MICHIGAN STATE PLANNING BODY...Aug 27, 2019  · lawsuits”. The proposed rule will not politicize the cy pres process—indeed, by creating a default recipient of cy pres funds,

MICHIGAN STATE PLANNING BODY

15 S. Washington Street Ypsilanti, Michigan 48197 (734) 665-6181

August 27, 2019

Larry S. Royster

Michigan Supreme Court Clerk

P.O. Box 30052

Lansing, MI 48909

[email protected]

Re: ADM File # 2018-02

Cy Pres Rule

Dear Mr. Royster,

We are writing to comment on this proposed rule on behalf of the Legal Services Association of Michigan (LSAM)

and the Michigan State Planning Body (MSPB). We are writing in support of the rule.

The proposed rule would amend MCR 3.501 to provide that in determining the distribution of residual funds in a

class action case, unless a court designates another recipient of funds that is directly or indirectly connected to the

interests of the class, 50% of those residual funds will be distributed to the Michigan State Bar Foundation to

promote access to the civil justice system for low income residents of Michigan.

This rule amendment was proposed by LSAM and MSPB through a December 2017 letter to the State Court

Administrator. Our initial letter in support of the rule is attached as Ex. 1. We’re writing to suggest clarifying edits

to the rule as proposed and to respond to some of the questions raised in Justice Markman’s concurrence with the

Order publishing the rule for comment.

A. Proposed revised rule language. The rule as initially suggested by LSAM and the MSPB was modified in the

publication process. The proposed rule as published is internally inconsistent—it creates a requirement that at least

50% of residual funds be transferred to the Michigan State Bar Foundation—and then permits courts to ignore that

requirement.

We are now suggesting language that eliminates this conflict—by: defining “residual funds”; recognizing a court’s

authority to designate such funds to a non-profit that has a direct or indirect relationship to the underlying litigation;

and, absent such a designation, identifying the Michigan State Bar Foundation as the recipient of at least 50% of

such residual funds. The proposed rule language is attached as Ex. 2.

B. Response to concerns raised by Justice Markman.

1. The proposed rule is consistent with ABA guidance and rules in other states. The proposed amendment to

MCR 3.501 does not create a new legal or policy approach to the distribution of residual cy pres funds. The

proposed amendment tracks ABA Resolution 104 of 2016 and rules that are in effect in 21 states. See Attachments

1 and 3.

2. The rule does not change underlying class action law in Michigan. Justice Markman’s concurrence begins

with his observation that Michigan’s current class action system is “reasonable and responsible”. The proposed rule

doesn’t change that system. Under the current system, a class action suit may result in a damage judgment through

which a pool of funds is designated for distribution to class members. After class member claims are processed,

there may be residual funds which are distributed through a process negotiated by the parties and/or ordered by the

court. Such funds are to be distributed for a purpose related to the rights involved in the underlying litigation or in a

manner that otherwise promotes the interest of the class (the “cy pres” doctrine). None of these elements of the

current system are changed by the proposed rule.

Co-Chairs:

Hon. Judith E. Levy

U.S. District Court

Eastern District Of Michigan

Angela R. Tripp

Co-Executive Director

Michigan Statewide Advocacy Services

Agenda Committee:

Bob Gillett

Michigan Advocacy Program

Hon. Elizabeth Hines

15th District Court

Hon. Denise Page Hood

U.S. District Court

Eastern District of Michigan

Ashley Lowe

Lakeshore Legal Aid

2

What the proposed rule does is provide guidance to courts—unless another recipient of cy pres funds is

identified by the court based on the specifics of the litigation, at least 50% of the funds will be disbursed to

the Michigan State Bar Foundation (MSBF). The proposed rule merely adds a detail to the tail end of

Michigan’s “reasonable and responsible class action system”.

The proposed rule will not expand the use of class actions in Michigan; nor will it encourage “noninjury

lawsuits”. The proposed rule will not politicize the cy pres process—indeed, by creating a default recipient

of cy pres funds, the proposed rule both provides guidance to litigants and courts (who may only handle a

small number of class actions and who may not be familiar with the cy pres doctrine) and de-politicizes the

process. Similarly, the proposed rule will make appellate review of cy pres awards easier, not harder—

since the proposed rule creates a standard to judge the appropriateness of an organization designated as the

recipient of residual funds.

3. The Michigan State Bar Foundation is the appropriate recipient for these funds. A number of

Justice Markman’s questions have to do with the appropriateness of the Court determining “which public

and charitable programs and activities will become recipients” of cy pres funds.

First, we note that courts already are required to perform this task under current cy pres rules—the

proposed rule merely provides guidance to trial courts in carrying out this obligation.

Second, we note that designating the MSBF is not simply “choosing a charitable program”. The designation

of the MSBF in the rule reflects two unique attributes of the relationship between the Michigan court

system and the MSBF. (a) From the Court’s point of view, the provision of access to court system for low

income persons is not one of a myriad of competing worthy charitable activities—it is a core court system

function. See, e.g., Conference of Chief Justices and Conference of State Court Administrators Joint

Resolution 5 (2015) recognizing a court system goal of 100% access. This Court has repeatedly expressed

its support for the goal of access to justice. (b) Both this Court and the Michigan legislature have repeatedly

recognized the MSBF as the vehicle for providing access to justice in Michigan—see MRPC 1.15 (creating

the Interest On Lawyer Trust Account (IOLTA) program and designating MSBF as the administrator of

those funds); and MCL 600.1485 (designating the MSBF as the administrator of the portion of state filing

fees allocated to provide civil legal aid to the poor).

We do not view the proposed rule as choosing among equal competing charities—we see the rule as

consistent with and building upon this Court’s longstanding commitment to provide access to the court

system for low income residents of the state and its longstanding designation of the MSBF as the

administrative vehicle to achieve that Court goal.

4. National policy discussions regarding cy pres. We’re aware of the national debate about cy pres

rules—see, e.g., Chief Justice Roberts’ statement in Marek v. Lane, 571 US 1003, 1006 (2013); see,

Boies, Wilber and Keith, Latonia, “Class Action Settlement Residue and Cy Pres Awards: Emerging

Problems and Practical Solutions”, Virginia Journal of Social Policy and the Law, Vol. 21, No. 2, 2014.

Many of Justice Markman’s questions sound themes that have been raised in this debate.

This debate should not impact this Court’s consideration of the proposed rule. The rule is a relatively minor

change to Michigan’s “reasonable and responsible” class action system. There may be changes to the

overall cy pres doctrine at some point in the future; those changes might impact the application of this

rule—or not. This Court shouldn’t delay its consideration of the proposed rule based on actions that might

be taken by other courts or non-court bodies in response to other cases or proposals.1

1 We note that Judge Robert’s statement was made 6 years ago. While the comment helped engender an

active national debate about cy pres, the basic law governing cy pres has not changed in that time.

3

C. Conclusion.

We thank the Court for taking up and considering our proposal. We urge the Court to adopt the proposed

rule with the amendments suggested in this letter. We would be happy to respond to any questions or to

provide additional information to the Court.

Respectfully submitted,

Ann Routt Pamela Hoekwater Angela Tripp Bob Gillett

Ann Routt Pam Hoekwater Angela Tripp Bob Gillett

Legal Services Association of Michigan Michigan State Planning Body