Maximize Pro Bono Legal Services with Little-Known Cy Pres Awards

Summary

Pro bono legal services are essential to providing justice and access to the law for people who cannot afford it. However, the cost of providing pro bono services can often be prohibitively high for many organizations. Cy pres awards can provide a solution to this problem by allowing organizations to be awarded a percentage of money from a lawsuit in order to fund their services.


Cy pres awards are relatively unknown, but they offer a great opportunity for pro bono legal services organizations to secure funds without having to solicit donations. Cy pres awards are given out when a lawsuit settlement has been reached, but a portion of the settlement funds remain unclaimed after the parties have been compensated. Rather than the money being returned to the defendant, it is instead awarded to a charity or pro bono organization that shares the interests of the parties in the lawsuit.

The process of applying for a cy pres award is fairly straightforward. Organizations must demonstrate to the court that their mission and activities are closely aligned with the interests of the parties in the lawsuit and the relief sought in the lawsuit. Organizations must also submit a detailed proposal for how the funds would be used to benefit the public and further their mission.

Once granted, a cy pres award can provide substantial funding that can be used to provide legal services and other support to individuals and communities in need. For instance, cy pres awards can fund legal aid clinics, provide support to immigrant communities, and provide access to justice to low-income families.

Cy pres awards are a great way for pro bono legal services organizations to secure funding without having to solicit donations. By submitting a detailed proposal and demonstrating how their mission and objectives align with the interests of the parties in a lawsuit, organizations can apply for and be awarded a portion of settlement funds from a lawsuit. While relatively unknown, cy pres awards can provide substantial benefits for organizations that provide pro bono legal services, allowing them to provide essential access to justice for individuals and communities in need.
 

Laws, Rules & Regulations for Cy Pres Awards

Cy Pres awards can be incredibly beneficial for pro bono legal services, yet many lawyers and law firms may not be familiar with their regulations and legal requirements. The origin of cy pres awards can be traced back to the 1700s when it was used as a process to modify legal decisions, often in the form of charitable activities. Cy Pres awards, which derive from the French term meaning "as near as possible," are court-ordered settlements that are approved by the judge in a case when distributing the entire amount in the settlement is impossible, or when the original purpose of the settlement is no longer possible or practical.
 

Eligibility & Benefits of Cy Pres Awards

Most commonly, cy pres awards are for settlement funds that are not fully allocated or cannot be allocated to the group or individuals who originally suffered the wrong. Instead, the court will take these settlements and allocate the funds to charity, pro bono legal services, or other organizations. According to the American Bar Association (ABA), lawyers and law firms should ensure they are fully aware of the laws and regulations associated with cy pres awards before taking action. Benefits of cy pres awards may include the satisfaction of helping to provide pro bono legal services to those in need, as well as other public benefits or charitable outcomes.
 

Legal Obligations for Attorney & Law Firms

When accounts of cy pres awards are being finalized, attorneys and law firms must be aware of certain strict ethical standards that must be followed. Most jurisdictions require that attorneys remain diligent in their efforts to locate the claimants and make efforts to distribute the settlement funds before any cy pres awards can be considered. Furthermore, attorneys and law firms may be obligated to provide a detailed record of the case, including any efforts made to locate the claimants, to the court for review.
 

Increased Availability of Cy Pres Awards

Recently, the availability of cy pres awards have increased, providing lawyers and law firms additional opportunities to support pro bono legal services. The ABA has encouraged the expansion of cy pres awards, stressing the importance of such awards in helping to protect rights, as well as providing practical support to lawyers and law firms. Many notable cases have seen large cy pres awards, such as Microsoft v. California, where the $1.1 billion settlement was partly used to support pro bono legal services.

<<In the settlement agreement for the case Robert H. Bassin & Sherl Weems v. District Cablevision, the Comcast cable company was ordered by the Superior Court of the District of Columbia to donate any settlement money left unclaimed by members of the class to organizations working pro bono for consumers' legal rights.

The George Washington University School of Law's clinical program received $2.4 million, its largest gift ever. The other beneficiaries were Law Students in Court, the Georgetown University Law Center Clinical Program, and Legal Counsel for the Elderly—all based in Washington, DC.

The attorney who argued the case, Philip Friedman of Friedman Law Offices Washington, DC, "deserves a lot of credit" for urging the court to set aside the money for the pro bono programs, says Carol Izumi, Associate Dean for Clinical Affairs at George Washington School of Law.

While the awards can be substantial and make a great difference to the clients served by benefiting organizations, cy pres awards are still not well known by future or current members of the bar and bench.

The term cy pres (pronounced "see pray") stems from a medieval French phrase cy pres commé possible, meaning "as close as possible." Its legal use started with trusts and estates law, explains Kieron Quinn, an attorney with Quinn, Gordon & Wolf in Baltimore. If money is left in trust to maintain an estate's gardens, for example, and after 75 years of a nearby river's rising, those gardens are flooded permanently, the estate's trustee still has to follow the guidelines of the trust.

