Residual Claimant Filings
CII welcomes members and other organizations involved in class-action lawsuits to consider requesting that CII or the CII Research and Education Fund be the recipient of residual funds from class-action lawsuit settlements.
CII as a Residual Fund Recipient
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 that have been located fail to cash the checks that have been issued to them. Once the vast majority of the funds have been distributed, it becomes economically impractical to continue to make distributions because the cost per class member of distributing the remaining funds exceeds the amount each class member would receive.
When distribution of settlement funds to class members is impractical, the court generally invokes the doctrine of cy pres to distribute class funds to a “next-best” recipient. In early cases involving the cy pres doctrine, courts sought to identify residual fund recipients with interests and purposes aligned with the class. More recently, trial courts have been allowed wide discretion in determining the residual fund recipient.
Under any test, the Council of Institutional Investors would be an appropriate recipient of residual funds, particularly in cases where the Council’s values and goals have a significant relationship to the conduct giving rise to the claim and the harm suffered by class members.
How You Can Help
Effective corporate governance fosters transparency, accountability and market integrity. Any amount from a net settlement fund donated to CII or CII-REF would support programs and initiatives aimed at enhancing corporate governance and strengthening shareholder rights. We believe those programs and initiatives are closely aligned with the interests of class members of securities litigation who often suffer damages as a result of governance and transparency failures.
We ask that in those securities class-action cases in which your firm participates, you consider advocating for CII as the recipient of any residual funds. For more information or assistance, please contact Melissa Fader.