DESCRIPTION OF THE CY PRES PROBLEM

Imagine the settlement of a case involving the refund by Jefferson County, Alabama of employee occupation taxes that the Court finds to be illegal. There are 350,000 claimants and about $30M or about $100 a head. In paying claims, you followed a Cadillac distribution plan, first asking the employers, who kept the payroll records for occupation taxes, to provide the information to pay the employees. Then, for the employees whose employers did not participate, you gave them time to file their own claims. Throughout the process, you provided notice in the newspapers and news media and used employer name and address data provided by Jefferson County.

The dust has settled and you have paid claims to about 85% of the people, with there being about $2.5M left.

If you were to pay the remainder to the 85% of the claimants that you located, they would each get $8. And it would cost about $5 to prepare and send each check.

Where should the money go?

Courts around the country have looked at four alternative solutions:

1. Pay the excess money to the claimants who appeared, no matter how expensive.

2. Give the money back to the defendant.

3. Give it to the state or federal government, depending on what Court you are in.

4. Apply the cy pres doctrine, which would result in the money going to charity.

What seems to be the most fair? Continue reading The Cy Pres Distribution of a Class Action Recovery Surplus: Equity or Inequity →