What is Cy Pres? How It Affects Class Action Settlements and Payouts

Cy pres is what happens to class action settlement money that cannot practically be paid to the people in the class: a court sends it to a charity or nonprofit whose work is related to the case instead. This guide explains where the term comes from, why settlements end up with leftover money in the first place, when cy pres takes money that could have gone to claimants, and how the charities are chosen.

The short version for anyone with a claim: cy pres is usually last in line. In most settlements it only touches money that is left after eligible claimants have been paid. But there are settlements where it comes first, and knowing the difference tells you a lot about a settlement before you file.

What cy pres means

Cy pres (usually pronounced "see pray") is short for an old Norman French phrase, cy près comme possible, which means "as near as possible". The idea started in the law of charitable gifts long before class actions existed. If someone left money in a will to a charity that later closed, a court would not simply cancel the gift. It would redirect the money to the closest thing to what the person had wanted. That is the cy pres doctrine: when money cannot be used exactly as intended, use it as near to that purpose as possible.

Class action courts borrowed the idea. In a class action, the money is meant for the class, which is everyone the lawsuit covers. When some of it cannot reach them, a cy pres award (sometimes called a cy pres distribution) sends it to an organization whose work is supposed to benefit people like them. An organization that receives the money is called a cy pres recipient.

Why class action settlements have leftover money

A settlement fund is a fixed pot. The settlement administrator, which is the firm a court appoints to process claims and send payments, divides it up according to the settlement agreement. Money gets left over for a few ordinary reasons:

• Uncashed checks. People move, lose the envelope, or assume a small check is junk mail. Once a check passes its void date, that money goes back into the fund.
• People who cannot be found. Contact details from a company's records can be years out of date.
• Fixed payments that do not use up the fund. Some settlements pay a set amount per claim, with a cap. If fewer people claim than expected, the fund is not used up.
• Amounts too small to send. If millions of people each have a claim worth a few cents, the cost of mailing a check is more than the check.

What happens to that leftover money is written into the settlement agreement. There are three usual answers. It can be redistributed among the claimants who did get paid, in a second round. It can revert, meaning it goes back to the company that was sued. Or it can go to cy pres. Our guide to the state of class action settlements in America covers how often people actually claim, which is the biggest driver of how much is left.

How cy pres affects class action payouts

In most settlements, cy pres does not reduce what an eligible claimant receives, because it only applies to money that is left after claimants are paid. Many settlements go further and require a second distribution to claimants first, with cy pres only for whatever is left after that, when another round would cost more than it pays out.

There are three situations where it does matter to you.

When the whole settlement goes to cy pres. Some settlements pay class members nothing directly. The best-known example is the Google search-referrer privacy case, which settled for $8.5 million. Class members received no cash, and most of the fund was set aside for nonprofits and university programs working on internet privacy, with a share going to class counsel, the lawyers appointed to represent the class. The argument for settlements like this is that the class is so large and each person's claim so small that paying anyone directly would cost more than it was worth. Objectors challenged the settlement all the way to the Supreme Court in Frank v. Gaos (2019). The Court sent the case back on a separate question about whether the plaintiffs could sue at all, and did not decide whether settlements that pay only charities are allowed. So the question is still open, and courts in different parts of the country treat these settlements differently.

When the split leans too far toward charity. In In re Baby Products Antitrust Litigation (2013), a federal appeals court looked at a $35.5 million settlement in which only about $3 million was headed to class members and much of the rest was set to go to cy pres. The court threw out the approval and said a judge should consider how much the class actually receives before approving a settlement like that. That ruling binds only the courts in that part of the country, but it is widely cited.

When fees are counted on money the class never sees. Class counsel are often paid a percentage of the whole settlement fund. If a large part of that fund goes to charity, the lawyers can be paid on money that never reaches the class. Critics of cy pres point to this more than anything else, and some courts now look at what the class actually receives when deciding what the lawyers should be paid.

How and why cy pres is added to a class action settlement

Cy pres gets into a case through the settlement agreement. The lawyers for the class and the lawyers for the company negotiate the terms, including what happens to leftover money, and the agreement names either the recipient or a process for choosing one later.

Both sides tend to have reasons to agree to it:

• For the class's lawyers, cy pres means the company pays the full amount it agreed to, rather than getting unclaimed money back through a reversion. A settlement where the company keeps whatever is not claimed is weaker for the class.
• For the company, it settles the case for a known amount. And where paying people one by one would cost more than the payments themselves, a cy pres settlement avoids that cost altogether.
• For the court, it is a way to put money to some use for the class when sending it directly is impossible or would cost more than it pays.

