Why Should I Care about Cy Pres Awards?

Thursday, July 12, 2012, 1:45 – 3:15 pm

Session Description

More and more legal services programs are receiving Cy Pres awards, a number of which have exceeded seven figures. These awards can generate significant money for your organization. While securing cy pres is not purely a traditional development responsibility, usually there is no one else in a legal services program paying attention to this increasingly important source of income. As the primary resource development person, we as legal services development professionals should, at a minimum, be aware of the best ways to bring in these awards. By attending this session, you will learn about strategies/models employed by other legal services programs. The panel for this session will include attorney John Roddy whose primary practice is representing consumers in class actions challenging unfair and deceptive business practices and who has been instrumental in directing Cy Pres Awards to legal services programs, along with Rich DuBois of the National Consumer Law Center and Jack Ward of Greater Boston Legal Services, whose legal services programs have received millions of dollars in Cy Pres. Presenters: Rich DuBois, Director of Development and Project Planning, National Consumer Law Center, Boston, MA; John Roddy, Partner, Bailey & Glasser, Boston, MA; and Jack Ward, Associate Director for Finance and Development at Greater Boston Legal Services Biographies: Richard DuBois is the Director of Development and Project Planning at the National Consumer Law Center (NCLC) in Boston. Rich oversees all of NCLC's resource development activities. He helps to identify and maintain appropriate sources of funding for NCLC’s programs and works to keep the philanthropic community informed and engaged in the Center’s work. In particular, Rich works closely with staff attorneys and policy experts to develop projects and funding proposals. Prior to assuming his current role he was a development officer at NCLC for nine years, when he focused on foundation grants and cy pres awards. Rich joined NCLC in 1998 as a staff attorney specializing in foreclosure prevention issues. He was previously an attorney at the Center for Insurance Research in Cambridge, Mass. Rich earned his B.A. from Yale University and his J.D. from the University of Michigan. John Roddy’s practice is devoted to representing consumers in class actions challenging unfair and deceptive business practices, and serving as relators' counsel in qui tam “whistleblower” actions as the law firm of Bally & Glasser. Since 1998, his practice has obtained more than $700 million in restitution and debt forgiveness for consumers victimized by predatory business practices, and as such John has been recognized as a

Massachusetts Super Lawyer. For the past fourteen years he has co-chaired the Practising Law Institute's Annual Institute on Consumer Financial Services Litigation, held in New York and Chicago. At the end of 2011, John, with his law partner Elizabeth Ryan, left Roddy, Klein & Ryan, the Boston class action firm, to accept a partnership at Bailey & Glasser and open its Boston office. John has been instrumental in Cy Pres awards being designated for various legal services programs. Jack Ward is the Associate Director for Finance & Development at Greater Boston Legal Services where he has worked as its chief development professional since 1984. He is recognized as the leading expert in fundraising for legal services. Under his leadership, GBLS has developed one of the most diversified funding bases of any legal services program. GBLS is a leader in securing annual philanthropic support from the private bar which now annually is close to $3 million. In addition, GBLS annually secures more than $1 million in foundation support, as well as having a significant Major Gifts program. Jack has also lead multi-million dollar capital, endowment and special purposes campaigns for GBLS. More than 20 years ago, Jack helped found the annual conference for legal services development professions. In addition, for the past 15 years Jack has been one of the two co-presenter at the annual Intensive Private Bar Campaign Training sponsored by the Section of Litigation of the American Bar Association. Besides his development responsibilities, Jack is the Chief Financial Officer for GBLS and is a key member of its senior management team.

Session Topics

Overview

• Cy Pres Awards • Other Types of Court Awards • Settlement Agreements

An Insider’s Perspective

John Roddy, a plaintiff’s attorney whose practice is devoted to representing consumers in class actions challenging unfair and deceptive business practices, will provide his insight into how these awards get determined.

