Donating Residual Funds to CII-REF
CII-REF encourages institutional investors and law firms involved in class-action lawsuits to consider requesting that courts designate CII-REF as the recipient of residual funds from settlements.
Organizations involved in securities class-action cases can advocate for CII-REF as the recipient of any residual funds. One practical and easy way is to notify CII when you become aware of any public information related to settlements of securities class action litigation.
In addition, when you are a member of the plaintiff class or plaintiff class counsel in a securities litigation case, you can communicate to the lead plaintiff or lead plaintiff counsel the reasons why CII-REF is an appropriate recipient of any residual funds.
What Are Residual Funds?
Residual funds are monies from a securities class action settlement that are directed by the trial court to be distributed to a non-profit entity instead of to the class, because it is too expensive to distribute to the claimants.
In securities litigation cases, claimants generally receive their payments in a multi-step distribution process. Through this process, some claimants cannot be located, or those who have been located fail to cash the checks that have been issued to them. Once the vast majority of the funds is distributed, it often becomes economically impractical to continue to make distributions; the cost per class member of distributing the remaining funds exceeds the amount each class member would receive.
When that point is reached, the court generally invokes the doctrine of cy pres to distribute class funds to a “next-best” recipient. Initially, courts sought to identify residual fund recipients whose interests and mission aligned with those of the class. More recently, trial courts have exercised their discretion more broadly in determining the residual fund recipient.
Naming CII-REF As a Residual Fund Recipient
Under any test, CII-REF, a 501(c)(3) non-partisan, tax exempt entity, is an appropriate recipient of residual funds. This is particularly true in securities class actions because CII-REF’s mission includes educating the general public about corporate governance issues relevant to the conduct giving rise to the claims and the harm suffered by class members.
Federal law presently favors the appointment of institutional investors, such as pension fund members of CII, to manage and oversee securities class action litigation. Once appointed by the court, the institutional investor’s authority includes identifying potential candidates to the court for receipt of residual funds. Although the court will make the final determination about where the money will go, the lead plaintiffs are significantly involved and will petition the court for final distribution of the funds.
From 2010-2017, lead plaintiffs have successfully obtained orders directing that CII-REF or CII receive residual funds totalling $1.15 million in cy pres awards. CII encourages that CII-REF be given priority for residual funds to further expand research available to the general public on corporate governance, shareholder rights, investment, capital markets, accounting standards and securities litigation.