate, indirect, prospective benefit of the class members through funding equal access to justice. This use of the residual funds is particularly appropriate as one of the underlying purposes of class action litigation is to make access to justice possible for those who otherwise would not be able to obtain it.
NC IOLTA at the State Bar: A Suitable Nexus
The NC State Bar and its Interest on Lawyers Trust Account (IOLTA) program serve as a funding nexus for organizations that provide civil legal services to low-income North Carolinians in all 100 counties. IOLTA works closely with local legal aid organizations and legal professionals to develop and fund statewide legal aid projects where help is needed most. Since 1984, IOLTA has provided over $50 million to legal aid programs in North Carolina to help those in need. Strategically positioned to serve the entire state,
the NC State Bar’s IOLTA program is an ideal nexus for the simple and effective distribution of cy pres awards in North Carolina for civil legal services for low-income residents, while the Indigent Person’s Attorney Fund supports criminal defense for indigent persons.
Other Court Awards Can Increase Access to Justice
The distribution of funds to legal aid providers can also occur through mediation, arbitration, and settlement agreements. These strategies, along with cy pres awards, can be valuable sources of funding for legal aid providers. Legal aid organizations can use these court awards to fund the delivery of civil legal aid to the poor in North Carolina.
Manual for Attorneys and Judges on Cy Pres and Other Court Awards
The NC Equal Access to Justice Commission has published a manual on Cy Pres and Other Court Awards to educate judges and attorneys as to the importance of such awards to legal aid organizations. The manual includes information on different types of court awards, tips for structuring award agreements, examples of awards, and a primer on how to structure a cy pres settlement.
To view the manual, click here.