AAI Proposes Rule Endorsing Cy Pres

The American Antitrust Institute (AAI) proposed a new rule in support of cy pres awards in a letter to the Advisory Committee on Civil Rules.  The Committee is considering whether to begin work on possible class action amendments, including cy pres awards.

The AAI, which has received cy pres awards in settlement of antitrust class actions, is generally supportive of the American Law Institute’s (ALI) principles concerning cy pres.  Those principles endorse cy pres awards when it is not economically viable to make distributions to the class, and the cy pres recipient has interests that reasonably approximate those being pursued by the class.

The AAI offered a different approach to cy pres awards when an initial distribution has been made and funds remain because many class members do not come forward or cannot be located to claim compensation.  The AAI points out that even if a second or multiple distributions are feasible, a cy pres award may be preferable because the benefits and fairness of a further distribution to the same claimants may be outweighed by the benefits and fairness to the entire class of a proposed cy pres distribution.

The AAI also suggested that the risks of a conflict-of-interest can be addressed by ensuring transparency and that the cy pres recipient has a nexus to the class.  Its letter proposes that courts ensure that cy pres funds, once distributed, are free of any control by the parties, and are subject to a reasonable process for accounting. And, at least where there is a nexus between the recipient and the class, the letter rejects arguments that attorneys fee awards should not reflect cy pres relief.

The letter was drafted by AAI Founder and Senior Fellow Bert Foer and AAI President Diana Moss.  Recent AAI commentary on cy pres can be found here.

Diana Moss