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Class Action Residuals Civ Pro Rule Change: Your Input Is Wanted

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By Aditi Mukherji, JD on August 19, 2013 3:55 PM

The Supreme Judicial Court's Rules Committee would like you to weigh in on proposed amendments to Rule 23(e) of the Massachusetts Rules of Civil Procedure.

The proposed amendments would require that at least fifty percent (50%) of class action residual funds be given to the Massachusetts IOLTA Committee to "support activities and programs that promote access to the civil justice system" for low income Massachusetts residents, according to the notice.

Class Action Residuals

In 2008, the Supreme Judicial Court amended Rule 23 and recognized that residual funds in class actions can be disbursed -- in whole or in part -- to help low-income people access the civil justice system. From January 2009 to April 2013, the IOLTA Committee received $149,000 in class actions residuals from Massachusetts courts, according to the Committee letter.

The IOLTA Committee wants to add a percentage requirement that at least 50% of the class action residuals go to them and, in turn, to legal organizations.

Tough Times

The IOLTA program is historically the largest funding source of civil legal aid, but it's taken a crippling blow with a 78% decline since 2008, and it's only expected to get worse, according to the letter. Making matters worse, legal aid programs have had their grants cut by 54%. The IOLTA Committee is hoping to use the class action residuals to lessen the losses.

Charity Preference

Don't worry, the proposed rule won't get in the way of your class action practice, or with the way you craft and propose settlements. It's more a question of whether you like being able to choose where your residual funds go.

The Massachusetts IOLTA Committee, which receives all interest earned on IOLTA accounts, distributes all of its available funds to three charitable entities:

  • Boston Bar Foundation (7%)
  • Massachusetts Bar Foundation (26%)
  • Massachusetts Legal Assistance Corporation (67%)

The proposed rule would prevent you and your clients from allocating all of the residual funds to charities of your or your clients' choosing. So if you have particular charities you'd like to devote your class action residuals to, then this proposed rule may not be ideal for you.

Other States Do It

With California being the trailblazer, ten states (including Massachusetts) allow courts to disburse class action residual funds to legal aid organizations.

Five of those states -- North Carolina, South Dakota, Pennsylvania, Indiana and Washington -- have gone further and require at least a minimum percentage of residual funds be disbursed for low-income legal aid.

The proposed rule is modeled after the rule in Washington, which requires 25% be disbursed to the Legal Foundation of Washington.

Contact Information

Send your comments to Christine P. Burak, Secretary, Supreme Judicial Court Rules Committee, Supreme Judicial Court, John Adams Courthouse, One Pemberton Square, Boston, MA 02108 on or before September 6th, 2013. You can also email your comments to christine.burak@sjc.state.ma.us.

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