Cy Pres in TCPA Class Settlements: What Defendants Should Know
Claim rates in TCPA class settlements are often low, so a settlement has to say where the leftover money goes. Many use cy pres, a payment to a nonprofit whose work indirectly benefits the class. The Ninth Circuit requires that cy pres distributions “account for the nature of the plaintiffs’ lawsuit, the objectives of the underlying statutes, and the interests of the silent class members.” A poorly chosen recipient invites objectors and can sink approval, which costs a defendant time even when the settlement amount is fair.
What is cy pres in a class settlement?
A payment of settlement money to a nonprofit when the money can’t practically go to class members.
In Frank v. Gaos, 586 U.S. 485 (2019), the Supreme Court described cy pres as “the practice of distributing settlement funds not amenable to individual claims or meaningful pro rata distribution to nonprofit organizations whose work is determined to indirectly benefit class members.” In TCPA cases the issue usually comes up at the end: checks go uncashed or claim rates come in low, leaving a remainder that costs more to redistribute than it’s worth.
How do courts decide whether a cy pres award is proper?
They ask whether the settlement is “fair, reasonable, and adequate” under Rule 23(e)(2), and in the Ninth Circuit they apply a fit test to the recipient.
Every class settlement needs court approval under Federal Rule of Civil Procedure 23(e)(2), which requires a finding that it is “fair, reasonable, and adequate.” The Ninth Circuit’s leading cy pres decision, Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011), held that cy pres distribution “must be guided by (1) the objectives of the underlying statute(s) and (2) the interests of the silent class members.”
Nachshin reversed approval of awards to local Los Angeles charities and a national judicial group in a case about email services. The court found that the awards failed to “(1) address the objectives of the underlying statutes, (2) target the plaintiff class, or (3) provide reasonable certainty that any member will be benefit-ted.” It also faulted the awards for ignoring the class’s nationwide spread.
Did the Supreme Court settle whether cy pres-only settlements are allowed?
No. In Frank v. Gaos it took the question and then sent the case back on standing.
The Court granted review to decide whether a settlement giving “a cy pres award but no direct relief to class members” meets Rule 23(e)(2), according to the per curiam opinion. It didn’t answer. It vacated and remanded so the lower courts could address whether any named plaintiff had standing. The cy pres question remains open nationally, and objectors keep raising it.
For TCPA defendants that matters because a cy pres-only deal is an easy target. A settlement that pays class members first and sends only a residue to a nonprofit is far easier to defend.
How should a TCPA defendant structure the remainder clause?
Pay the class first, make cy pres a last resort, and pick a recipient tied to the TCPA’s purpose.
| Settlement term | Objection it invites | Safer drafting |
|---|---|---|
| Cy pres in place of class payments | Settlement isn’t fair, reasonable, and adequate under Rule 23(e)(2) | Direct payments to claimants, cy pres only for residue |
| Recipient unrelated to calls or privacy | Fails the Nachshin fit test | A nonprofit focused on consumer privacy or telephone fraud |
| Local charity for a national class | Doesn’t account for geographic spread | A national organization or one matching the class footprint |
| Recipient with ties to counsel or the defendant | Conflict of interest | Disclose ties, choose an independent recipient |
| Reversion of unclaimed funds to the defendant | Objectors argue it undercuts class relief | Address reversion openly in the approval papers |
A second distribution to claimants who cashed their first checks often beats cy pres when the remainder is large, and it removes the objection. And the recipient should be named in the settlement, not left to later agreement, so the court can test the fit at preliminary approval instead of after notice goes out.
Steps to take before signing a TCPA class settlement
- Preserve the call and text logs, platform data, and consent records for the class period under a litigation hold, since they define the class list.
- Pull the opt-out and internal do-not-call logs, with dates, to test the class definition.
- Pull the National Do Not Call Registry scrub records and version dates used.
- Collect vendor and lead-source contracts and scripts, including indemnity terms that may fund part of the settlement.
- Have a lawyer review the claim rate assumptions, the remainder clause, and the cy pres recipient before agreeing to terms.
Settlement design is part of TCPA class action defense, not an afterthought. Related posts cover individual TCPA settlement release terms and Rule 23(f) appeals of class certification.
Questions about cy pres in TCPA settlements
Does unclaimed TCPA settlement money go back to the defendant?
Only if the agreement says so and the court approves it. Many courts look skeptically at reversion clauses, and objectors attack them. Most TCPA settlements instead send residue to claimants in a second round or to a cy pres recipient. Defendants that want reversion should expect to justify it in the approval papers.
Can a TCPA settlement pay only cy pres and nothing to class members?
It’s risky. The Supreme Court agreed to decide that question in Frank v. Gaos and then didn’t reach it. In TCPA cases, where class members can usually be identified from call records, a court is likely to ask why they can’t be paid directly.
What makes a good cy pres recipient in a TCPA case?
An organization whose work relates to the TCPA’s objectives, such as consumer privacy or protection from unwanted calls and fraud, and whose reach matches the class. Under Nachshin, a recipient that doesn’t address the statute’s objectives or reach the class can doom approval.
Who picks the cy pres recipient?
The parties usually propose one and the court approves it. Disclosing any relationship between the recipient and counsel, the defendant, or the judge avoids a conflict objection late in the process.
Negotiating a TCPA class settlement
If your company is negotiating a class settlement of TCPA claims, the claim process and the remainder clause usually decide whether approval goes smoothly. Rosenberger + Kawabata represents businesses defending TCPA lawsuits and class actions through its business litigation practice, including class settlements of calling and texting claims. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
Federal Rule of Civil Procedure 23; Nachshin v. AOL, LLC, 663 F.3d 1034 (9th Cir. 2011); Frank v. Gaos, 586 U.S. 485 (2019); 47 U.S.C. § 227.
This post is general information about the Telephone Consumer Protection Act and related laws as of May 6, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Courts and the FCC change the rules in this area often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.