The 'Illusion of Compensation': Cy Pres Distributions in Canadian Class Actions
(2013) 92:2 Can Bar Review 173
37 Pages Posted: 22 Apr 2014 Last revised: 14 Jan 2015
Date Written: April 22, 2014
In both the U.S. and Canada, the now common use of cy près in the design of class action settlement distribution plans represents a radical transformation of the original cy près doctrine. Despite the facilitative role of class actions in aggregating claims, in some cases there may be no practical way to calculate or pay hundreds of thousands of small claims. In its current manifestation in class actions, cy près has become the mechanism by which aggregation of loss is effected. Cy près is therefore used not only to dispose of unclaimed settlement funds, but to avoid having class members claim a portion of the settlement at all. In this way, cy pres creates the "illusion of class of compensation” (to borrow Martin Redish's term), because the bulk of the class receives no compensation at all.
In this paper I critically and empirically examine the use of cy près in Canadian class actions, with references to developments in American cy près jurisprudence. First, I describe the origins and purpose of cy près in Canadian law. In Part II, I provide a taxonomy of the ways in which cy près has been used in class actions, and refer to illustrations of these categories in the case law. In Part III, I summarize and critique the various judicial approaches to cy près in Canadian class actions. In Part IV, I provide an empirical account of the use of cy près in Canada over the last two decades. It is, I believe, the most comprehensive collection of information regarding the nature and extent of cy près use in Canada. Finally, in Part V, I examine the policy questions surrounding cy près settlements identified in Redish's 2010 article, and conclude with observations about the use of cy près as it has developed in Canadian class actions.
Keywords: class actions, litigation, settlement, cy pres
JEL Classification: K00, K40, K41
Suggested Citation: Suggested Citation