Class action residuals: Make a major contribution to access to justice

Issue March/April 2017 By Douglas Salvesen

If you are involved in class action litigation you may have an opportunity to support equal justice by designating class action residual funds for distribution to the Massachusetts Interest on Lawyers' Trust Accounts (IOLTA) Committee or directly to a legal aid program. In the past two years, such designations have brought local legal services for the poor such amounts as $393,926 and $254,408.

What are "residual funds?" At the conclusion of a class action, funds designated for the members of the plaintiff class are sometimes left over and not distributed. Perhaps members of the class cannot be located or fail to submit claims. Or the amount due is so small that the cost of notice, disbursement and administration may exceed the value of the claim. These are residual funds.

Both state and federal courts have broad discretion in determining how residual funds should be distributed. Courts have found IOLTA programs and legal aid societies to be appropriate recipients of these funds. Under Rule 23 in both federal and state procedure, the class action is designed to afford otherwise powerless class members access to equal justice. Legal services for the poor have a similar purpose, affording access to justice to people who would otherwise have no way to protect their rights.

In 2009, the Massachusetts Supreme Judicial Court amended Mass. R. Civ. P. 23 to explicitly provide for the payment of residual funds in class actions either to one or more nonprofit organizations whose activities benefit the class (which could include legal services programs) or the Massachusetts IOLTA Committee, which provides funds for legal services programs. The SJC in July 2015 amended the rule governing class action law suits to require plaintiffs to notify the Massachusetts IOLTA Committee before a judgment is entered or a compromise approved regarding the disposition of class action residuals.

At its annual meeting on August 8, 2016, the American Bar Association House of Delegates passed Resolution 104, which provides that the ABA urge state, local, territorial and tribal jurisdictions to adopt court rules or legislation authorizing the award of class action residual funds to non-profit organizations that improve access to civil justice for persons living in poverty.

The IOLTA program, established by the SJC, requires lawyers and law firms to use interest-bearing accounts for client deposits which are nominal in amount or expected to be held for a short term. The interest is remitted to the IOLTA program which then distributes it to three charitable entities: the Boston Bar Foundation, the Massachusetts Bar Foundation and the Massachusetts Legal Assistance Corporation. These entities distribute the funds to legal aid and administration of justice projects.

If you need additional information on class actions or would like to request a free copy of our Class Action Residual Handbook for Litigators, please contact the IOLTA Committee at 617-723-9093 or

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