Class action rule change can benefit Hawaii nonprofits

From Hawaii Access to Justice Commission

An amendment to Rule 23 of the Hawaii Rules of Civil Procedure could make significant funding available to support the work of nonprofit legal services providers. The amendment, adopted by the Hawaii Supreme Court effective July 1, directs the distribution of residual funds in class action cases.

In cases when class members no longer exist, cannot be located or do not submit required claim forms, the amendment provides that the amount payable to such class members be determined and an order issued for the payment of these residual funds.

The distributions can now go to nonprofit tax-exempt organizations that provide legal services to indigent persons or to the Hawaii Justice Foundation for distribution to one or more such organizations. The court will approve when and how to distribute these residual funds, as agreed to by the parties.

The amendment to Rule 23 operates in a manner similar the doctrine of cy pres, which means “as near as possible.” The cy pres doctrine was developed as a means of distributing a trust fund whose primary purpose could not be fulfilled, such as where the designated trust beneficiary was no longer in existence.

“Distribution of residual funds to nonprofit organizations that are eligible to receive funding for the services they provide in helping individuals achieve access to the justice system serves a purpose that is very similar to the purpose served by the class action procedure — i.e., both enable individuals who could not otherwise do so to vindicate their legal rights,” said David J. Reber, member of the Administration Committee of the Hawaii Access to Justice Commission who worked on the amendment proposal.

“Nonprofit organizations providing access to justice have been presented with financial challenges, with severely reduced state, city, federal, and private contributions, while needs continue to grow for those they serve,” said Associate Judge Daniel R. Foley, chair of the Hawaii Access to Justice Commission. “Providing increased funding to support the efforts of these organizations will serve a compelling public purpose.”

This procedural rule would not override any provision of substantive law that would require a contrary disposition of the residual funds. The rule was designed to apply only in those cases in which the court approves or authorizes the creation of residual funds.