No Claim, No Gain: The Unclaimed Property Solution to Undistributed Class Action Awards

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.

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Introduction

Throughout the early 2000s, Comcast added unexpected charges to the bills of nearly 3.5 million customers, forcing customers to rent “set-top boxes” along with their cable packages to access the channels for which they had already paid.[1] Frustrated by the surprise charges, classes of Comcast customer plaintiffs filed twenty-four civil actions, later consolidated as multidistrict litigation under the name In re Comcast.[2] After nine years of litigation and multiple failed settlement attempts, Comcast entered into a $15.5 million settlement agreement with the plaintiffs.[3] But, because only 20,262 Comcast customers filed claims, Comcast ultimately paid out only $498,241—nearly 60 percent of which it paid not in cash but as movie rental credits that could be redeemed only on Comcast-enabled devices.[4] The remaining funds reverted to Comcast.[5]

Class action lawsuits have two main purposes: to provide relief to those who were harmed and to deter similar behavior. Allowing residual settlement funds to revert to the defendant achieves neither of these aims. Less than 0.5 percent of plaintiffs received any kind of relief from the Comcast settlement, and cable companies have not discontinued the practice of unexpected charges: The average cable customer in the United States still pays $450 in unexpected fees to their cable company each year.[6] Unfortunately, this scenario is not unique to Comcast or even to cable companies. Consumer class actions have notoriously low claims rates,[7] and unclaimed funds can often revert to the defendant.

To avoid these types of reversionary settlements in class actions, courts have relied on multiple options: pro-rata distribution, escheat to the state, and distribution to non-profits via the cy pres doctrine. These options, while better than reversion, are not without their flaws. Pro-rata distribution, which divides the total settlement amount among only the class members who have claimed, is ineffective at ensuring that awards reach a critical mass of class members. Escheatment, which grants unclaimed settlement funds to the state, is subject to constitutionality concerns. And when settlement funds are used by the state, they are not directed towards the people impacted by the defendant’s conduct. The most common alternative, the cy pres doctrine, generally results in distribution of unclaimed funds to non-profit organizations. Unfortunately, due to procedural flaws and lack of oversight, this can result in the allocation of funds to charities that do little to impact class members or those similarly situated.

This Note sets forth a strategy to further both goals of class actions: compensating class members and deterring future conduct by defendants. Part I of this Note discusses low claims rates—the major flaw of consumer class actions—and three methods of utilizing unclaimed funds: reversion to the defendant, pro-rata distribution, and escheat to the state. It addresses why these methods do not achieve the goals of consumer class actions and why they should be disfavored.

Part II addresses the cy pres doctrine. It proposes that the cy pres doctrine, while superior to the other options, still requires more court-implemented guidance to ensure its efficacy.

Finally, Part III presents a novel solution for distribution of unclaimed class action funds to consumers. First, automatic distribution should occur in cases like Comcast where defendants know the full name, address, and billing information of class members. If automatic distribution is not possible, defendants should be required to report these awards to class members’ last-known states of residence for inclusion in the states’ unclaimed property databases. By utilizing the unclaimed property offices that already exist in every state in the nation, more class members will receive their rightful awards, achieving the twin goals of compensating class members and deterring future harmful behavior.

I. The Fault in Consumer Class Actions: Low Claims Rates and Ineffective Means of Distribution

Despite large numbers of consumer class actions, the fact that many of these cases end in private settlement means there is very little empirical data about how many class members receive compensation. While large-scale empirical data on class action claims rates is scarce, the data that does exist suggests that average claims rates in consumer class actions are extremely low—often less than 1 percent.[8]

A.      Low Claims Rates as a Major Hurdle in Consumer Class Actions

The lack of comprehensive empirical research on consumer class actions has made it difficult for courts to appreciate the extent to which low claims rates have created less-than-ideal outcomes in consumer class actions. In 2013, Mayer Brown LLP conducted a study of 148 federal class actions initiated in 2009.[9] Of these, two-thirds were either dismissed voluntarily by the named plaintiff or dismissed by the court on the merits and thus produced no relief for the class. The remaining one-third resulted in settlements.[10] Of the eighteen cases where class members claimed their share of the settlement, claims rates were available for only six.[11] Save for one outlier where the claims averaged $2.5 million,[12] claims rates ranged from abysmal to mediocre: 0.00006 percent, 0.33 percent, 1.5 percent, 9.66 percent, and 12 percent.[13]

Subsequent studies have found similarly low claims rates. A 2015 Consumer Financial Protection Bureau report on arbitration in financial products found a median claims rate of about 8 percent.[14] This number seems downright massive compared to data from class action administrator KCC[15] on claims rates for claim notifications that were provided only through media advertisements. For products like toothpaste, heating pads, snack food, and sunglasses, KCC found claims rates between 0.002 percent and 9.37 percent, with a median claims rate of only 0.023 percent.[16]

In 2019, the Federal Trade Commission (“FTC”) published a study of 149 consumer class action cases from large class action administrators.[17] While this is the largest study of consumer class action claims rates to date, the study did not include consumer class actions that proceeded through smaller class action administrators or other means and, therefore, is not fully representative of the breadth of consumer class actions.[18] The median claims rate was 9 percent and the weighted mean (where cases were weighted by the number of notice recipients) was 4 percent.[19] Success rates varied by method of contact: campaigns that used notice packets with claim forms had claims rates of 10 percent, while campaigns that relied on postcards and email had claims rates of 6 and 3 percent, respectively.[20]

While the FTC study also found that the median claim approval rate was 93 percent,[21] the low claims rate does little to reassure us that class actions are living up to their purpose of “vindicating the rights of groups of people who individually would be without effective strength to bring their opponents into court at all.”[22] Consumer class actions should vindicate the rights of as many class members as possible and compensate them fairly. There is hardly “vindication” when the majority of class members have not claimed at all.

B.      Existing Methods of Redistributing Unclaimed Funds Fail to Accomplish the Objectives of Class Actions

Faced with low claims rates, courts have multiple options for distributing remaining funds, three of which are suboptimal in nearly all instances and should be avoided. The first of these options, reversion to the defendant, is the least desirable as it incentivizes defendants to use inefficient forms of notice and compensate as few class members as possible. This both reduces the amount distributed to class members and decreases the potential deterrent effect, as defendants will ultimately pay less than the settlement initially dictated. Two other options, pro-rata distribution and escheat to the state, may serve as effective deterrence mechanisms due to their financial impact on the defendant, but neither option effectively compensates class members.

1.       Reversion to Defendant Neither Deters Conduct nor Compensates Class Members

While reversionary settlements are relatively uncommon due to growing awareness of their faults, they are still permissible under the Supreme Court’s ruling in Boeing v. Van Gemert.[23] In Boeing, holders of nonconvertible debentures brought a class action suit claiming that Boeing had violated federal and state law when it failed to give adequate notice of the plaintiffs’ ability to convert their debentures into stock.[24] Boeing was ordered to pay a sum of money for each plaintiff’s recovery based on the plaintiff’s ownership, as well as undetermined attorney fees against the entire fund.[25] On remand, the Second Circuit found that unclaimed settlement money could be distributed back to the defendant so long as the defendant could “stand ready to pay valid claims against the fund in perpetuity.”[26]

The rulings in Boeing established that a defendant effectively has ownership of the money until it is placed into the settlement fund, and unless the fund is claimed in its entirety, the defendant has a “substantial, if not compelling, claim to its return.”[27] While the practice is increasingly disfavored by courts, lower courts have allowed reversionary settlements in wage-and-hour class actions,[28] and the Ninth Circuit has held that reversion is permitted if deterrence was not a goal of the statute the defendant violated.[29]

While some judges believe that reversionary settlements encourage defendants to put forth a “more generous settlement offer,” the data do not substantiate this.[30] Perhaps this discrepancy is due to the general lack of data on class action settlements, or perhaps it is because reversionary settlements “encourage[] the defendant and class counsel to design a claims process that reduces the compensation actually paid to the class.”[31] When a defendant is faced with a large settlement amount in a court that allows reversionary settlements, the defendant is incentivized to use less effective forms of notice to ensure that as few class members claim as possible. Since attorney’s fees are paid from the gross amount of the settlement rather than the proportion of the settlement claimed by class members, class counsel is not incentivized to improve the notice mechanism.[32]

Reversionary settlements therefore provide minimal benefit to the class while benefitting class counsel and reducing the defendant’s financial burden. Reversionary settlements do not adequately deter defendants from causing similar harms in the future, and they fail to compensate class members. Such settlements altogether abandon the idea that unidentified class members could be otherwise “compensated” from settlement funds being allocated elsewhere. Instead, reversionary settlements return the funds to the defendant with the mere hope that the defendant will not perpetuate similar harms in the future.

