Cy Pres Provisions in Settlement AgreementsThe term “Cy pres” originates from the French expression “cy pres comme possible” meaning as near as possible. In class action settlement agreements, cy pres provisions are commonly used to address the issue of unclaimed funds that are not distributed to class members for a variety of reasons. The remaining funds are often used for creating cy pres awards to charitable organizations that have a connection to the class action litigation, rather than having those funds revert back to the defendant.
Guidelines for Using Cy Pres Awards
Both the American Law Institute (ALI) and the National Association of Consumer Advocates (NACA) have each issued guidelines on the appropriate use of cy pres awards in class action settlements. The two circumstances in which cy pres awards are appropriate according to the ALI guidelines are: (1) when funds are left over after all claims are satisfied or when distribution of funds to all class members is not feasible (for example, because recipients cannot be located); and (2) when the identified or administrative costs for distribution are too large and the interests of the recipients reasonably approximate the interests of the class members. (ALI, Principles of the Law of Aggregate Litig., Section 3.07 (2010).)Conversely, the NACA guidelines provide for cy pres awards only for unclaimed portions of the settlement and state that unclaimed portions of the settlement should be used to either: (1) protect the interests of persons injured by illegal conduct and thus indirectly benefit absent class members; and (2) promote the purposes of the statutory prohibitions sought to be enforced in the underlying litigation. (NACA, Standards & Guidelines for Litig. & Settling Consumer Class Actions, Revised, 255 F.R.D. 215, 244 (2009).) Certain states, including Tennessee, have adopted statutes or court rules at the state level codifying the principle that organizations which promote legal aid and access to justice are always an appropriate use for residual funds in class action cases.
Court Approval of Cy Pres AwardsA court has the authority to approve a cy pres award pursuant to Fed. R. Civ. P. 23(e). A court will approve a cy pres award if the court finds that the settlement, taken as a whole, is fair, reasonable and adequate. Courts will look at several factors to determine whether a cy pres award is appropriate, including: (1) the adequacy of the nexus between the alleged class injury and the cy pres recipient; (2) whether the award to the class is nondistributable; (3) the compensation to class members as compared to the cy pres award; and (4) whether counsel or the court faces criticism or a conflict of interest.
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Timothy L. Miles has committed his entire career to representing shareholders in complex litigation. Mr. Miles has been recognized for numerous awards for his legal abilities in his struggles to fight for shareholder rights not only among his peers but also those in the judiciary who see firsthand not only his tenacity for protecting shareholder rights, but how he always adheres to the utmost ethical standards when litigating against his adversaries and in a Court of Law. These efforts have resulted in Mr. Miles being recognized not only as an industry leader in his fight for shareholders but also in the ethical manner in which he conducts himself as a lawyer and member of the bar. These recognitions include: The AV® Preeminent™ Rating by Martindale-Hubble®, which is bestowed on fewer than 5 percent of attorneys, in Securities Law, Litigation and Class Actions (2014-2018); The AV® Preeminent™ Attorney – Judicial Edition, the Highest Possible Rating in Both Legal Ability & Ethical Standard Reflecting the confidential opinions on members of the Bar and Judiciary (2018-2017); The Top-Rated Lawyer in Litigation™ for Ethical Standards and Legal Ability by Martindale-Hubble® (Feb. 2015); Superb Rated Attorney, (10.0 out of 10), the Highest Rating Possible by Avvo; Avvo Top Rated Lawyer 2017 & 2018 (Avvo); America’s Most Honored Professionals – Top 1% (2016-2018) (American Registry). Mr. Miles is also a member of Top 100 Civil Plaintiff Trial Lawyers: The National Trial Lawyers Association, which is by invitation only and according to the National Trial Lawyers Association, is “extended to those attorneys who exemplify superior qualifications, trial results, and leadership in their respective state based upon objective and uniformly applied criteria.” The press release by The National Trial Lawyers Association announcing Mr. Miles selection for inclusion into its Top 100 Trial Lawyers stated: “With the selection of Timothy L. Miles by The National Trial Lawyers: Top 100, Miles has shown that he exemplifies superior qualifications, leadership skills, and trial results as a trial lawyer. The selection process for this elite honor is based on a multi-phase process which includes peer nominations combined with third party research.” Mr. Miles focuses his practice on securities fraud class actions, shareholder derivative actions, and corporate mergers and acquisitions class actions.