Given the impossibility of planting daffodils underwater, the trustee might request a court to approve a change in the trust's guidelines. If the court does so, then it must apply the gardening money to the next best use, a use that is as close as possible (cy pres) to the original intent of the trust. In this example, the judge would possibly require the money go to maintaining other gardens nearby.

And so the cy pres concept evolved to its current and most common use: accounting for the funds left over from class-action lawsuit settlements. In most states, if the money in a class-action settlement or judgment is not put into a cy pres award, then it goes back to the defendant. There are two parts to reaching a cy pres award: agreeing to do it and deciding its beneficiaries.

Most class-action lawsuits settle, so most cy pres awards are established in a mutual agreement from both sides. When cases go to court and the jury finds for the plaintiffs, however, a judge can also impose a cy pres award as part of the penalties.

In either situation, there are two main justifications for setting up a cy pres award: it will be impossible to find all the class members to give them their individual shares of the money and giving out the money will cost more than the award itself (if the award comes to one dollar, but it costs two dollars to send the money).

Defendants, Quinn points out, will argue vehemently against cy pres awards, since otherwise they would be getting their unclaimed money back.

This wrinkle can bring up ethical issues for attorneys involved in class-action settlement negotiations, says Quinn, who says he has seen lawyers make the wrong choices in these situations. A lawyer must be very careful never to use a cy pres award as a bargaining chip to increase his/her own fees from a case (plaintiff's side) or to decrease his client's actual settlement payments (defendant's side). Doing this is unethical, says Quinn.

For example, in negotiating a class-action settlement, both sides know it will be impossible to find all the members of this class. The plaintiff's attorney honestly thinks that an $8-million settlement would be reasonable. But at the very start of the negotiations, the defendant's attorney offers a much larger settlement ($12 million) on the condition that there is no cy pres award provision.

When presenting the settlement to the judge, the plaintiff's attorney gets his/her 25% or 30% of the settlement in fees, depending on what the judge decides. "You see the difference," says Quinn.

The plaintiff's lawyer would be getting a lot more money from the $12-million settlement, but the defendants would be paying far less for their punishment. The $8 million with a cy pres provision would be $8 million total in defendant payments. The $12 million would be $1 million or so in actual payments, if that many class members could even be located—unethically "saving" the defendants money by bribing the plaintiff's attorney with higher fees.

Luckily, there are more honest lawyers than dishonest ones—despite popular myth—and cy pres awards are growing in frequency and visibility.

The awards must go to nonprofit organizations that serve people who are close to, or the next best thing, to the lawsuit's class members.

In October 2004, the Maryland Legal Aid Bureau received a $30,000 cy pres award from a $2.6-million class-action lawsuit settlement against a local car dealership brought by Quinn, Gordon & Wolf. The lawsuit was brought against Jim Coleman Automotive of Columbia, MD, for overcharging customers an average of $50 each on tax, title, and registration fees.

Maryland Legal Aid is one of the largest legal services groups in the country, partly because it serves the whole state, with 150 lawyers in 13 offices on a budget of $20 million per year, says Joe Surkiewicz, Director of Communications. Its lawyers help low-income people in civil matters such as evictions, consumer fraud cases, domestic violence, and family law cases.

The group receives funding from a wide range of sources, including grants, state and federal money, private fundraising, and occasional cy pres awards.

The organization "has always been pressed for dollars," says Executive Director Wilhelm Joseph, Jr., who has been a legal-services attorney since 1975. Cy pres award money "helps with the budget crunch," he adds. Although these unplanned, one-time awards cannot be included in the group's budget, they do benefit clients.

The Maryland group will most likely put the recent $30,000 award towards an endowment fund to help newly hired recent law school graduates pay off student loans, says Joseph. High law school loan repayment costs are often a barrier to new graduates' taking public service jobs.

California law has exact guidelines on what groups receive cy pres awards in what circumstances. For other states, exactly which organizations benefit from cy pres awards depends on local laws, local practices, and the judge. Ultimately, the judge decides on the recipients of the cy pres money, but attorneys from either side can make suggestions.

Hence the field of cy pres fundraising.

Some groups that might benefit from cy pres awards are taking the initiative and are working to spread the word about the awards, as well as about their own work and other pro bono legal services provided to low-income people.

Maryland Legal Aid is currently developing a manual on cy pres and is "hoping to educate judges and lawyers" on the practice and on the legal services that the organization provides, says Joseph. The group has already given judges some information on cy pres, and they have welcomed it, says Joseph.

Cy pres fundraising is not a new trend, says John Isbister, an attorney with Tydings & Rosenberg, LLP, Baltimore. Isbister is also a member of the Equal Justice Council, the fundraising board for Maryland Legal Aid. Cuts in government funding have led legal services organizations to look for other ways to support their services over the past 10 to 15 years, he says.

Since Maryland Legal Aid received cy pres awards in the past, the largest being $200,000, the Equal Justice Council "decided to make a conscious effort," says Isbister, to educate the bar and the bench on the availability of cy pres awards as an option in class-action case decisions and settlements. The education effort started last fall, so no actual cy pres award money has come in quite yet. Isbister notes that the information campaign has received "a good reception from the bench so far."