The term "cy pres" originates from old Norman French meaning "as near as possible". The cy pres doctrine found its legal roots in charitable trusts: if a donor's trust document contains an impossible, impracticable, or illegal objective, courts are given the power to amend the trust, keeping as close to the donor's original intent as possible.
The cy pres doctrine has recently expanded its reach to apply to class action distributions or grants as well. If a nonprofit's mission parallels the interest of the class action plaintiff class, it may be entitled to receive a portion of unclaimed settlement funds. This is referred to as cy pres awards, which the California Supreme Court endorsed in 1986.
Cy pres awards in the class action context are available in limited situations. Courts will usually distribute class action settlements to charitable organizations when recovery for class members is impossible or impracticable, if class members are difficult to identify, or if unclaimed funds remain after all class members have received their portion of the settlement.
Before a court approves a class action award, it undergoes a multitude of deliberations, one of which is whether or not a cy pres award will be included. Further, it considers which organizations might be eligible to receive the award. Those organizations that clearly present a mission statement and organization purpose in the public space, such as on a website, are more likely to be selected to receive the award due to ease of administrative process (if the organization's goals meet the award criteria). Some organizations even explicitly state on their websites why they would be excellent candidates for a cy pres award. The more familiar courts and class action attorneys are with the organization, the more likely it will be nominated for a cy pres award.
You can read more about the legal foundations of the cy pres doctrine in the IRS Publication The Cy Pres Doctrine: State Law and the Dissolution of Charities here.
- Taleen Alexander