2.       Pro-Rata Distribution and Escheatment Fail to Adequately Compensate Class Members

While escheatment and pro-rata distribution may serve the goal of deterrence by imposing a financial burden on defendants, they fail to adequately compensate all class members. Pro-rata distribution dispenses the settlement fund among the class members who have claimed their award. This can encourage enterprising plaintiffs to bring “class actions likely to result in large uncollected damage pools”[33] and incentivize lead plaintiffs to keep other class members uninformed. Under Federal Rule of Civil Procedure 23(a)(4), representatives may be dismissed for failure to provide adequate representation due to conflicts of interest.[34] It is therefore counterintuitive to the purpose of class action litigation to permit settlement terms that might create a new conflict of interest between the representative and their class, where a representative’s award is impacted by the presence of other class members.[35] Although pro-rata distribution creates financial consequences for the defendant, it does not produce equitable results among class members.

In the same vein, the state may take custody of unclaimed funds under the doctrine of escheat, thereby creating financial consequences for the defendant but inequitable outcomes for class members. Once these funds are in the state’s hands, they may be used at the state’s discretion. While states may use funds to the advantage of state and local communities, escheatment does not ensure that the funds equitably impact class members or those similarly situated. Because escheat to the state does not award impacted class members, it is not aligned with the goal of consumer class actions.

At the federal level, escheatment is permissible under Title 28, Section 2042 of the United States Code, which provides that settlement money that has been deposited in a federal court, “has been adjudicated or is not in dispute,” and has been “deposited for at least five years unclaimed by the person entitled thereto” can be “deposited in the Treasury in the name and to the credit of the United States.”[36] Per this section, any claimant entitled to such money may petition the court to receive payment, thus making the United States more of an impermanent “trustee” of the money, rather than the actual owner.[37] At the state level, under most state unclaimed property laws, the state acts as a holder of the funds and is permitted to use them as it sees fit.[38]

Escheatment to the federal government presents constitutionality concerns, particularly regarding the separation of powers and the distinction between procedural and substantive law in Rule 23(e). If remaining settlement funds can escheat to the state, some argue that this does not meaningfully differentiate a settlement from a civil fine.[39] In a system where the private compensatory model is the “sole enforcement mechanism contained in the underlying substantive law,” escheatment could violate the Rules Enabling Act by transforming the private remedy between parties into a public remedy between parties and the state.[40] Similarly, Ethan D. Millar and John L. Coalson, Jr. have argued that the escheat of a class action settlement is inherently substantive rather than procedural because it “forms part of a claim for relief, the remedy available for a claim, or a defense to a claim.”[41] Millar and Coalson point out that if a federal court approves a class action settlement in a state where unclaimed property escheatment laws exist, reporting and remitting these funds to the state despite the federal court’s order would result in an impermissible conflict of law.[42]

In class actions arising under state law, the feasibility and effectiveness of escheatment depends on the state’s unclaimed property laws. In states that adopted the provisions of the Uniform Unclaimed Property Act of 1995,[43] “property received by a court as proceeds of a class action, and not distributed pursuant to the judgment,” is property subject to abandonment.[44] However, this does not necessarily qualify the property for escheatment since uncashed settlement checks are not considered funds “received by a court.”[45] In California, no true escheat can occur in cases that arise under state law. California Code of Civil Procedure Section 384 requires that “the distribution of any unpaid residue or unclaimed or abandoned class member funds derived from multistate or national cases brought under California law shall provide substantial or commensurate benefit to California consumers.”[46] California Senate Bill 847, passed in 2018, requires that all residual funds be allocated to “nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons, or that promote the law consistent with the objectives and purposes of the underlying cause of action, to child advocacy programs, or to nonprofit organizations providing civil legal services to the indigent.”[47] While some states have similar provisions that require escheated funds to be redirected to nonprofits or direct services addressing the litigation’s underlying cause, most do not.[48] In Utah, Rhode Island, and Wyoming, for example, escheatment provisions allow the states to use the funds as they wish.[49]

In the best-case scenarios, reversion, pro-rata distribution, and escheatment still fail to get money into the hands of class members. In the worst-case scenarios, reversion and pro-rata distribution create potential conflicts of interests and incentives for defendants and class representatives to reduce the number of class members who are contacted, while escheatment leaves funds up to a state’s broad discretion.

II. The Cy Pres Doctrine: A Second-Best Solution to Distribution

While settlement fund distribution via the cy pres doctrine is preferable to the other methods, it is not without its flaws. The cy pres doctrine allows courts to distribute funds to other beneficiaries who serve a similar purpose or are similarly situated to the class. Cy pres is used for the distribution of residual funds. Cy pres is also used when the award per class member is so small that the administrative cost of distribution is not justified. This second type of cy pres distribution, called a cy pres-only distribution, is more common in cases where large numbers of class members are challenging to identify.[50]

Under cy pres, residual funds should be sent to a charity or other nonprofit as the nearest best use of the money. This Note posits that the use of the cy pres doctrine is acceptable when the amount distributed per class member is minimal and there is adequate oversight of recipient organizations. However, this Note proposes reforms to the cy pres doctrine to bring it in alignment with the goals of consumer class actions.

First, this Part outlines the historical roots of the cy pres doctrine. Then, it addresses how circuit courts have ruled on two major aspects of the cy pres doctrine: (1) when may a cy pres distribution be used? and (2) which organizations make acceptable cy pres recipients? It then discusses cases in which the cy pres doctrine has been applied too broadly and highlights how these cases provide fuel to conservatives and critics who wish to diminish the availability of class actions outright. Finally, it provides guidance for how the cy pres doctrine may be properly applied to preserve its availability and legitimacy.

A.      Historical Use of the Cy Pres Doctrine

The term “cy pres” comes from the Norman French expression “cy pres comme possible,” which translates to “as near as possible.”[51] The cy pres doctrine extends far beyond the beginning of American jurisprudence, having been documented in the Digest of Justinian in Roman times.[52] When it was adopted into English law, it was associated with the practice of almsgiving to expiate sin, allowing men “to buy their way into heaven by giving property to charity.”[53] In the early republic, courts rejected the use of cy pres in trusts because they saw it as contrary to both the separation of powers and the Lockean ideal that the “natural rights of man” included the right to dictate how one’s property is used.[54] This sentiment remained through the 1920s: In 1923, a Connecticut court ruled that “[n]o public benefit . . . can justify a court in making over the wills or contracts of men, in the conviction that changed conditions make this, if not necessary, at least highly desirable.”[55] Thereafter, the cy pres doctrine was usually only invoked in the enforcement of charitable trusts. It was also often hindered by the perceived abuses associated with prerogative cy pres and discomfort with the idea that courts might go against what was written in someone’s will for the sake of convenience.[56]

This changed, however, after the 1966 revision of Federal Rule of Civil Procedure 23, which bound all class members to the outcome of class actions, including those who had not joined the suit. Following the revision, a law student at the University of Chicago named Stewart R. Shepherd proposed an analogous use for the cy pres doctrine: to solve the problem of uncollected damages in class actions.[57] Shepherd proposed that a “next-best” class composed partially of plaintiff class members would allow for the distribution of uncollected damages and could also benefit non-class members, thus allowing undistributed class action funds to serve a “broader public service in order to maximize the benefit to society.”[58] In his proposal, Shepherd stated that a cy pres remedy should be measured by “(1) the extent to which the injured class receives the damages, (2) the cost of applying the remedy, and (3) the equitability of the distribution with respect to the potential of wind-falls for nonclass members.”[59] Despite Shepherd’s novel proposal, it was not until the publication of two student notes in 1987 that the modern version of cy pres remedy emerged: donation to charitable purposes through a trust fund or existing organization.[60]

In the courts, the first use of cy pres in a class action was recorded in 1974 in Miller v. Steinbach.[61] Miller involved a merger dispute in which the shareholders of one corporation alleged that the terms of the merger were unfair and that one shareholder had breached his fiduciary duty to his fellow shareholders by agreeing to settle his personal claim.[62] The parties’ proposed settlement, with fees deducted, amounted to $58,000, with $8,000 in costs required to actually distribute the settlement.[63] At this amount, only $0.012 would be distributed per share.[64] The parties instead agreed to apply a variant of the cy pres doctrine to distribute the funds to the trustee of the first corporation’s retirement plan.[65] However, the court made “no effort to assure itself that by donating unclaimed funds . . . the settlement’s award was likely to indirectly compensate members of the injured class.”[66]

B.      Court Guidance

While courts have generally interpreted the cy pres doctrine to mean that unclaimed funds should be distributed to charities, the doctrine has also been used to justify other creative distributions of unclaimed funds that impact plaintiffs or those similarly situated. The Supreme Court has never ruled on which applications of the cy pres doctrine are permissible.

