What is a “cy pres” award?

A “cy pres” award is a distribution of money that is left over from a class action settlement that is then given to a charitable organization. The funds are available because individual class members fail to claim their portion of the settlement or when it is impractical to distribute very small amounts of money to large numbers of class members. In many circumstances, and under court supervision, these leftover monies can be awarded to nonprofits, such as LAAW.

LAAW meets both state and federal requirements to qualify for cy pres awards

Cy Pres under California law: LAAW is a proper recipient of cy pres funds in California class actions. The rules for cy pres funds in California are governed by statute in California Code of Civil Procedure § 384. Under that law, any nonprofit organization that provides “civil legal services to the indigent” is a proper recipient of cy pres funds. LAAW is such a nonprofit organization.

Thus, LAAW is an appropriate designee of cy pres funds for almost any type of class action in California state court.

LAAW is an ideal cy pres recipient for class actions involving employment law (such as wage-and-hour cases). But it is also an appropriate recipient of monies arising out of consumer, antitrust, privacy, securities, and other class actions as well.

IMPORTANT UPDATE: Code of Civil Procedure § 384 was recently amended (effective June 27, 2018). Under the new law, nonprofits like LAAW are proper recipients of 100% of the cy pres funds at issue. There is no longer a requirement that any portion of those monies be allocated to state governmental entities. For questions about this amendment, email  [email protected].

Cy pres under federal law: Although there is no specific federal statute requiring cy pres awards to legal services organizations, LAAW is an appropriate cy pres beneficiary in many federal class action cases, including any case involving employment law. Indeed, over the past 10 years, LAAW has been found to be an appropriate cy pres beneficiary in class actions raising a wide variety of employment law claims, as well as consumer and antitrust claims. Under federal case law in the Ninth Circuit, the recipients of cy pres funds must have a nexus to class claims. (See, e.g., the Northern District of California’s Procedural Guidance for Class Action Settlements (“The parties should address their chosen cy pres awardees, if any, and how those awardees are related to the subject matter of the lawsuit and the class members, including their location.”); Dennis  v. Kellogg Co., 697 F.3d 858 (9th Cir. 2012); Nachshin v. AOL, LLC, 663 F.3d 1064 (9th Cir. 2011). Dennis and Nachshin both affirm the rule that “to ensure that a class action settlement retains some connection to the plaintiff class and the underlying claims, . . . a cy pres award must qualify as the next best distribution to giving the funds directly to class members,” and they both hold that the Ninth Circuit “require[s] that there be a driving nexus between the plaintiff class and the cy pres beneficiaries.”  See, e.g., Dennis, 697 F.3d at 865. Legal Aid at Work meets this requirement in a wide range of employment class actions brought by the plaintiffs’ bar. Examples of nexus under federal Law:

• Our Wage Protection Program represents low-wage workers who are the victims of wage violations. The wage claims made by our clients are often the same type of claims made in wage-and-hour class actions brought by workers under the federal Fair Labor Standards Act and under California wage-and-hour laws. For example, where there is a settlement of claims for unpaid overtime, meal and rest break denials, or wage-statement violations, the claims brought by plaintiffs’ attorneys are just like the claims that we make for low-wage workers—meaning there is the requisite nexus to designate LAAW as a cy pres beneficiary in wage-and-hour class actions.
• LAAW’s other programs also may have a nexus to many other class actions related to employment law, including discrimination, denial of leaves and accommodations, unequal pay, privacy, and other terms and conditions of employment.

Some federal courts outside of the Northern District of California do not require that recipients of cy pres funds have a nexus to class claims. In those courts, the nexus may be only one of a number of factors considered in determining whether to award a cy pres distribution to a nonprofit organization. Those courts therefore would have even more leeway to make Legal Aid at Work a cy pres beneficiary in a broad array of class actions, regardless of whether they are based on employment law claims.

Contact us!

If you have questions about designating Legal Aid at Work to receive cy pres funds, or about the amendment to California Code of Civil Procedure, Section 384, please contact our president, Joan M. Graff, at [email protected], or Mike Gaitley, who directs our Workers’ Rights Clinic, at [email protected]. You can also reach Joan or Mike by calling 415-864-8848. Thank you!