The cy pres doctrine is a legal doctrine that allows the court to amend the terms of a settlement “as near as possible” to the original intent. For example, when legal actions filed on behalf of many plaintiffs (class action) or the public result in a settlement with a monetary award, it is sometimes impractical or difficult to distribute these funds. In some cases, these are residual funds which remain after distributions to class members (because some class members did not make claims or could not be located), and in other instances, these are funds designated for award where no initial direct distribution to the class or public was practical or possible. In both instances, funds may be designated as cy pres and used for purposes other than direct compensation to the injured class.
According to the California Supreme Court, in the precedent setting case which established the California Consumer Protection Foundation (CCPF), State of California v. Levi Strauss & Co., both the settlement fund and any remainder may be subject to fluid recovery, commonly called a cy pres action. Additionally, Section 384 of the California Civil Code of Procedure permits the court to distribute consumer class action cy pres funds to benefit the class or similarly situated consumers or to promote the law consistent with the underlying case.
There have been many positive benefits to consumers through use of cy pres funds, ranging from education projects on financial literacy to increasing access to the Internet. Criticism of the cy pres doctrine has arisen from a variety of sources primarily from defendants and others who object to what they consider to be improper distribution. In 2002, the California State legislature amended the California Code of Civil Procedure (C.C.P.) Section 384 to make it more difficult for the courts to approve general charitable contributions with cy pres funds. C.C.P. Section 384 governs distributions of residuals remaining from class action settlements after distributions to class members. It provides general standards, and then enumerates categories of permissible cy pres recipients. More recently, in 2010, the American Law Institute issued its final official Principles of the Law of Aggregate Litigation. Section 3.07 deals with cy pres settlement and proposes new criteria.