Circuit courts have established two primary use cases for the cy pres doctrine. The first, cy pres-only distribution, occurs when the award per class member would be so small that the administrative cost of distribution cannot be justified.[67] Once attorney’s fees are deducted, the remaining settlement funds are distributed in their entirety to charity.[68] The second, cy pres distribution of residual funds, occurs when funds are first distributed to those class members who made claims and then remaining unclaimed funds, if any, are distributed to charities.[69] Both cy pres-only distribution and cy pres distribution of residual funds are subject to the requirement that class action settlements be “fair, reasonable, and adequate.”[70] Generally, cy pres awards have been upheld when (1) the class size is so large or the amount per class member so small that distributing to each class member would result in negligible awards and (2) there is a sufficient relationship between the population the nonprofit serves and the harms the defendants caused.[71]

Courts are likely to favor cy pres-only distributions when the class size is large, such that the amount per class member is extraordinarily small or identifying class members is challenging. For example, in Naschin v. AOL, the Ninth Circuit approved a cy pres-only settlement where the recovery at trial was $2 million, which, divided among the more than sixty-six million AOL subscribers, would only amount to about three cents per class member.[72] Likewise, in In re Google Inc. Street View Electronic Communications Litigation (“Google Street View”), the Ninth Circuit held that a cy pres-only settlement was justified given a $13 million settlement fund and a sixty-million-person class, from which it was “not feasible to verify class members’ claims.”[73] Thus, a fund is a likely candidate for a cy pres-only settlement when it is “non-distributable” due to difficulties identifying class members.[74] This mechanism is often seen in large-scale privacy litigation.[75] As Nachshin demonstrates, even when it is possible to identify all class members, a small settlement amount or small distribution per class member may justify a cy pres-only settlement. Indeed, the Seventh Circuit held that a cy pres-only distribution was favorable even with a class of only 2,800 members because each member would receive at most $3.57 in damages.[76]

In evaluating whether a cy pres-only distribution is acceptable, courts should first determine whether the defendant has access to the names and contact information of all class members. This may be challenging, for example, in cases where the defendant violated consumers’ privacy, given the sheer number of people implicated in privacy violations and the fact that many of them are internet users whose accounts are not necessarily linked to their names or identifying information.[77]

While a simple calculation of the amount each class member would receive may be used to determine whether a cy pres-only distribution is appropriate, determining whether a given cy pres recipient is appropriate is more challenging. In evaluating whether a given cy pres recipient is well suited, the Ninth Circuit considers the “nature of the plaintiffs’ lawsuit, the objectives of the underlying statutes, and the interests of the silent class members, including their geographic diversity.”[78] When the beneficiaries of a cy pres distribution do not align with the geographic distribution of the affected class, the Ninth Circuit has mandated that the parties locate a more suitable cy pres beneficiary.[79] The Third Circuit has taken the same approach in cy pres-only distributions, holding that a cy pres-only settlement may be approved if the beneficiaries “bear a direct and substantial nexus to the interests of absent class members.” This nexus requires that “the geographic scope of the class correspond[] to that of the cy pres recipients.”[80]

In addition to requiring that the beneficiaries adequately represent the class members’ geographical distribution, the Ninth Circuit has separately held that the organization that receives the funds should have a specific plan for supervising how the settlement proceeds will be used.[81] In Six (6) Mexican Workers v. Arizona Citrus Growers, the Ninth Circuit rejected a proposal to distribute all unclaimed funds, totaling over $50,000, to the Inter-American Foundation’s (IAF) humanitarian projects in areas of Mexico where many of the plaintiffs in a class of 1,349 undocumented workers were believed to reside.[82] While the court found cy pres to be an acceptable remedy, the IAF was “not an organization with a substantial record of service.” [83] In this instance, the court found that the “distribution plan should be supervised by the court or a court appointed master to ensure the funds are distributed in accordance with the goals of the remedy.”[84]

The fact that an organization has previously received cy pres distributions does not bar the organization from receiving funds in future settlements.65 In Google Street View, Google established a $13 million settlement fund after its Street View vehicles were found to have collected, decoded, and analyzed data—such as emails, usernames, passwords, and documents—transmitted over unencrypted Wi-Fi networks.[85] This class consisted of approximately sixty million members. Rather than provide for direct payments to class members, the plaintiffs proposed distribution to eight cy pres recipients, among them the Center on Privacy & Technology at Georgetown Law and the American Civil Liberties Union Foundation.[86] The Electronic Privacy Information Center successfully petitioned the district court to be included as a cy pres recipient.[87] The Ninth Circuit rejected the plaintiffs’ contentions that the district court abused its discretion by approving cy pres recipients to whom Google had already paid funds in previous cy pres cases. The court concluded that receiving cy pres funds from a defendant does not “disqualif[y] a proposed recipient for all future cases.”[88]

Despite differences in how circuit courts have addressed cy pres distributions, the Supreme Court has said little on the matter. In 2013, the Court denied certiorari in a cy pres case, Marek v. Lane (discussed below as Lane v. Facebook), with Chief Justice John Roberts stating that “[i]n a suitable case, this Court may need to clarify the limits on the use of such remedies.”[89] In 2019, in Frank v. Gaos, the Court appeared prepared to discuss whether cy pres settlements “satisfy the requirement that class settlements be ‘fair, reasonable, and adequate,’” but ultimately it only ruled on other aspects of the case.[90] In Gaos, the named plaintiff initially filed a complaint on behalf of herself and a putative class alleging that Google’s use of referrer headers stored user search terms in violation of the Stored Communications Act.[91] The negotiated settlement resulted in (1) required disclosures about referrer headers on three Google webpages and (2) an $8.5 million payment, none of which was distributed to class members.[92] Instead, the settlement was cy pres only, and all funds were distributed to charity.[93] But while Gaos was pending, the Supreme Court ruled in Spokeo v. Robins that “Article III standing requires a concrete injury even in the context of a statutory violation.”[94] Since Gaos relied on the principle that violation of a statutory right satisfied the injury-in-fact requirement, a principle the Supreme Court overruled in Spokeo, the Court ultimately remanded Gaos to the district court and did not rule on whether the cy pres distribution was permissible.[95] In the absence of clear guidance from the Supreme Court on when cy pres awards should be allowed, courts may develop their own guidelines to promote the most effective uses of settlement funds.

C.      Justified Criticism of the Cy Pres Doctrine and the Need for Reform

Progressives may be dismissive of criticism of cy pres when it stems from conservative judges who seek to dismantle the class action mechanism outright,[96] but these criticisms are not without merit. Although cy pres is often used to distribute funds to much-needed legal services and community organizations, it has also been misused to confer indirect benefits on the named parties without benefiting the class as a whole. In failing to address these pitfalls, each cy pres settlement presents a new opportunity for conservative judges to critique the remedy and restrict its application. This presents a dangerous set of circumstances for those who see class actions as a mechanism for justice: If the cy pres doctrine is deemed impermissible, the remaining options for settlement funds neither compensate plaintiffs nor prevent the return of funds to the defendant.

