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Abstract
The two primary goals of consumer class actions are to provide relief to those who have been harmed and to deter similar behavior in the future. Yet, in many class actions, claims rates are so low that only a small fraction of class members actually receives their share of a settlement, leaving remaining unclaimed funds subject to judicial discretion. This allows for reversion to the defendant, pro-rata distribution, or escheat by the state. While distribution to charities via the cy pres doctrine is often deemed the “next best” use of these funds, inadequate oversight of recipient charities results in distributions that may not effectively address the harms caused by the defendant’s conduct. Ineffective use of cy pres undermines the compensatory objective of class actions and opens the doctrine up to scrutiny from those who seek to dismantle the class-action mechanism altogether. Yet, despite its faults, the cy pres doctrine is still preferable to alternative mechanisms of distribution and should be refined rather than eliminated.
This Note proposes guidelines to improve the administration of cy pres remedies. At the same time, it emphasizes that distribution to individual class members is still the best way to provide relief to those harmed because it fulfills the dual objectives of consumer class actions: providing redress to affected individuals and deterring wrongful conduct by defendants. To fulfill these goals, this Note presents a novel solution for compensating class members: Funds should be distributed automatically to identifiable class members, and remaining funds should be turned over to states’ unclaimed property databases in the name of unreachable class members.