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 www.maiolta.org.