Since cy pres recipients are determined as a part of the settlement process, both the plaintiff’s attorneys and the defendant’s attorneys are incentivized to favor charities with which they have an existing relationship.[97] While this practice is not necessarily harmful in itself, the long-term effects of such behavior can create partiality that amplifies biases, reinforcing the “very social ills [philanthropy] says it is trying to overcome.”[98] While some cy pres fund recipients engage in zealous advocacy to stop the sorts of harms that plaintiffs experience, not all charities function this way. Moreover, parties are more or less at will to allocate their cy pres funding where they choose. Although courts have long recognized this potential concern, they have not taken action to limit the scope of charities that are considered acceptable cy pres recipients. As the Ninth Circuit noted in Nachshin, courts have awarded cy pres distributions to “myriad charities which, though no doubt pursuing virtuous goals, have little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved.”[99]

Further concern arises when the charities selected to receive cy pres funds are affiliated with parties to the settlement. In Lane v. Facebook, Inc., the Ninth Circuit permitted a director employed by the defendant, Facebook, to serve on the board of the sole cy pres recipient, an organization that did not even exist before the settlement agreement.[100] In Lane, Facebook had used its Beacon program to broadcast users’ private information without their required affirmative consent.[101] As part of the settlement, Facebook agreed to terminate the Beacon program and pay $9.5 million, of which attorney’s fees accounted for over $2.3 million.[102] While the 3,663,651 class members were provided notice of the settlement, they received no compensation.[103]

Instead, the $6.5 million remaining in the settlement fund was distributed to a new charity organization called the Digital Trust Foundation (“DTF”), created as part of the settlement.[104] DTF’s mission was to “fund and sponsor programs designed to educate users, regulators, and enterprises regarding critical issues relating to the protection of identity and personal information online through user control and the protection of users from online threats.”[105] The three-member board of directors consisted of Chris Hoofnagle, Director of Information Privacy Programs at the Berkeley Center for Law and Technology; Larry Magrid, a member of the federal government’s Online Safety and Technology Working Group; and Timothy Sparapani, Facebook’s Director of Public Policy.[106] While objectors argued that Sparapani’s presence on DTF’s board created an “unacceptable conflict of interest that [would] prevent DTF from acting in the interests of the class,” the Ninth Circuit disagreed, finding that cy pres “do[es] not require . . . that settling parties select a cy pres recipient that the court or class members would find ideal.”[107]

But while a cy pres recipient does not need to be “ideal,” courts should be more skeptical when a defendant creates an entirely new organization to receive a cy pres award. As Judge Kleinfeld noted in his Lane dissent, cy pres awards should be scrutinized when numerous organizations that serve similar purposes already exist and the new organization has no track record by which the court can evaluate the organization’s purported relationship to the cause of action.[108]

Likewise, cy pres awards create an appearance of impropriety and decrease the effectiveness of class actions as a deterrent when recipients and party counsel have a history of business dealings or overlap in personnel.[109] In the settlement resulting from Google’s misconduct in Frank v. Gaos, the American Association for Retired Persons (AARP) was one of the recipients of the $5.3 million cy pres award, receiving more money than any individual plaintiff.[110] The same year, AARP paid Google over $21.5 million for advertising services, making Google AARP’s highest-paid independent contractor.[111] Furthermore, AARP repeatedly promoted Google’s products on the AARP website to its members.[112] While using Google is perhaps an inevitability of modern life, paying Google nearly $22 million and repeatedly advertising its products are not. Courts should consider the financial relationships between defendants and cy pres recipients more carefully to prevent settlement agreements from becoming a way to further defendants’ business relationships.

Although some cy pres distributions raise alarms, criticisms of the doctrine are generally voiced by conservative judges, who use egregious examples of the problems with cy pres to question the doctrine in its entirety. In her concurrence in Google Street View, Judge Bade, a Trump appointee, questioned whether the “practical advantages” of cy pres doctrine “inappropriately displace[d] other concerns implicated by cy pres awards.”[113] Judge Bade noted that she was “not convinced that cy pres awards to uninjured third parties should qualify as an indirect benefit to injured class members.”[114] She added that cy pres remedies may instead be “‘purely punitive,’ with defendants paying millions of dollars in what are essentially civil fines to class counsel and third parties while providing no compensation to injured class members.”[115]

Likewise, in his Gaos dissent, Justice Thomas criticized the cy pres doctrine as an ineffective and unconstitutional form of relief, a subject that the rest of the Court avoided entirely.[116] He declared that “cy pres payments are not a form of relief to the absent class members and should not be treated as such.”[117] In his view, the cy pres-only settlement in the case failed to meet the requirements of Rule 23 because the fact “that class counsel and the named plaintiffs were willing to settle the class claims without obtaining any relief for the class . . . strongly suggest[ed] that the interests of the class were not adequately represented.”[118] He ultimately concluded that “the class action should not have been certified, and the settlement should not have been approved.”[119]

Scholars have echoed these concerns about the cy pres doctrine’s legitimacy. A team at Northwestern University found the cy pres doctrine to suffer from “three key constitutional flaws.”[120] First, adding beneficiaries turns the two-party adjudicatory process into a trilateral process.[121] Second, the practice results in essentially a civil fine, thus violating the separation of powers by transforming judicial oversight of compensation between two parties into an “administrative redistribution of wealth for social good.”[122] Third, cy pres awards threaten the due process rights of both parties.[123] Other critics at the Institute for Legal Reform have alleged that the cy pres doctrine violates the Rules Enabling Act.[124] According to these critics, when a party does not collect on the judgment and the award is instead given to a third party, the courts themselves are altering substantive law.[125] These concerns are similar to those cited in the early republic, when the cy pres doctrine was used solely for charitable trusts,[126] and almost exactly mirror the critiques of escheatment addressed in Part I of this Note.

D.     Necessary Guidance for Effective Cy Pres Administration

To ensure that cy pres distributions are effective, courts should allow them only when distribution of the settlement funds to the selected charity would improve consumer protections for class members or those similarly situated.[127] This would ensure that more class actions serve their dual remunerative and deterrent functions by prioritizing distribution to plaintiffs and discouraging similar defendant conduct. First, courts should develop bright-line rules for when cy pres distribution is appropriate based on individual award amounts and class sizes. Second, courts must scrutinize cy pres recipients to determine that they will serve plaintiffs or those similarly situated.

First, for cy pres-only distributions,[128] courts should establish bright-line rules to determine how large a class must be to render the administrative costs of distribution inefficient. While courts have not specified how many class members are required to justify a cy pres-only distribution, trends in the case law show that classes must be at least in the tens of millions for the administrative challenges of individual distribution to justify cy pres-only distribution instead. Gaos dealt with a class size of 129 million.[129] Meanwhile, in Naschin, individual distributions were unreasonable for a class size of sixty-six million members.[130] And, in Google Street View, the court considered it “unusually difficult” to identify class members with a class size of sixty million.[131]

Likewise, courts should establish bright-line rules to determine the amount of money needed per class member to justify the administrative costs of cy pres-only distribution. Generally, a high number of class members results in small award amounts to each class member. In Naschshin, for example, the distribution per class member would have been only about three cents.[132] While no case law sets a threshold for how much money per plaintiff is “worth” the administrative costs of individual distribution, courts have acknowledged that sometimes cy pres awards to charities do more for potential plaintiffs than a meager distribution to each class member. For example, in Hughes v. Kore of Indiana, the Seventh Circuit noted,

Payment of $10,000 to a charity whose mission coincided with, or at least overlapped, the interest of the class (such as a foundation concerned with consumer protection) would amplify the effect of the modest damages in protecting consumers. A foundation that receives $10,000 can use the money to do something to minimize violations of the Electronic Funds Transfer Act; as a practical matter, class members each given $3.57 cannot.[133]

This Note proposes that funds amounting to less than $16 per person (in 2025 dollars) should not be distributed to individual class members in California class actions, while funds over $16 per person should be distributed to class members.[134]

Second, courts should scrutinize cy pres recipients to ensure they are appropriate. To do so, courts must, at a minimum, ensure there is no self-dealing or appearance of impropriety between party counsel and the recipient charity. We have come a long way from medieval England, and defendants should no longer be able to pay any organization of their choice to expiate their “sins” of causing harm to class members. When defendants can choose beneficiaries based on previous relationships or potential self-dealing, the cy pres doctrine may undermine class actions’ deterrent and remedial functions. Thus, courts should adhere to the modern conception of the cy pres doctrine and use funds to “support new and ongoing projects on behalf of consumers” or to “finance projects beneficial to the injured consumer class and those similarly situated.”[135] In most cases, this means that legal services organizations are the best recipients of cy pres funds, given that their missions most clearly align with the goals of the cy pres doctrine. Situations like Lane, where the defendant was permitted to create a brand-new charity with a seat on the board, are, simply put, unacceptable. With nearly two million nonprofits in the United States, it is extremely unlikely, for any given class, that there is no preexisting charity that serves a similarly situated population.[136]

Similarly, courts should follow the framework the Third Circuit established in In re Google Inc. Cookie Placement Consumer Privacy Litigation to address continued financial or business relationships between parties and cy pres recipients.[137] In that case, Google had designated the same cy pres recipients in multiple settlements, and one of the lawyers representing the class was on the board of another cy pres recipient.[138] The Third Circuit found that if a relationship between a cy pres recipient and a litigant could undermine the fairness of a settlement, “a district court must review the selected cy pres recipients to determine whether they have a significant prior affiliation with any party, counsel, or the court.”[139] The court also concluded that the parties “bear the burden of explaining . . . why the cy pres selection was fair, which may include describing the nature of any prior affiliations; what role, if any, each affiliation played in the cy pres selection process; whether other recipients were sincerely considered; and why these recipients are the proper choice.”[140]

Ideally, courts should encourage the selection of cy pres recipients that provide direct legal services to the same general population as the class. In the 2022 case Norton v. LVNV Funding, which involved a settlement for unfair debt collection practices, nearly 90 percent of class members did not make a claim.[141] Once the court acknowledged that cy pres was an effective solution to benefit the “next best” class, it approved the Katherine and George Alexander Law Center at Santa Clara School of Law as a cy pres recipient.[142] The court found that the Law Center’s mission to provide “regular brief service advice clinics” and “full representation” to “low-income clients with consumer and/or debt issues,” specifically those related “to collection activity by debt buyers,” aligned well with the “subject at the heart of this case.”[143] Similarly, the court in Malta v. Federal Home Loan Mortgage Corp. found the Samuelson Law, Technology & Public Policy Clinic at Berkeley Law to be an appropriate cy pres recipient. The court reasoned that the Samuelson Clinic “foster[ed] the protection of consumer privacy interests,” which aligned with the issues in the case, where the defendants had violated the Telephone Consumer Protection Act by using an automatic dialing system to call class members without their consent.[144] Cases like these are ideal examples of cy pres because the distributions help to solve the problems the defendants’ behavior created.

