Class action residuals make a major contribution to equal justice

Issue November 2014 By Jayne Tyrrell

You provide pro bono services and contribute to your local legal aid program. What more can you do?

If you are involved in class action litigation, you may have an opportunity to support equal justice in a major way - by designating class action residual funds for distribution to the Massachusetts 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 $473,256 and $483,279.

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 interest on lawyers' trust accounts (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 to the Massachusetts IOLTA Committee, which provides funds for legal services programs.

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 find yourself involved in a class action in which residual funds are showing up, contact the IOLTA Committee at (617) 723-9093 or www.maiolta.org for help in determining whether a contribution to support equal justice is appropriate in your case.

Jayne Tyrrell is the director of the Massachusetts Interest on Lawyers' Trust Accounts.