Cy pres is a legal doctrine allowing courts to modify the terms of a charitable trust when the original intent cannot be fulfilled. It can also be applied to redistribute unclaimed funds from class action lawsuits. The court substitutes a similar charitable object and must represent the original purpose. Critics argue judges should not spend other people’s money without restrictions.
Cy pres is an equity courts legal doctrine that allows the court to change the terms of a charitable trust when the underlying charitable intent of the testator cannot be completed as stated. Rather than allowing the charitable donation to fail, the written instrument can be modified so that the funds are used in a similar and executable manner. The French term literally means “as close as possible” and its application has been broadened in the United States to include redistribution of settlements in class action lawsuits and charitable trusts. Some jurisdictions in England, Wales and Scotland have also maintained the doctrine.
In applying the doctrine of cy pres, the court will substitute a similar charitable object for the original one which is no longer possible to fulfill. The new charitable item should represent the original charitable purpose of the gift. The doctrine can also be applied when the testator bequeaths funds for charitable purposes in general without indicating a beneficiary, forcing the judge to choose one. The underlying legal theory is that a court has the power to amend a charitable trust to prevent it from going out of business.
A famous American case from Cyprus is Jackson v. Phillips, decided by the Massachusetts Supreme Court in 1867. The Bostonian testator died in 1861 and created a monetary gift to be used to help change public opinion about slavery. This purpose became impossible to carry out once slavery was abolished in 1865. The court changed the trust so that the remaining money could be given to needy former slaves living in the Boston vicinity.
Courts do not automatically apply the doctrine every time a charitable trust is in danger of failing. The trust may fail if the testator desires a specific purpose which cannot be replaced by another without straying too far from the original intent. There is not even a general bequest for charity in these cases. The presumption is that the testator would rather bankrupt the trust than divert funding elsewhere.
Controversially, the doctrine has been applied by US courts to facilitate the redistribution of unclaimed monies from class action lawsuit settlements. When an agreement is reached, many members of the class may no longer be traceable or may be deceased. As a result, a large amount of settlement money intended to benefit the class goes unclaimed.
Instead of returning the money to the defendant, the court can enforce the summons and distribute the funds to a charity that could help class members. In Masters v. Wilhelmina Model Agency, a judge presiding over a 2007 class action involving fashion models in New York redistributed unclaimed funds to programs she believed would benefit class members. After two days of interviewing potential beneficiary organizations, the judge selected programs that addressed eating disorders and drug abuse.
This use of cypress is the subject of much debate in the American legal field. While some applaud the use of unclaimed funds to help local charities and communities, others see a danger in allowing judges to spend other people’s money without restrictions. Rather than handing out the unclaimed funds to charity, some critics suggest simply allocating a larger share to locatable plaintiffs.
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