III. The Unclaimed Property Solution

While a reformed version of cy pres is effective for distribution when the amount per class member is minimal, this Part proposes a novel solution to the challenge of distributing larger sums of unclaimed funds. Specifically, this Part argues that parties should first utilize automatic distribution and then use state unclaimed property databases to hold funds for class members who did not receive their settlement payments.

As discussed previously, class action settlements of over $16 per person should be distributed to class members.[145] This should occur first through automatic distribution: Courts should require defendants to mail checks or directly deposit funds into class members’ accounts when the class members’ contact information is known or accessible. However, due to moving, mail delivery challenges, and myriad other factors, many class members whose names and states of residence are known will still never receive compensation. For these class members, defendants should be required to report unclaimed funds to the state unclaimed property office for safekeeping and eventual distribution. This Part details how this process would function in California via the State Controller’s Office, but each state has an unclaimed property office or database that is available, free of charge, to residents and former residents and that could presumably function in a similar way.[146]

A.      Favoring Automatic Distribution for All Class Members

Because of low claims rates, courts should favor automatic distribution for all class members. Currently, the people that ultimately receive some kind of remedy are not necessarily the same people that were injured by the initial harm. Consumers who are familiar with the claims process, or those who are more technologically savvy, are more likely to make a successful claim. And while studies of consumer class actions have not accounted for disparities in claims rates by income, age, or race and ethnicity, the FTC’s 2019 study indicated that Black and Hispanic individuals were less likely to receive digital notices due to lower rates of Internet and email access.[147]

However, even if all class members were to receive and acknowledge notice of their inclusion in a class, improving claims rates would remain difficult: The settlement consideration is often “so trivial” that many class members will not deem it worth the effort.[148] Regardless of attempts to improve claims rates through case-specific websites, electronic transfers of funds, and multiple forms of outreach, much of the settlement money intended for individual distribution to class members remains unclaimed.[149]

While some courts have guidelines for class action distributions, these guidelines have not done enough to improve claims rates. For example, the Northern District of California’s Procedural Guidance for Class Action Settlements requires that parties explain the effectiveness of a notice distribution plan and suggests that, when possible, notice should be sent via text or social media and made public on settlement websites that estimate claim amounts for each specific class member.[150] But while these practices may increase claims rates, the guidance is optional, and each settlement is subject to compliance with the orders of the presiding judge.[151] Some courts have simply accepted that low claims rates are a reality in consumer class actions and have rejected the idea that low claims rates are indicative of insufficient notice.[152]

Therefore, to effectively carry out the purposes of consumer class actions, which are to compensate class members and deter defendants, courts should favor automatic distribution of settlement funds over requiring class members to fill out claim forms. Automatic distribution often requires mailing checks but can also occur via direct deposit. In cases where defendants sold something directly to customers or where defendants sold something over the Internet to customers, courts and class counsel should insist that defendants preserve potential class members’ names and last-known contact information at the outset of a case so this information is easily accessible at the time of settlement.[153] In other situations, the information may not be directly accessible by the defendant but is accessible by a third party, such as an online retailer, that can be subpoenaed for information.[154] Courts should leverage the massive amounts of consumer data that defendants collect to the advantage of class members, and they should not approve settlements that require class members to fill out claim forms to provide defendants with information they already have.

While automatic distribution would improve the proportion of class members who are compensated, it would not guarantee that all class members are compensated. First, the amount distributed to each class member might be so small that the benefit of distribution does not outweigh the administrative cost.[155] In these instances, a cy pres-only distribution might be preferable. Second, the contact information the defendant has might be out of date. The average American moves 11.7 times in their lifetime, and it is not uncommon for class action cases to take years to reach a settlement.[156] In these instances, it might be appropriate for courts to require that claims administrators conduct skip traces[157] or utilize the U.S. Postal Service’s NCOALink system to see whether class members have moved before attempting automatic distribution.[158]

Finally, even with the correct contact information, some class members might be skeptical of checks they received in the mail and elect not to cash them, or they may stuff the checks in drawers and forget to cash them until after they have expired. Therefore, even with automatic distribution, residual funds may still be subject to courts’ broad discretion to determine how to distribute. Currently, options for distribution include the suboptimal methods of reversion, escheat, pro-rata distribution, or cy pres distribution.[159]

B.      Reporting Unclaimed Funds

To resolve challenges in contacting and compensating class members, courts should utilize unclaimed property offices and databases. These offices already exist in every state and are used for purposes similar to class action distributions. In California, certain businesses are required to conduct yearly reviews of their records and report any property that has remained unclaimed for the required dormancy period, which is three years for most types of unclaimed property.[160] Unclaimed property generally takes the form of stocks, insurance benefits, wages, or unclaimed checks.[161] Once a business establishes that they have such property, they must inform the property’s owner that their property will be reported to the state within six to twelve months.[162] Next, California mails owners notices to inform them that they must retrieve their property from the business within the required timeframe.[163] After the property remits to the state, the owner can search the Unclaimed Property database on the California State Controller’s website.[164] However, once the property is in the database, Californians receive no further notice that they have unclaimed property waiting for them.[165] After seven years in the database, unclaimed property escheats to the state and is used in California’s General Fund.[166]

Unclaimed property makes up 0.5 percent of the California General Fund’s revenue and is the fifth largest source of revenue in the state, following income tax, sales and use tax, corporation tax, and insurance tax.[167] In 2022–23, unclaimed property accounted for $506 million of the California General Fund’s budget.[168] That same year, the General Fund’s nearly $235 billion budget funded K–14 education, drought response and resilience, energy, wildfire response and resilience, transportation, climate change response, transportation infrastructure, retention for skilled nurses and behavioral health services, Medi-Cal coverage expansion, housing, and higher education.[169]

C.      Class Action Funds as Unclaimed Property

Unclaimed funds from consumer class actions could be submitted to the California Controller in essentially the same manner as other types of unclaimed funds, with a few necessary adjustments. This could start as a pilot program, with the goal of introducing similar programs in other states and in federal class actions. To do this, state legislators must first pass legislation requiring class action administrators to report unclaimed property to the state in a similar manner as other businesses. Legislators would need to determine the amount of time that class action administrators could hold onto funds before reporting them. While the default dormancy period for most unclaimed property is three years, dissolved or liquidated funds must be turned over to the state within six months.[170] Regardless of the time frame, class action administrators should have to make a final attempt to distribute the funds before turning them over to the state, just as businesses do. Currently, there is no legislation that requires the state to notify someone that it has possession of their unclaimed funds. However, this is subject to change as the California State Legislature has indicated that it intends to adopt a notification program for unclaimed property.[171]

If class action funds are to be processed as unclaimed property, it is crucial that the Legislature establish a policy to notify owners of their unclaimed property once it is in the database. Currently, when the state takes hold of unclaimed funds, it is considered escheat under California Code of Civil Procedure Section 1300. Yet there is a distinction in California escheatment law between “escheat” and “permanent escheat.”[172] Escheat is “the vesting in the state of title to property the whereabouts of whose owner is unknown or whose owner is unknown or which a known owner has refused to accept . . . .”[173] In contrast, “permanent escheat” is the “absolute vesting in the state . . . and the barring of all claims to the property by the former owner thereof or his successors.”[174] Currently, funds are only escheated permanently after a “waiting period of not less than seven years from delivery of property to the state.”[175] In order to differentiate the use of unclaimed property databases from the problems associated with escheat addressed in Part I, the state must prioritize notification and make continued efforts to reunite class members with their funds. Perhaps this form of notification alone will improve one of the major problems with class action claims rates: Rather than receiving notice from an email or a check in the mail from a dubious source, people would receive notice from the State Controller, which they might consider a more trustworthy source. In addition to individual notification, the state should make further efforts to increase public awareness of unclaimed property by encouraging Californians to check for any other unclaimed property in the database.[176] This could be facilitated through digital marketing and public advertising campaigns.

