Insight

Too Much Money and No One to Give it to- The Cy Pres Doctrine

Published on: May 8, 2017

What happens when someone leaves money in a will to a charity that has closed its doors by the time the will is probated? In this strange circumstance, a court may apply the “cy pres doctrine” to answer this question. Cy pres is a French term which loosely translates to mean “as near as possible.” In modern litigation, cy pres is not only used to distribute charitable donations, but also to distribute millions of dollars left over in class action settlements.

In the example above, a court may use cy pres to transfer the donated money to a charity similar to the one that had shut down. In class actions, there are often funds left over when not enough people register to receive money under a settlement. In this situation, the court will use cy pres to decide where this money goes; but that decision is a tricky one. Courts will sometimes direct these funds to a governmental entity loosely related to what the lawsuit was about. Other times these funds will go to a charity. Whatever the choice, there are usually complaints.

In one case, a nationwide class of AOL customers agreed to a settlement in a class action filed in California. Even though class members lived all over the country, the cy pres funds went to a legal aid office in Los Angeles, where the judge’s husband served as a director. This raised some eyebrows.

In another case, Kellogg’s settled a class action filed because its advertisements claimed that frosted mini-wheats improved kids’ brain power, which -sadly- turned out not to be true. Those cy pres funds initially went to a charity designed to feed the poor. However, the court later ruled that the funds should have gone to a group that protected the public from false advertising.

As more and more cases like these garnered attention, rules were passed as to how to distribute these funds. Generally, these rules require some connection between the issues in the lawsuit and the mission of the group that gets the funds. While the United States Supreme Court has yet to address these issues, Chief Justice Roberts recently indicated that the Court may be ready to put its stamp on cy pres.

We may be “as near as possible” to some clarity in the murky law of cy pres.

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Keogh Cox & Wilson, Ltd. provides this blog as a public service for general information only. The materials contained herein may not reflect the most current legal developments or even express the opinion of all or even most of Keogh Cox attorneys. Such material does not constitute legal advice or form any attorney-client relationship. Keogh Cox and all contributing author(s) expressly disclaim all liability to any person with respect to the contents of this Web site and Blog and expect that no reliance will be made upon the information provided.

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The Louisiana Legislature Overhauls the “Direct Action” Statute

For decades, Louisiana law provided a claimant or injured person an uncommon opportunity (1) to directly name an insurer in a lawsuit, and (2) to make the jury aware of the presence of insurance. This was known nationally as the “Louisiana Direct Action Statute.” This statute, embodied in LSA—R.S. 22:1269, has long been a topic of debate.

The Louisiana Legislature recently amended the “direct action statute” in Act 275 and declared that the injured person “shall have no right of direct action against the insurer” unless at least one of the exceptions applies: the insured files for bankruptcy, the insured is insolvent, service cannot be made on the insured, a tort cause of action exists against a family member, uninsured motorist claims, the insured is deceased, or when the insurer issues a reservation of rights or coverage denial (but only for the purpose of establishing coverage). The Act further provides that the insurer shall not be included in the caption of the case. And, the existence of insurance is not to be disclosed unless the Louisiana Code of Evidence requires it. This new legislation is effective August 1, 2024.

But, the Act also provides for new provisions that allow for the joinder of an insurer after settlement or in connection with a final judgment. The Act further includes specific provisions enacted to provide notice to an insurer of an action and outlines the procedures and timelines for how insurers assert reservation of rights or a denial of coverage.

The revisions to LSA—R.S. 1269 represent a significant change in how lawsuits involving insurance companies will proceed.

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What Mrs. O'Leary's Cow Has to Do With Spoliation

For more than a century, the debate has raged over whether Mrs. O'Leary and her famous cow truly started The Great Chicago Fire of 1871. Were the tragic events of that conflagration to happen today, someone would ask Mrs. O'Leary to produce the "RFID" chip in her bovine. (You know they would). They would contend that this key evidence could show the whereabouts and movement of the cow at the time the fire began. When she could not produce it, they would claim not only that she started the fire that destroyed a swath of Chicago, but that she also destroyed the evidence of her guilt. They would cry "spoliation."

"Spoliation" is the legal term for the improper destruction or alteration of evidence to prevent its use in litigation. It is also an ugly word and its presence in litigation can lead to ugly results. While this doctrine has existed in some form or the other for hundreds of years, understanding the concept may prove to be even more important now in a time when reams of documents can be stored on a "zip drive" smaller than a stick of gum and information can be maintained in a multiplicity of ways previously unthinkable.

To prove spoliation, a litigant must demonstrate that their adversary in litigation: (1) knew of a lawsuit or had a reasonable expectation that a lawsuit would follow; (2) failed to produce relevant evidence without an explanation; and, (3) participated in intentional conduct to alter, secret, or destroy the evidence. It is important to note that a defendant is not responsible under the doctrine of spoliation when the defendant’s failure to produce evidence is adequately explained.

A party who discovers that evidence has been spoliated has options. They may ask the court to enter an adverse presumption. If allowed, a court may instruct the jury that the missing or altered evidence would have been unfavorable to the party who destroyed it. Depending upon the nature and relevancy of the evidence, the court may have grounds to strike claims or defenses relevant to the evidence.

Another option is to file a formal claim against the party who spoliated the evidence. This type of claim alleges that the alleged “spoliator” impaired a party's ability to win or defend a law suit. In Louisiana, all five appellate circuit courts have recognized the tort of spoliation.

The issues surrounding spoliation have been magnified by technology. Meaningful information can now be found on almost anything: "smart refrigerators"; product sensors; a car's "black box" that may reveal the speed at the time of impact; SMS information on a phone, computer, or tablet; and on and on. Consider further the increasing scope of surveillance video recorded at businesses, schools, hospitals, and even homes, which is complicated by the fact that many systems automatically "write over" prior video in a matter of days, weeks, or months.

In short, it’s a good time for everyone to understand the doctrine of spoliation. The chance that some party will loudly proclaim that your spoliation of evidence adversely affected their case continues to increase. Being aware of the potential spoliation issues that may arise when a suit has been filed, or is expected to be filed, may save your case. It may also save you the time, money, and distraction involved in defending a claim that you have spoliated key evidence.

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Creating Obstacles to Frivolous Claims

The costs of litigation can be substantial, but a seldom used statute arms defendants with a tool to minimize these costs. If a defendant has not filed another pleading, La. R.S. 13:4522 allows the defendant to request that a court order the plaintiff to post a bond as security to cover certain costs. If the plaintiff fails to post this security in the time fixed, his case will be dismissed without prejudice.

The security identified in this statute can include expert witness fees, deposition costs, exhibit costs, and other related expenses. The defendant bears the burden of showing the amount needed for proper security. If a plaintiff’s damages are questionable, or preliminary investigation shows that the plaintiff might be apportioned most of the liability for the incident, the attorney filing the suit may think twice before pursuing the claim further, especially if a substantial amount of security is ordered.

By its terms, the statute does not apply to cases brought in forma pauperis. It also does not apply to claims filed in the Parish of Orleans. Everywhere else, the provisions of La. R.S. 13:4522 can add a layer of protection in the defense of frivolous claims.

John Grinton is a Keogh Cox associate whose practice areas include commercial and construction litigation. When not practicing law, John spends most of his time with his wife and son, and their two dogs.