Cy pres

One way courts help fund legal aid in Wisconsin is through something called cy pres. These funds come to WisTAF as a result of class action lawsuits. Sometimes sending cy pres funds to WisTAF is required, while other times it's up to a court to decide.

What is cy pres?

When some members of a class action lawsuit don't claim the funds they're entitled to, courts may distribute these leftover funds to nonprofit organizations whose work aligns with the intent of the lawsuit.

The practice became known by the legal doctrine it follows, cy pres, which originally referred to using a trust fund for its “next best use” when its original purpose was no longer possible.

Today, while cy pres commonly refers to residual funds left over from a class action lawsuit, it can also refer to funds from restitution, negotiated settlements, or penalties.

Required vs. discretionary cy pres distributions

In 2016, the Wisconsin Supreme Court unanimously adopted a rule change directing at least 50 percent of residual funds in state class action settlements and awards to WisTAF to support civil legal services.

In addition, courts in both the state and federal systems have broad discretion in awarding the non-mandatory portions of their cy pres distributions.

Cy pres awards help expand access to justice

Cy pres awards for civil legal aid can be crucial in ensuring settlement funds benefit the public, particularly in funding legal aid programs that assist low-income individuals. Cy pres-funded grants help nonprofit legal aid providers that receive WisTAF grants to enhance their services and reach more individuals in need throughout Wisconsin.

WisTAF grantees help thousands of low-income Wisconsin residents every year to resolve civil legal problems related to nearly every area of life — including housing, employment, health care, family and personal safety, consumer law, and more.

The Wisconsin Supreme Court has acknowledged "the importance of supporting programs that improve access to civil legal services for unrepresented low-income Wisconsin residents," as well as WisTAF's suitability to receive cy pres funds.

WisTAF’s suitability

Consider these factors when determining whether to name WisTAF as the recipient of cy pres distributions:

• Comprehensiveness. WisTAF funds a range of organizations that provide competent legal advice and representation, helping to resolve disputes efficiently and fairly. Its grant recipients serve a range of geographic areas as well. (Taken as a whole, they serve the entire state of Wisconsin.)
• Focus, fairness, flexibility, and expertise. Nearly 30 years of grant-making experience and an independent, non-partisan board means WisTAF can ensure accountability as well as a fair distribution of funding. In addition, WisTAF has the flexibility to target a cy pres award towards a specific initiative as needed.
• Freedom from conflicts. WisTAF does not file lawsuits or represent parties in court, and thus is free of any potential conflict that otherwise might arise for the court or the defendant in a class action.

Practice tips

Timing

Counsel should raise the issue of a cy pres provision very early in settlement negotiations. This helps facilitate shared understanding of the requirements of SCR 803.08(10) and the option of directing additional discretionary funds to a good cause.

Relevance for plaintiff and defense

Although plaintiff’s counsel most often creates the initial proposal for a cy pres provision, counsel for the defendant should consider cy pres settlements as an opportunity to further the work of organizations they already strongly support. Consequently, settlement awards may be an attractive option for both parties during a class action suit.

Structuring the provision

When structuring a cy pres provision in a class action lawsuit, counsel should keep in mind that the court, as well as the class members, must approve the settlement agreement. Keep in mind the court may disburse the balance of any residual funds beyond the minimum percentage (50%) to WisTAF for purposes that have a direct or indirect relationship to the objectives of the underlying litigation or otherwise promote the substantive or procedural interests of members of the certified class.

Get involved

If you are involved in legal proceedings, consider recommending cy pres funding for the purpose of civil legal aid. Your recommendation can help expand the outcome's impact and increase access to justice.