Finally, the state should devise a strategy to keep escheated class action funds that remain unclaimed after seven years separate from other forms of unclaimed property. While the California General Fund may positively impact many individuals by funding necessary state resources, these resources may have little pertinence to the underlying causes of consumer class actions. Rather than allow funds to be escheated to the General Fund after seven years, the Legislature may amend unclaimed property statutes to ensure that the state’s use of the unclaimed funds aligns with the purpose of consumer class actions. These amendments could provide that unclaimed property originating from class action funds be distributed via the cy pres doctrine to nonprofits,[177] or they could require that unclaimed class action funds go to the state’s Trial Court Improvement and Equal Access Funds to increase access to legal services.[178]

Alternatively, the state could provide for other methods of distribution that pertain more directly to class action members. For example, the state could distribute funds to state and local agencies that deal directly with consumer protection. While there is some justified apprehension about the state’s ability to use funds effectively, this is not a novel idea. In the 1946 California Supreme Court case Market Street Railway Co. v. Railroad Commission of State of California, the court ordered the privately owned Market Street Railway Company to refund excess fares to passengers after charging more than the fixed rate.[179] When only a small number of passengers received their claims, the court deemed the City and County of San Francisco the recipient of the unclaimed excess fares. These funds then supplemented San Francisco’s municipal street railway line.[180] In instances like Market Street where the harm is fairly localized and funds could go to municipal or local budgets, escheatment could be preferable to allocating money to the General Fund.

Although this method of utilizing unclaimed property databases to distribute residual funds would undoubtedly increase the proportion of class members compensated under California law, it would prove more difficult in class actions arising under federal law. Federal class actions often implicate multiple states, making distribution of unclaimed property and escheatment challenging, not to mention the general challenges of establishing a federal class action post-Wal-Mart Stores, Inc. v. Dukes.[181] However, these concerns do not prevent federal courts from allowing settlements with provisions for residents of states that might someday administer residual funds through unclaimed property websites. Because escheatment is permissible under federal law, there should be no conflict of law as long as the relevant state law does not conflict with the settlement agreement.[182] Thus, utilizing unclaimed property websites for the distribution of class action funds aligns well with the goals of deterrence and compensation to class members in class actions arising under both federal and state law.

Conclusion

Class actions are a powerful tool to make consumers whole for the harms that corporations and other powerful entities have caused them. Therefore, the primary goals of consumer class actions should be to compensate those class members and deter defendants from causing similar harm in the future. The options currently available for distribution of unclaimed funds do not adequately serve these purposes. While cy pres distributions are an acceptable tool when significant numbers of plaintiffs have been harmed and the amount each would receive is negligible, such distributions should not be the default solution for low claims rates. Instead, courts should prioritize automatic distribution, and states should use their unclaimed property databases to reunite class members with their money. This new process should be accompanied by legislation that increases awareness of unclaimed property. Such changes can prevent reversionary settlements and ineffective uses of the cy pres doctrine while allowing class members to receive the relief to which they are entitled.

Copyright © 2025 Al Malecha, J.D., 2024, University of California, Berkeley, School of Law. I am grateful to Professor Ted Mermin and the other students in Consumer Protection for their assistance in developing and refining this Note.

          [1].     In re Comcast Corp. Set-Top Cable Television Box Antitrust Litig., 333 F.R.D. 364, 370 (E.D. Pa. 2019).

          [2].     Id. at 370-71.

          [3].     Id. at 372-73.

          [4].     Id. at 385.

          [5].     Id. at 386.

          [6].     James K. Willcox, Cable Company Fees Add $450 to a Typical Annual TV Bill, Consumer Reps. (Oct. 3, 2019), https://www.consumerreports.org/fees-billing/cable-company-fees-add-to-tv-bill/ [https://perma.cc/5SVY-A7ER].

          [7].     A Smoking Gun in Debate over Consumer Class Actions, Reuters (May 30, 2014), https://www.reuters.com/article/idUS124971486120140509 [https://perma.cc/XD6X-DLJA].

          [8].     Id.

          [9].     Do Class Actions Benefit Class Members? An Empirical Analysis of Class Actions, Mayer Brown LLP (Dec. 11, 2013), https://cdn.ca9.uscourts.gov/datastore/library/2014/06/13/Laguna_ClassActions.pdf [https://perma.cc/76H7-8Y5X] (cited in Laguna v. Coverall North America, Inc., No. 12-55479 (9th Cir. 2014)).

        [10].     Id. at 4-5.

        [11].     Id. at 10.

        [12].     In this case, the class was composed of those involved in Bernie Madoff’s Ponzi scheme. Id. at 20.

        [13].     Id. at 10.

        [14].     The CFPB’s Final Arbitration Study: What’s the Real Story? Ballard Spahr LLP (Mar. 12, 2015) https://www.ballardspahr.com/insights/alerts-and-articles/2015/03/the-cfpbs-final-arbitration-study-whats-the-real-story [https://perma.cc/D9E6-VTS4].

[15].   KCC has rebranded as Verita, but its services remain the same.

        [16].     Reuters, supra note 7.

        [17].     Fed. Trade Comm’n, Consumers and Class Actions: A Retrospective and Analysis of Settlement Campaigns (Sept. 2019), https://www.ftc.gov/system/files/documents/reports/consumers-class-actions-retrospective-analysis-settlement-campaigns/class_action_fairness_report_0.pdf [https://perma.cc/G534-6T9Y] [hereinafter FTC 2019 Study].

        [18].     See id. at 12-13.

        [19].     Id. at 11.

        [20].     Id.

        [21].     Id. at 22.

        [22].     Benjamin Kaplan, A Prefatory Note, 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969).

        [23].     Boeing Co. v. Van Gemert, 444 U.S. 472, 472 (1980).

        [24].     Id.

        [25].     Id.

        [26].     Van Gemert v. Boeing Co., 739 F.2d 730, 731 (2d Cir. 1984).

        [27].     Rhonda Wasserman, Cy Pres in Class Action Settlements, 88 S. Cal. L. Rev. 97, 106 (2014).

        [28].     See Nur v. Tatitlek Support Servs. Inc., 2016 WL 3039573, at *3 (C.D. Cal. Apr. 25, 2016) (listing various cases in California federal and state courts where funds have reverted to the employer in wage-and-hour class action settlements).

        [29].     Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1307-08 (9th Cir. 1990).

        [30].     Mirfasihi v. Fleet Mortgage Corp., 356 F.3d 781, 785 (7th Cir. 2004).

        [31].     Howard M. Erichson, Aggregation as Disempowerment: Red Flags in Class Action Settlements, 92 Notre Dame L. Rev. 859, 892 (2016).

        [32].     See Jay Edelson & Amy Hausmann, Plaintiffs Bar Should Work to Raise Class Action Claims Rates, LAW360 (Mar. 7, 2022), https://www.law360.com/articles/1470619/plaintiffs-bar-should-work-to-raise-class-action-claims-rates [https://perma.cc/8ABN-EWLT].

        [33].     Stewart R. Shepherd, Comment, Damage Distribution in Class Actions: The Cy Pres Remedy, 39 U. Chi. L. Rev. 448, 453 (1972).

        [34].     Robert H. Klonoff, The Decline of Class Actions, 90 Wash. U. L. Rev. 729, 780 (2013).

        [35].     Id.

        [36].     28 U.S.C. § 2042.

        [37].     Wasserman, supra note 27, at 109. In a concurrence in part in In re Folding Carton Antitrust Litigation, the Seventh Circuit’s Judge Flaum stated that federal escheatment did not preclude states from escheating settlement funds, as the “state government may escheat unclaimed property on behalf of its citizens,” allowing states to “use[] the fund to benefit all of its citizens.” In re Folding Carton Antitrust Litig., 744 F.2d 1252, 1258 (7th Cir. 1984). The Ninth Circuit has upheld escheatment when it “serve[s] the deterrence and enforcement goals of the substantive federal statute.” Six (6) Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990). It has also done so when a “suitable cy pres beneficiary cannot be located.” Nachshin v. AOL, LLC, 663 F.3d 1034, 1041 (9th Cir. 2011).