Knowing the Decision Makers

• Plaintiffs Attorneys • Corporate Defense Attorneys • General Counsel of Corporations • Judges • Mediators

Promotional Efforts

• Brochure • Corporate Counsel Letter • State Statutes • State Supreme Court Directive • Cy Pres Administrator Position

Target Groups for Promotional Efforts

• Attorney Board Members • General Counsel • National Association of Consumer Advocates • Legal Services Cy Pres Administrator Job Description

National Consumer Law Center - Website Cy Pres Awards The term cy pres (meaning “as near as”) refers to the money that remains in a fund created by the settlement of class-action litigation, after the fund has otherwise been distributed among class members. Cy pres awards are distributed to organizations whose missions reflect the concerns of the underlying class-action case, or whose work will further the class benefits provided by a settlement. Class counsel in an individual case often has the ability to nominate charitable organizations to receive these funds. Cy pres awards can have a transformative effect on NCLC’s ability to advocate for low-income consumers. We welcome cy pres distributions to help us continue and enhance our work . NCLC has received over 300 cy pres and other class action settlement awards since 1997. Awards have been directed to NCLC by federal and state courts across the country, including: (E.D. Cal.); (Super. Ct. Cal.); (N.D. Ill.); (S.D. Fla.); (M.D. Ala.); (D. Conn.); (D. Mass); (Mass Sup. Ct.); (D. Minn.); (W.D. Mo.); (D. N.M.); (E.D. Pa.); (S.D.Ind); (E.D. Wis.); (E.D. Wash.); and (D. Neb.). Plaintiffs’ Counsel recommend NCLC for cy pres awards because of the expertise we bring to bear on wide range of consumer protection areas including home mortgages and foreclosures, credit cards, car purchases and financing, debt collection, credit reporting, student and payday loans, and home energy and telecommunications, to name a few. NCLC’s expertise includes policy analysis and advocacy; consumer law and energy publications; expert witness services, and training and advice for advocates. We work with nonprofit and legal services organizations, private attorneys, policymakers, and federal and state government and courts across the nation to stop exploitive practices, help financially stressed families build and retain wealth, and advance economic fairness.

If you have any questions about whether NCLC might be appropriate for cy pres in a particular case, please contact Jerry Tuckman at 1-617-542-8010 or by email at gtuckman@nclc.org. Cy Pres Awards Our thanks to these advocates for recent Cy Pres Awards to the National Consumer Law Center: (Links to work bios) Nancy Barron Mark Chavez Bryan Kemnitzer Robert Bramson Craig Rothburd Daniel Blinn Marc Stanley Robert Arleo Thank you for your support. It has an important impact on economic justice and the work we share.

STATE RULES CONCERNING CY PRES AWARDS Summary The following twelve states have adopted rules that limit, guide or codify the discretion of judges in approving cy pres awards from residual funds in class actions: California, Hawaii, Illinois, Indiana, Massachusetts, New Mexico, North Carolina, North Dakota, Pennsylvania, South Dakota, Tennessee and Washington. In addition, legislators in Alabama have repeatedly proposed a Bill to enact a cy pres statute, a version of which is currently before the House Ways and Means Committee.1 In Utah, there is a provision that applies to residual funds in anti-trust class actions only.2 Of the twelve states:

-five (California, Hawaii, Massachusetts, New Mexico and Tennessee) preserve complete discretion for the courts to determine the recipient of residual funds, although in some cases legal services organizations are mentioned as a possible, but not required, recipient -one (North Dakota) requires that residual funds escheat to the state or are returned to the defendant -six impose a requirement that at least some percentage be disbursed to support legal services within the state – Illinois (50%), Indiana (25%), North Carolina (100%), Pennsylvania (50%), South Dakota (50%) and Washington (25%)

California Effective Date: January 1, 2002 Citation: Cal. Civ. Proc. Code § 384 (West 2012) California’s Code of Civil Procedure requires parties to a class action to report back to the court the amount actually disbursed to class members. After calculating the amount of residual funds, the court must amend the judgment directing the defendant to pay these funds to one or more of either:

-nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons; -nonprofit organizations or foundations that promote the law consistent with the objectives and purposes of the underlying cause of action; -child advocacy programs; or -nonprofit organizations providing civil legal services to the indigent

