A federal judge asked Blawgletter a few years ago what we thought about "cy pres" (sounds like "sigh pray") payments in class actions. The judge had in mind a method of dealing with money that a class settlement or judgment produces but that for one reason or another doesn't find its way into class members' pockets — usually because you can't find the class members or because they don't claim their share of the funds. We admitted some queasiness about cy pres, which aims to do the next best thing with the cash. We saw good in it, particularly the part about taking the profit out of wrongdoing, but we also worried that it could get out of hand. So did the judge.
The judge's colleagues on the Fifth Circuit seem not to share our ambivalance about the cy pres remedy. In Lease Oil Antitrust Litig., No. 10-40119, slip op. at 14 (5th Cir. June 27, 2011), the panel ruled that potential cy pres "funds, insofar as they were allocated to plaintiffs with a last known address in Texas, are governed by Texas law of unclaimed property." The fact that the funds came from a class action settlement didn't impress the court, which held that Texas law didn't conflict with the class action rule.
We rather doubt that a state can properly snatch money out of the bank account that a federal court set up to hold funds coming from a class settlement. Surely the federal court's claim to the funds, and therefore its power to distribute them, trumps the state's grabbiness — and, likely, distaste for class actions.
Will the court reconsider? If it doesn't, will cy pres perish in the Fifth Circuit?