IN THE MATTER OF THE ADOPTION OF THE AMENDMENT TO CR 23

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ORDER NO. 25700-A-820

     The Washington State Bar Association, the Legal Foundation of Washington and the Access to Justice Board having recommended the adoption of the proposed amendment to CR 23, and the Court having approved the proposed amendment for publication;

     Now, therefore, it is hereby

     ORDERED:

     (a) That pursuant to the provisions of GR 9(g), the proposed amendment as attached hereto is to be published for comment in the Washington Reports, Washington Register, Washington State Bar Association and Office of the Administrator for the Court's websites expeditiously.

     (b) The purpose statement as required by GR 9(e), is published solely for the information of the Bench, Bar and other interested parties.

     (c) Comments are to be submitted to the Clerk of the Supreme Court by either U.S. Mail or Internet E-Mail by no later than 90 days from the published date. Comments may be sent to the following addresses: P.O. Box 40929, Olympia, Washington 98504-0929, or Lisa.Bausch@courts.wa.gov. Comments submitted by e-mail message must be limited to 1500 words.

     DATED at Olympia, Washington this 2nd day of June 2005.

	For the Court
	Gerry L. Alexander Chief Justice

     The suggested amendment to CR 23 creates a new section (f), which will provide direction to parties and trial court judges relating to the disposition of residual funds in class action proceedings. As defined in the suggested rule, these residual funds are "funds that remain after the payment of all approved class member claims, expenses, litigation costs, attorneys' fees and other court approved disbursements to implement the relief granted." Although class action matters frequently result in the creation of residual funds, CR 23 does not currently provide direction with respect to how such funds should be managed and disbursed. The suggested amendment fills this regulatory gap.

     Historically, in the absence of direction from the rule itself, trial courts have exercised their powers in equity to award residual funds on a discretionary basis. This form of equitable distribution has become known as the cy pres doctrine. Courts have applied this doctrine to direct payment of residual funds to charitable organizations whose objectives have some connection with the interests of the class as a whole.

     The suggested amendment will direct payment of twenty-five percent of residual funds in any class action to the Legal Foundation of Washington, which administers Interest on Lawyer's Trust Accounts (IOLTA) and other funds in support of legal and educational programs for low-income persons in Washington State. In so doing, the suggested rule will codify and refine the judicially developed cy pres doctrine in a way that is consistent with its equitable purpose and which will serve the compelling interest in ensuring equal access to justice.

     The suggested amendment is designed to apply only in those cases in which the parties and the court have authorized the creation of residual funds. It does not alter the ability of parties, subject to court approval, to formulate settlements that leave no residual funds remaining for distribution. Thus, the suggested amendment will only affect cases where, after the expiration of a claims period, residual funds in fact remain after payment of all class-member claims, authorized costs, expenses, attorneys' fees, and other obligations.

     (a) - (e) [Unchanged.]

     (f) Disposition of Residual Funds.

     (1) "Residual Funds" are funds that remain after the payment of all approved class member claims, expenses, litigation costs, attorneys' fees, and other court-approved disbursements to implement the relief granted. Nothing in this rule is intended to limit the parties to a class action from suggesting, or the trial court from approving, a settlement that does not create residual funds.

     (2) Any order entering a judgment or approving a proposed compromise of a class action certified under this rule that establishes a process for identifying and compensating members of the class shall provide for the disbursement of residual funds. In matters where the claims process has been exhausted and residual funds remain, not less than twenty-five percent (25%) of the residual funds shall be disbursed to the Legal Foundation of Washington to support activities and programs that promote access to the civil justice system for low income residents of Washington State. The court may disburse the balance of any residual funds beyond the minimum percentage to the Legal Foundation of Washington or to any other entity for purposes that have a direct or indirect relationship to the objectives of the underlying litigation or otherwise promote the substantive or procedural interests of members of the certified class.

     Reviser's note: The brackets and enclosed material in the text of the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.

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