1 The Bill, SB 220, would require that all residual funds be paid to the state Department of Child Abuse and Neglect Prevention. There are two exceptions provided. First, that the Bill does not “limit the rights of parties to a class action to contract in settlement for the reversion of residual funds to the paying party or to one or more persons or entities designated by the circuit court or a class member as a beneficiary or assignee of the rights of a class member.” Second, if the court determines that the mandatory disbursement is a substantial impediment to the settlement of a class action, the court may suspend that requirement. The proposed Bill, if passed into law, would become effective for all cases filed on or after January 1, 2013. See http://legiscan.com/gaits/text/627072 2 The Utah statute requires courts to order residual funds in anti-trust class actions to “be applied to benefit the specific class of injured plaintiffs”, or to be used to improve anti-trust enforcement generally by disbursing the funds into the Attorney General Litigation Fund, or both. Utah Code Ann. § 76-10-919 (West 2012).

The Code further requires that funds “derived from multistate or national cases brought under California law shall provide substantial or commensurate benefit to California consumers.” Hawaii Effective Date: July 1, 2011 Citation: Hi. R. R.C.P. 23(f) Hawaii’s Code of Civil Procedure requires parties to a class action to report back to the court the amount actually disbursed to class members. After calculating the amount of residual funds, the court must direct the defendant, by order of the court, as to how to distribute the funds. The court has discretion over the timing and method of distribution, and has discretion to approve the recipients of the funds as agreed to by the parties. The recipients MAY include, but are not limited to, one or more of the following:

-a nonprofit, tax exempt legal assistance organization (eligible under the state’s indigent legal assistance fund); or -the Hawaii Justice Foundation (a grantmaking organization funding philanthropic law-related projects in the State of Hawaii)

Illinois Effective Date: July 1, 2008 Citation: 735 Ill. Comp. Stat. Ann. 5/2-807 (West 2012) The Illinois Code of Civil Procedure distinguishes between common funds created by final judgment and those created by a court-approved settlement:

-for residual monies left in a common fund created by a final judgment in plaintiff’s favor, the funds must be distributed to one or more ‘eligible organizations’ -for residual monies left in a common fund created by a court-approved settlement, funds must be distributed to one or more ‘eligible organizations’, except that the court has discretion to distribute up to 50% of the funds to one or more other nonprofit charities or organizations serving the public if the court finds there is good cause to approve such a distribution as part of the settlement

For both provisions above, ‘eligible organization’ is defined by the statute to mean a not-for-profit that has existed (and been 501(c)(3) tax-exempt) for at least 3 years, is in compliance with all registration and filing requirements, and has a principal purpose of promoting or providing services eligible for funding under Illinois’ Equal Justice Act (which provides funding for low-income civil legal services in Illinois) Indiana Effective Date: July 1, 2011 Citation: In. St. Trial P. 23(f)

The Indiana Rules of Trial Procedure requires court orders approving class action settlement or entering judgment for class plaintiffs to provide for the disbursement of residual funds. Where residual funds remain after all claims have been exhausted, at least 25% of the funds must be disbursed to the Indiana Bar Foundation, designated for the Indiana Pro Bono Commission, which oversees and funds pro bono legal representation and services. The remaining 75% may also be disbursed to the Pro Bono Commission, or to any other organization for objectives that bear a relationship to the objectives of the underlying litigation, or “otherwise promote the substantive or procedural interests of members of the certified class.”