None of that takes effect until a judge approves it. In federal court, Rule 23(e) of the Federal Rules of Civil Procedure requires a judge to find that a class settlement is "fair, reasonable, and adequate" before it takes effect, and the cy pres terms are part of what the judge reviews. Class members are told about the settlement through a notice, and the notice or the settlement agreement on the settlement website usually explains what happens to unclaimed funds. Look for a section headed "cy pres", "residual funds" or "unclaimed funds".

How cy pres recipients are chosen

The lawyers on both sides propose the recipient, and the judge decides whether to approve it. The proposal usually comes with an explanation of why that organization fits the case. Courts have developed a few standards for judging whether it does:

The recipient should be related to the lawsuit. This is the closest thing to a universal rule. A federal appeals court put it this way in Nachshin v. AOL (2011): the recipient should fit the nature of the lawsuit, the goals of the laws the case was brought under, and the interests of the people in the class, including where they live. So a privacy case should fund privacy work, a consumer fraud case should fund consumer protection, and a case about a single state's residents should benefit that state.

Good causes are not enough on their own. In Dennis v. Kellogg (2012), a case over advertising claims about Frosted Mini-Wheats, the same appeals court rejected a settlement that would have sent food to charities that feed the needy. Feeding people is a good cause, but it had nothing to do with the people who bought cereal because of what the ads said about it.

Cy pres should be the last option, not the first. The American Law Institute, an organization of judges, lawyers and law professors whose recommendations courts often cite, says that money should go to class members wherever that is workable, including through a second round of payments, and that cy pres should be used only when further payments to the class are not workable.

Watch for conflicts of interest. Courts are expected to look closely at any connection between a recipient and the lawyers, the company or the judge. In the Google search-referrer case, objectors pointed out that some of the university recipients were schools that class counsel had attended. In a Facebook privacy settlement over its Beacon advertising program, most of the money went to create a new privacy foundation with a Facebook representative on its board. When the Supreme Court declined to hear an appeal of that settlement in 2013, Chief Justice John Roberts wrote that the Court might need to set rules for cy pres in a future case.

Some states set the recipients by law. A number of states have laws directing leftover class action money toward particular causes, most often legal aid, which is free civil legal help for people who cannot afford a lawyer. California's law (Code of Civil Procedure section 384) lists the types of organizations a court can choose, including legal aid providers, child advocacy programs and nonprofits connected to the subject of the case. Illinois law (735 ILCS 5/2-807) directs leftover money from many class action judgments toward legal aid organizations. Legal aid groups in many states rely on these awards, and some publish sample settlement language naming themselves as recipients.

What cy pres means for you if you have a claim

Cy pres is not something a claimant can opt into or out of, but a few things are in your hands:

1. File your claim. In a settlement that pays pro rata, which means the fund is divided among everyone whose claim is approved, every claim not filed makes the other shares larger. Money only reaches cy pres once eligible claimants have been paid, so the claims that do get filed are first in line.
2. Choose a payment method you will actually use. A digital payment to an email address you no longer check, or a paper check to an old address, is how money drifts back into the fund. Our guide to how long class action settlements take to pay covers the payment options and their tradeoffs.
3. Deposit checks promptly. Settlement checks usually carry a void date, often 90 or 180 days after they are issued, and the date is printed on the check.
4. Read the unclaimed-funds section of the notice. If a settlement pays the class nothing, or sends most of the money to charity, that is worth knowing before you decide whether to stay in.
5. Object if you think the terms are wrong. A class member can file a written objection with the court by the deadline in the notice, explaining what they think is unfair. The notice gives the address and what an objection must include. Both Frank v. Gaos and the Baby Products case reached appeals courts because class members objected.

How Chimo fits in

Chimo watches for class action settlements you are likely to qualify for and, for members, prepares, signs and mails the claim. Class action filing is included in a Chimo membership, and we do not take a percentage of what a class action pays out.

Most people never file at all. Plenty of others find the notice, open a form asking them to prove a purchase from years ago, and decide it is not worth the evening. That money does not disappear. Depending on the settlement, it is shared among the people who did claim, returned to the company, or given to a charity. Filing is how it stays with you.

Check whether companies you buy from have open claims.

Common questions about cy pres

These are the questions people most often search for about cy pres awards and class action settlements.