Saturday, November 7, 2009
Martin Redish (Northwestern), Peter Julian (Northwestern), and Samantha Zyontz (Searle Civil Justice Institute) have posted "Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative and Empirical Analysis" on SSRN. It will be published in the Florida Law Review.
Since the mid 1970s, federal courts have taken the doctrine of cy pres relief from the venerable law of trusts and adapted it for use in the modern class action proceeding. In its original context, cy pres was utilized as a means of judicially designating a charitable recipient when, for whatever reason, it was no longer possible to fulfill the original goal of the maker of the trust. The purpose of cy pres was to provide “the next best relief” by finding a recipient who would resemble the original donor’s recipient as much as possible. In the context of class actions, courts have utilized the doctrine as a means of disposing of unclaimed class wide relief. Where a substantial portion of the fund is likely to go unclaimed by absent class members, courts either order or authorize the payment of all or part of the remaining funds to a charitable interest that has some connection - however loose - to the subject matter of the suit. In recent years, use of cy pres in federal class actions has increased dramatically.
Use of cy pres in class actions has largely escaped either judicial or scholarly scrutiny or critique. This is unfortunate, since the doctrine’s use distorts the class action in a manner that undermines the inherently adversary nature of the federal adjudicatory process and the inherently compensatory nature of the underlying substantive law being enforced in the class proceeding. At the same time, resort to cy pres threatens the due process rights of both defendants and absent class members. It achieves these pathological ends by creating an illusion of victim compensation through adversary adjudication when in reality it transforms the underlying law into the forced payment of the equivalent of a civil fine to an entity that has no legitimate interest in the proceeding and has suffered no injury at the hands of the defendants.
In this article, we initially explore the history and current use of cy pres relief in the modern class action. We then explain - for the first time ever in legal scholarship - why the doctrine’s use so seriously undermines norms that are central both to our constitutional system and to American democracy. We then conduct a detailed empirical examination of the available data concerning the use of cy pres relief in class actions. Our empirical analysis underscores our normative critique of the doctrine by highlighting both its rapid expansion and the manner in which it has been abused.