Massachusetts Effective Date: July 1, 2009 Citation: Mass. R. Civ. P. 23(e)

Massachusetts’ Rules of Civil Procedure require residual funds to be disbursed to either: -one or more nonprofit organizations or foundations that support projects that will benefit the class members or similarly situated persons, consistent with the objectives of the underlying causes of action (including, but not limited to, legal services organizations); or -the Massachusetts IOLTA committee to promote access to the civil justice system for low-income Massachusetts residents

New Mexico Effective Date: May 11, 2011 Citation: N.M. R. Dist. Ct. R. C. P. 1-023(G)

New Mexico’s Rules of Civil Procedure require residual funds to be disbursed to one or more of the following organizations:

-a nonprofit organization that supports projects that will benefit the class members or similarly situated persons, consistent with the goals of the underlying causes of action; or -an educational entity that provides training, teaching and legal services that further the goals of the underlying causes of action; or -a nonprofit organization providing legal services to low-income persons; or -the New Mexico IOLTA organization; or -the organization administering the State Bar’s pro hac vice fund, for the purposes of supporting legal services to low-income persons

North Carolina Effective Date: October 1, 2005 Citation: N.C. Gen. Stat. Ann. § 1-267.10 (West 2012)

North Carolina requires unpaid residual funds to be divided equally between the Indigent Person's Attorney Fund and the North Carolina State Bar (designated for the provision of civil legal services for low-income persons). North Dakota Effective Date: At least as early as January 1, 1995 Citation: N.D. R. Civ. P. 23(o)

North Dakota requires courts to calculate the amount of monies remaining in the common fund that cannot be distributed to class members, because they could not be identified or located or failed to claim or prove their entitlement to a share of the fund. After such calculation, and a hearing, the court must distribute the amount to one or more states as unclaimed property, or back to the defendant, or to some combination of the two. In determining whether the funds should escheat to one or more states or to the defendant, the court must consider the following factors:

-any unjust enrichment of the defendant; -the defendant's willfulness or lack of willfulness; -the impact on the defendant of the relief granted; -the pendency of other claims against the defendant; -any criminal sanction imposed on the defendant; and

-the loss suffered by the plaintiff class The court may impose conditions on the defendant as to the use of any monies returned, “in order to remedy or alleviate any harm done.” Pennsylvania Effective Date: July 1, 2012 Citation: 2012 Pennsylvania Court Order 0016 (C.O. 0016) (creating new Pa. R.

C. P. 1716)

Pennsylvania adopted an amendment to its Rules of Civil Procedure on May 11, 2012, effective July 1, 2012. After that date, the rules will require a minimum of 50% of any residual funds to be disbursed to the Pennsylvania IOLTA Board to support programs within the state, delivered by 501(c)(3) non-profits, to provide civil legal services to low-income clients. Courts may order the balance of the residual funds to also go to the IOLTA Board, or to another organization “for purposes that have a direct or indirect relationship to the objectives of the underlying class action, or which otherwise promote the substantive or procedural interests of the members of the class.” South Dakota Effective Date: July 1, 2008 Citation: S.D. Codified Laws § 16-2-57

South Dakota requires at least 50% of residual funds to be disbursed to the South Dakota Commission on Equal Access to Our Courts, an organization awarding grants to programs within the state that are funded by the Legal Services Corporation to deliver legal services to low-income residents. The default is for the entire sum of residual funds to be disbursed to the Commission, but courts have the discretion to award up to 50% of the funds to one or more other nonprofit charitable organizations that “serve the public good[,] if the court finds there is good cause to approve such a distribution as part of the settlement.” Tennessee Effective Date: July 1, 2009 Citation: Tn. R. R.C.P. 23.08

Tennessee’s Rules of Civil Procedure give the court discretion to approve the timing and method of distribution, and the recipient or recipients of residual funds. The Rules state that “[a] distribution of residual funds to a program or fund which serves the pro bono legal needs of Tennesseans including, but not limited to, the Tennessee Voluntary Fund for Indigent Civil Representation is permissible but not required.” Washington Effective Date: March 1, 2006 Citation: Wa. R. Super. Ct. Civ. C.R. 23(f) Washington’s Superior Court Rules require a minimum of 25% of residual funds to be disbursed to the Legal Foundation of Washington to support civil legal services for low-income residents of the state. The court has discretion to disburse the balance of funds to the Legal Foundation, or to another organization “for purposes that have a direct or indirect relationship to the objectives of the underlying litigation or otherwise promote the substantive or procedural interests of members of the certified class.”