Nonprofits Could Be Winners in Class-Actions

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June 17, 2011; Source: Star Advertiser | Class-action lawsuits typically reward plaintiffs' lawyers and their clients. But under a rule adopted in Hawaii a class of nonprofits who aren't even parties to such lawsuits stand to share in future victories. Effective July 1, thanks to an earlier ruling by the state Supreme Court, money left over from class-action lawsuits will be disbursed to nonprofits that provide legal services to the poor.

In the past, if plaintiffs in a case couldn't be found or they didn't file a claim, defendants would ask the courts to return the residual funds. The new rule was recommended by the Hawaii Access to Justice Commission, a group working to increase access to civil courts for low- and moderate- income residents.

"Nonprofit organizations providing access to justice have been presented with financial challenges with severely reduced state, city, federal and private contributions, while the needs continue to grow for those they serve," said Daniel Foley, chairman of the commission and a state appeals court judge. "Providing increased funding to support the efforts of these organizations will serve a compelling public purpose."

No one knows how much money might be might available after lawyers, their clients and expenses are paid in future class-action suits, but Honolulu attorney David Reber, who worked on the rule, told the Star Advertiser that the potential disbursements could be "substantial."

Hawaii joins a handful of other states that have similar rules or laws. The newspaper notes that in Illinois alone, leftover funds from class-action cases have totaled some $3 million over the years.—Bruce Trachtenberg