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Should residual class action awards go to legal aid?

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A proposed civil procedure rule to advise judges and parties that unclaimed funds from class action suits could be sent to legal aid programs or The Florida Bar Foundation was closely questioned by the Supreme Court at oral argument April 3.

Florida Supreme Court SealThe amendment to Civil Procedure Rule 1.220 came from the Rules of Civil Procedure Committee after the court referred to it a recommendation from the Commission on Access to Civil Justice. The commission suggested “permitting courts to order that residual, undistributed, or unclaimed funds awarded in class action suits be distributed to The Florida Bar Foundation or nonprofit legal services organizations” under the cy pres doctrine.

A minority of the rules committee argued the amendment is substantive and should be addressed by the Legislature and that the Foundation should not be specifically named in the rule.

“They are, in fact, procedural in nature, not substantive,” Scott Dimond, chair of the Rules of Civil Procedure Committee, told the court when arguing for the amendment. He noted the proposed amendment was approved by the rules committee 19-5, and the Bar Board of Governors and the Bar’s Pro Bono Services Committee voted unanimously to recommend acceptance of this rule.

That prompted Justice Robert Luck to ask if a trust had been set up for a purpose that no longer existed — such as to support a school that had closed — would it be permissible for a judge to assign the funds to a similar use. Dimond said that would be allowable with the consent of the parties and it would still be procedural. Luck then noted the Legislature had passed a cy pres law for such a situation, F.S. §746.0413, which suggested is was a substantive, not a procedural matter.

“If there is a context in which everyone agrees to the donation, then you don’t need the Legislature to enact a statute,” Dimond replied, adding that in the probate setting, the person making the original bequest would likely be dead and hence a law might be needed, while in the proposed rule governing class action suits, all parties would be in agreement about how the residual money should be used.

“Why shouldn’t it be, even if it’s residual, something that the Legislature should be the one that is responsible for determining what happens with residual funds?” Justice Barbara Lagoa asked.

“Because all the parties involved agreed to it,” Dimond said. “If the plaintiffs agree to give it and the defendants agree to give it and the court approves it, whose rights are being trampled on?”

He noted the minority position from the committee contended that someone’s money was being taken without their consent. “I reject both parts of that. Nobody’s money is being removed because these are people who are never going to get this money by operation of the class action mechanism and their consent is implicit because the class representatives have agreed on their behalf,” Dimond said.

Justice Carlos Muñiz said the rule cements a connection between class action cases and legal aid, adding, “to me that doesn’t seem to be the case necessarily.”

Muñiz also said, “It seems like the whole genesis of coming up with this proposal was not so much to improve the rules in a technical sense but to advance the substantive goal of getting more money for these groups.”

“The motivation of the rule was to give guidance to circumstances that already exist, where people are already permitted to do this. They may just not know it,” Dimond replied. “There are judges and litigants who are not familiar with the cy pres mechanism. This will make them familiar with the mechanism that exists in the law today.”

Kathleen McLeroy, representing the Bar’s Pro Bono Legal Services Committee, said the rule was justified because class action suits are about gaining access to justice for people who otherwise would be unable to get into court, and the cy pres awards would go to related legal access programs.

She noted the ABA has suggested a rule to encourage such awards.

Justice Alan Lawson asked if the proposed amendment was trying to guide the discretion of a judge faced with trying to determine what to do with residual class action funds in the absence of a law or prior agreement.

“It’s our belief that class actions always involve a group of class claimants who otherwise would not be able to individually have access to justice because of the nature of the size of their claim and collectively through the class action process they’re able to get that,” McLeroy said. “By that very premise that class actions residuals are appropriate to be given to legal aid to help generally access to justice.”

Lagoa asked why the Foundation was specifically mentioned in the rule.

McLeroy said the rule does not mandate that the Foundation get any awards, but added it is “uniquely situated to provide both the geographic bandwidth to all the legal aid grantees in the state or to create specific projects if that particular case demanded it.”

Retired lawyer Leza Tellam spoke against the rule.

“My argument is the rule is primarily substantive and a substantive rule does not belong in a [procedural] rule of court,” she said, also questioning whether the Bar and its entities understand the best way to provide legal access and that there are too many procedural rules, many of which are confusing to nonlawyers and are unconstitutional.

“We should be empowering individuals and not the Bar and not creating more rules, particularly where the discretion of the court. . . is already there,” Tellam said. “It’s a common law issue, it’s a matter for the case. . . . I am violently opposed to more rules and I am violently opposed to anything which complicates for the average person [going to court].”

The amendment adds subdivision (f) to Civil Procedure Rule 1.220 and says: “Prior to the entry of any judgment under subdivision (d)(3) or the approval of any compromise under subdivision (e), the court shall determine the total amount payable to class members. The court shall set a date when the parties shall report to the court the total amount actually paid to class members. After that report is received, the court may direct the defendant, by order entered on the record, to distribute any unpaid residual funds remaining after the payment of approved class member claims, expenses, litigation costs, attorneys’ fees, and other court approved disbursements. Unless otherwise required by governing law, it shall be within the discretion of the court to approve the timing and method of distribution of residual funds and to approve the recipient(s) of residual funds, as agreed to by the parties, including one or more nonprofit, tax exempt organizations that provides civil legal services to the poor, including the Florida Bar Foundation.”

Justice Jorge Labarga, who chairs the Commission on Access to Civil Justice, did not participate in the argument, which came in Case No. SC18-1176.