As class action settlement funds become more and more prevalent, cy pres awards have become a more common means of providing relief to absent class members. The primary purpose of cy pres awards is to provide a second-best form of relief when it is deemed impossible to directly compensate individual plaintiffs. Most often, these cy pres awards are given to some kind of charitable organization. Under federal law, class action settlements and cy pres awards are governed by Federal Rule of Civil Procedure 23(e). Rule 23(e)(2) requires all class action settlements to be “fair, reasonable, and adequate,” but provides no further guidance. Thus, federal courts look to judge-made standards to determine the validity of a cy pres award. Numerous states have codified cy pres laws with specific requirements into their statutory schemes. Every state has an unclaimed property law. Both the state cy pres statutes and unclaimed property laws may conflict with federal law. This Note will examine how a federal court sitting in diversity jurisdiction would and should respond where state and federal law conflict. In so doing, it will discuss the interplay of cy pres doctrine, the Erie doctrine, the Rules of Decision Act, and the Rules Enabling Act. This Note concludes by examining the proposal by the Rule 23 Subcommittee on Civil Rules to codify cy pres in Rule 23(e) and the Subcommittee’s subsequent withdrawal of the amendment. This conduct bolsters the conclusions that that a Rules Enabling Act analysis is more appropriate for these cy pres questions, and that federal cy pres awards may indeed violate the Rules Enabling Act.
Class Action Settlements, Cy Pres Awards, and the Erie Doctrine,
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