        [38].     Ethan D. Millar & John. L. Coalson, Jr., The Pot of Gold at the End of the Class Action Lawsuit: Can States Claim It as Unclaimed Property?, 70 U. Pitt. L. Rev. 511, 516 (2009).

        [39].     Martin H. Redish, Peter Julian & Samantha Zyontz, Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative and Empirical Analysis, 62 Fla. L. Rev. 617, 665 (2010).

        [40].     Id.

        [41].     Millar & Coalson, supra note 38, at 542.

        [42].     Id. at 544.

        [43].     Unif. Unclaimed Prop. Act § 2(a)(10), 8C U.L.A. 87, 103 (1995).

        [44].     Id.

        [45].     Id. at 519.

        [46].     Cal. Civ. Proc. § 384(b).

        [47].     Id.

        [48].     Sylvia Stewart, Brandeis Univ. Sillerman Ctr. For The Advancement of Philanthropy, As Near as Possible? Applying Best Philanthropic Practice to Judicial Disbursement of Residual Funds in Class Action Lawsuits via the Cy Pres Doctrine 11 (2018), https://heller.brandeis.edu/sillerman/pdfs/reports/cy-pres.pdf [https://perma.cc/5LDR-UEVB].

        [49].     Id.

        [50].     Naschin v. AOL, 663 F.3d 1034, 1037 (9th Cir. 2011).

        [51].     Donate Residual Funds (Cy Pres), The State Bar of Cal., https://www.calbar.ca.gov/Access-to-Justice/Legal-Services-Trust-Fund-Program/Donate-Residual-Funds [https://perma.cc/XCQ3-Y9EU].

        [52].     Edith L. Fisch, The Cy Pres Doctrine and Changing Philosophies, 51 Mich. L. Rev. 375, 376 (1953).

        [53].     Id. at 375.

        [54].     Id. at 381.

        [55].     First Congregational Soc’y v. City of Bridgeport, 99 Conn. 22, 82 (1923).

        [56].     Redish, Julian & Zyontz, supra note 39, at 629-30.

        [57].     Stewart R. Shepherd, Comment, Damage Distribution in Class Actions: The Cy Pres Remedy, 39 U. Chi. L. Rev. 448, 452 (1972).

        [58].     Id. at 453.

        [59].     Id. at 464.

        [60].     Redish, Julian & Zyontz, supra note 39, at 633-34; Natalie A. DeJarlais, Note, The Consumer Trust Fund: A Cy Pres Solution to Undistributed Funds in Consumer Class Actions, 38 Hastings L.J. 729, 759–60 (1987).

        [61].     Miller v. Steinbach, 268 F. Supp 255 (S.D.N.Y. 1967).

        [62].     Id. at 260.

        [63].     Id. at 264.

        [64].     Id.

        [65].     Id. at 265.

        [66].     Redish, Julian & Zyontz, supra note 39, at 635-36.

        [67].     Wasserman, supra note 27, at 103-04.

        [68].     Id.

        [69].     Id.

        [70].     Fed. R. Civ. P. 23(e)(2).

        [71].     Wasserman, supra note 27, at 103-04.

        [72].     Naschin v. AOL, 663 F.3d 1034, 1037 (9th Cir. 2011).

        [73].     In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th 1102, 1115 (9th Cir. 2021).

        [74].     See id. at 1114 (affirming the district court’s finding that cy pres relief was appropriate in part because it was “unusually difficult and expensive to identify class members”).

        [75].     See id.; Frank v. Gaos, 586 U.S. 485, 490 (2019).

        [76].     Hughes v. Kore of Indiana Enter., Inc., 731 F.3d 672, 674-75 (7th Cir. 2013).

        [77].     See In re Google Inc. St. View, 21 F.4th at 1110.

        [78].     Six (6) Mexican Workers v Ariz. Citrus Growers, 904 F.2d 1301, 1307-08 (9th Cir. 1990).

        [79].     See Naschin v. AOL, 663 F.3d 1034, 1036 (9th Cir. 2011) (reversing approval of the settlement in part because the cy pres distribution failed to target the plaintiff class, as the three designated beneficiaries were based in Los Angeles while the class consisted of people spread across the country).

        [80].     In re Google Inc. Cookie Placement Consumer Priv. Litig., 934 F.3d 316, 330 (3rd Cir. 2019); In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th 1102, 1107-08 (9th Cir. 2021) (emphasis added).

        [81].     Six (6) Mexican Workers, 904 F.2d at 1308.

        [82].     Id.

        [83].     Id.

        [84].     Id.

        [85].     In re Google Inc. St. View, 21 F. 4th at 1108-09.

        [86].     Id. at 1109.

        [87].     Id.

        [88].     Id. at 1119.

        [89].     Marek v. Lane, 571 U.S. 1003, 1003 (2013).

        [90].     Frank v. Gaos, 586 U.S. 485, 488 (2013) (quoting Fed. R. Civ. P. 23(e)(2)).

        [91].     Id. at 489.

        [92].     Id. at 490.

        [93].     Id. at 490-91.

        [94].     Spokeo v. Robins, 578 U.S. 330, 331 (2016).

        [95].     Gaos, 586 U.S. at 492-93.

        [96].     In Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 374-78 (2011) (Ginsburg, J., concurring in part and dissenting in part), AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 361-66 (2011) (Breyer, J., dissenting), and American Express Co., et al. v. Italian Colors Restaurant, 570 U.S. 228, 246-53 (2013) (Kagan, J., dissenting), liberal Supreme Court justices criticized the Court’s conservative justices for narrowing the instances in which class actions are available to plaintiffs. It is reasonable to believe that progressives may have a similar reaction to the narrowing of the cy pres remedy.

        [97].     See Sergio J. Campos, The Class Action as Trust, 91 Wash. L. Rev. 1461, 1521 (2016).

        [98].     See Cheryl Dorsey, Peter Kim, Cora Daniels, Lyell Sakaue & Britt Savage, Overcoming the Racial Bias in Philanthropic Funding, Stanford Soc. Innovation Rev. (May 4, 2020), https://ssir.org/articles/entry/overcoming_the_racial_bias_in_philanthropic_funding/ [https://perma.cc/RKT9-RPV5].

        [99].     Naschin v. AOL, 663 F.3d 1034, 1039 (9th Cir. 2011).

      [100].     Lane v. Facebook, Inc., 696 F.3d 811, 821-22 (9th Cir. 2012).

      [101].     Id. at 816.

      [102].     Id. at 818.

      [103].     Id. at 817-18.

      [104].     Id. at 817.

      [105].     Id.

      [106].     Id.

      [107].     Id. at 820-21.

      [108].     Id. at 834 (Kleinfeld, J., dissenting).

      [109].     See Jorge Galavis, Horseshoes and Hand Grenades: Frank v. Gaos and the Problem with Class Action Cy Pres Distributions, 28 U. Mia. Bus. L. Rev. 88, 94 (2019).

      [110].     Id. at 102.

      [111].     Am. Ass’n of Retired Persons – Full Filing – Nonprofit Explorer, ProPublica (Dec. 20, 2024), https://projects.propublica.org/nonprofits/organizations/951985500/201702999349301675/full [https://perma.cc/8TBL-K2F2].

      [112].     Galavis, supra note 109, at 102.

      [113].     See, e.g., In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th 1102, 1123 (9th Cir. 2021) (Bade J., concurring) (expressing reservations about cy pres awards in a concurrence separate from her opinion, focusing on whether giving awards to uninvolved third parties can truly be considered a benefit to the class members who suffered harm).

      [114].     Id. at 1125.

      [115].     Id. (quoting Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 784 (7th Cir. 2004)).

      [116].     Frank v. Gaos, 586 U.S. 485, 494-95 (2019) (Thomas J., dissenting).

      [117].     Id. at 495 (emphasis added).

      [118].     Id.

      [119].     Id.

      [120].     See Redish, Julian & Zyontz, supra note 39, at 641-42.

      [121].     See id.

      [122].     See id.

      [123].     See id.

      [124].     See John H. Beisner, Jessica Davidson Miller & Jordan M. Schwartz, Cy Pres: A Not So Charitable Contribution to Class Action Practice, U.S. Chamber Inst. For Legal Reform (Oct. 27, 2010), https://instituteforlegalreform.com/research/cy-pres-a-not-so-charitable-contribution-to-class-action-practice/ [https://perma.cc/7XHD-8WXE].

      [125].     See id.

      [126].     See Fisch, supra note 52.

      [127].     See, e.g., Hughes v. Kore of Indiana Enter., Inc., 731 F.3d 672, 678 (7th Cir. 2013) (holding that $3.57 per plaintiff was not a valuable use of funds, but a foundation receiving $10,000 could meaningfully do something to minimize violations of the Electronic Funds Transfer Act).

      [128].     Here, “cy pres-only distributions” refer just to monetary relief, but consumer class action settlements can also (and often should) include injunctive relief.

      [129].     In re Google Referrer Header Priv. Litig., 869 F.3d 737, 740 (9th Cir. 2017) (case name was changed to Frank v. Gaos at the Supreme Court).

      [130].     Nachshin v. AOL, LLC, 663 F.3d 1034, 1036 (9th Cir. 2011).

      [131].     In re Google Inc. St. View Elec. Commc’ns Litig., 21 F.4th 1102, 1114 (9th Cir. 2021).

      [132].     Nachshin, 663 F.3d at 1037.

      [133].     Hughes v. Kore of Indiana Enter., Inc., 731 F.3d 672, 676 (7th Cir. 2013). Hughes was decided in 2013. The inflation-adjusted value of $3.57 in 2025 is $4.87.

      [134].     This number is just a suggestion. It is derived from the California minimum wage in 2024, making compensation for the harm caused by the defendant at least equivalent to one hour of the consumer’s time. The actual cost of distribution is an unknown factor. Minimum Wage Frequently Asked Questions, Cal. Dep’t of Indus. Rels. (Dec. 2024), https://www.dir.ca.gov/dlse/faq_minimumwage.htm#:~:text=1.,an%20industry%20or%20a%20locality [https://perma.cc/TUZ5-RHVV].

      [135].     DeJarlais, supra note 60, at 759-60.

      [136].     Nonprofit Organizations in the U.S. – Statistics and Facts, Statista, https://www.statista.com/topics/1390/nonprofit-organizations-in-the-us/ [https://perma.cc/Q3J8-6GPU].

      [137].     In re Google Inc. Cookie Placement Consumer Priv. Litig., 934 F.3d 316, 330 (3rd Cir. 2019).

      [138].     Id.

[139].   Id. at 331.

      [140].     Id. On remand, the district court did not address the fairness of the cy pres settlement because the class could not be certified under Rule 23(b)(2).

      [141].     Norton v. LVNV Funding, LLC, No. 18-CV-05051-DMR, 2022 WL 562831, at *1 (N.D. Cal. Feb. 24, 2022).

      [142].     Id.

      [143].     Id.

      [144].     Malta v. Fed. Home Loan Mortg. Corp., No. 3:10-CV-01290-BEN-NLS, 2019 WL 1367814, at *1 (S.D. Cal. Mar. 25, 2019).

      [145].     See discussion infra Part II.D. In these instances, a cy pres-only distribution can be used, but it should be limited to direct legal services organizations serving class members and those similarly situated.

      [146].     For the purposes of this discussion, state class actions are the most feasible; however, this distribution mechanism would also be possible in class actions arising under federal law.

      [147].     See FTC 2019 Study, supra note 17, App. G, G-1.

      [148].     See Amanda M. Rose, Classaction.gov, 88 U. Chi. L. Rev. 487, 490 (2021).

      [149].     Id.

      [150].     Procedural Guidance for Class Action Settlements, U. S. Dist. Ct., N. Dist. of Cal. (Aug. 4, 2022), https://www.cand.uscourts.gov/forms/procedural-guidance-for-class-action-settlements/ [https://perma.cc/V8KD-LTZW].

      [151].     Id.

      [152].     See In re TikTok, Inc., Consumer Priv. Litig., 617 F. Supp. 3d 904, 929 (N.D. Ill. 2022).

      [153].     See Brian T. Fitzpatrick & Robert C. Gilbert, An Empirical Look at Compensation in Consumer Class Actions, 788-89 (Vanderbilt Pub. L. Rsch., Working Paper No. 15-3, 2015) http://www.ssrn.com/abstract=2577775 [https://perma.cc/KJ4R-ZGPA].

      [154].     Id. at 790.

      [155].     See Nachshin v. AOL, LLC, 663 F.3d 1034, 1037 (9th Cir. 2011) (finding that distribution of $2 million divided among sixty-six million AOL subscribers, which would amount to about three cents per class member, did not justify the high administrative cost of distribution to individual class members).

      [156].     Calculating Migration Expectancy Using ACS Data, U.S. Census Bureau (Aug. 22, 2024), https://www.census.gov/topics/population/migration/guidance/calculating-migration-expectancy.html [https://perma.cc/K5YP-5G8E].

      [157].     Skip tracing is used to locate people who are otherwise unfindable for the purposes of serving a summons and collecting on debt, in addition to other purposes related to investigations. It utilizes phone numbers, social media, and other basic information to find a person’s current address.

      [158].     NCOALink®, U.S. Postal Serv. Postal Pro, https://postalpro.usps.com/mailing-and-shipping-services/NCOALink [https://perma.cc/8ALE-65KP].

      [159].     Kevin M. Forde, What Can a Court Do with Leftover Class Action Funds? Almost Anything!, 35 Judges J. 19, 19-23 (1996).

      [160].     Malia M. Cohen, How to Report, Cal. State Controller’s Off., https://www.sco.ca.gov/upd_how_to_report.html#:~:text=California%20Unclaimed%20Property%20Law%20requires,the%20property%20owner%20outreach%20process [https://perma.cc/6EZ2-LWQN].

      [161].     Id.

      [162].     Cal. Civ. Proc. §§ 1513.5, 1514, 1516(d), 1520(b).

      [163].     Malia M. Cohen, Notice to Owners, Cal. State Controller’s Off., https://sco.ca.gov/Files-UPD/SCONoticetoOwners.pdf [https://perma.cc/VL9G-SZAZ].

      [164].     Malia M. Cohen, Unclaimed Property, Cal. State Controller, https://ucpi.sco.ca.gov/en/Property/SearchIndex [https://perma.cc/K4E9-3XZ5].

      [165].     Malia M. Cohen, How to Claim Property, Cal. State Controller’s Off., https://www.sco.ca.gov/upd_claim_property.html [https://perma.cc/P4D6-9H9K].

      [166].     Cal. Civ. Proc. § 1501.5(c)(3).

      [167].     Ryan Miller, Unclaimed Property is 5th Largest General Fund Revenue Source, Legis. Analyst’s Off. (Feb. 10, 2015), https://lao.ca.gov/LAOEconTax/Article/Detail/58 [https://perma.cc/EU7Z-2HEK].

      [168].     Gavin Newsom, Governor’s Budget Summary 2022-23, State of Cal., 276 (Jan. 10, 2022) https://ebudget.ca.gov/2022-23/pdf/BudgetSummary/FullBudgetSummary.pdf [https://perma.cc/5MMA-7ECR].

      [169].     Legis. Analyst’s Off., The 2022-23 Budget: Overview of the Spending Plan, Legis. Analyst’s Off., (Oct. 12, 2022) https://lao.ca.gov/Publications/Report/4616#Major_Features_of_the_2022.201123_Spending_Plan [https://perma.cc/4LSB-BFGG].

      [170].     Malia M. Cohen, Standard NAUPA II Electronic File Format Codes & Dormancy Periods, Cal. State Controller’s Off., https://sco.ca.gov/Files-UPD/upd_naupa_II_codes_dormancy_periods.pdf [https://perma.cc/F2BN-66UJ].

      [171].     Cal. Civ. Proc. § 1501(c).

      [172].     Cal. Civ. Proc. § 1300(c)-(d).

      [173].     Id.

      [174].     Id.

      [175].     Cal. Civ. Proc. § 1501.5(c).

      [176].     Perhaps this Note is one such way to inform the general public of the existence of state unclaimed property databases. Try California here: Unclaimed Property, Cal. State. Controller’s Off., https://ucpi.sco.ca.gov/en/Property/SearchIndex [https://perma.cc/ZNH8-HHWQ] or search your previous states of residence to see if you have money waiting for you.

      [177].     Cal. Civ. Proc. § 384(b)(1).

      [178].     For example, the Legislature could refer to a 2017 version of the California Code of Civil Procedure Section 384(b)(1) that directed some unclaimed class action funds to the Trial Court Improvement and Equal Access Funds.

      [179].     Mkt. St. Ry. Co. v. R.R. Comm’n, 28 Cal. 2d 363, 372 (1946).

      [180].     Id. at 368.

      [181].     See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (finding that a class action arising under federal law cannot be certified unless the named plaintiff suffered the same harm as all other members of a class).

      [182].     See Millar & Coalson, supra note 38, at 544.