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Ripple of Hope: Cy Pres funds make great impact on Access to Justice

By Alissa Chambers
Executive Director, Montana Justice Foundation

Everything we do creates a ripple.  This article celebrates the ripple of hope that flows from the choices of three Montana law firms whose contributions to access to justice initiatives will be felt for generations to come.  In the midst of a volatile economic landscape and the impending global recession, attorneys John Heenan (Heenan & Cook, PLLC, Billings) and David Paoli (Paoli Law Firm, Missoula) orchestrated a groundbreaking $1.5 million cy pres contribution to MJF in 2023.  John Morrison (Morrison Sherwood Wilson & Deola, Helena) directed two residual fund settlements totaling over  $130,000 to the Montana Justice Foundation and $100,000 in additional funds to Montana Legal Services Association (MLSA) and Montana CASA/GAL in the past year.  These cy pres funds, coupled with the unwavering support of the Montana legal community, have empowered nonprofit organizations across the state to ensure access to justice for those who might otherwise have been left voiceless and vulnerable.  

Civil Legal Issues’ Impact on Low-Income Montanans

With poverty rates soaring in 2022, backlog of Montana court dockets resulting in significant delays to resolution of matters impacting families, and housing costs at an all time high, the need for sustainable, adequate funding for civil legal aid is of critical importance.  Low-income Montanans face daily barriers to necessities such as food, shelter or safety.  When a civil legal crisis arises, those barriers multiply.  Studies show that a substantial majority of low-income Americans face one or more civil legal issues in a year.  Individuals dealing with domestic violence or eviction are likely to have five or more civil legal issues occurring simultaneously. Civil legal issues like eviction, denial of public benefits or employment disputes can have a direct impact on an individual’s ability to meet basic needs like housing, food and healthcare. Moreover, legal crises typically intersect with non-legal issues such as mental illness, substance abuse, disabilities, economic barriers, transportation and child care.  For too many Montanans, lack of access to the civil legal justice system can create or perpetuate cycles of poverty and disadvantage.  

Civil Legal Aid Funding in Montana

Although the majority of states provide direct state funding for general civil legal aid, Montana does not.  By and large, federal financial support for access for civil justice is accomplished through the Legal Services Corporation (LSC).  MLSA, Montana’s only statewide non-profit law firm for low-income people, is funded primarily through LSC funding.  LSC funding is determined through the federal budgetary process, making it subject to the political and fiscal priorities of the government, which can change from year to year based on various factors and political priorities.  Given the challenges with LSC funding, supplementary funding sources became necessary.  In the 1980s, Interest on Lawyer Trust Account (IOLTA) programs were established to generate funds for civil legal aid by pooling interest earned on lawyers’ trust accounts, which typically hold client funds temporarily or in nominal amounts.  IOLTA accounts generate interest on these pooled funds, providing a continuous revenue stream for civil legal aid that is tax free to the clients and the lawyers.

The interest on IOLTA accounts, individually, are nominal, but when pooled together can make a meaningful difference for civil legal aid funding. 

IOLTA and LSC funding work in tandem to support civil legal aid.  IOLTA acts as a supplemental, state-level funding source, while LSC provides federal funding.  MJF, as Montana’s IOLTA administrator, contributes 100% of the interest earned on IOLTA accounts back to MLSA and other access to justice nonprofit organizations in the form of grants.  In addition to supporting and maintaining MLSA direct legal services with MJF grants, MLSA leverages MJF funds to maximize the effectiveness of its services, using them to provide a critical match to encourage other funders to step in and to engage in certain activities for which LSC and other grant funds are restricted. For example, MJF funding helps match AmeriCorps State funding for the Justice for Montanans program, which is an essential part of MLSA’s ability to provide direct services to clients, and support other access to justice efforts around the state like the Court Self-Help Centers.  In 2022, MLSA leveraged MJF funding to handle 4,949 cases, assisting 12,137 clients and their families with public benefits, housing, and domestic violence matters.

Unfortunately, fluctuating interest rates and economic conditions make IOLTA funding a less predictable and consistent source of funding for civil legal aid.  2009 exemplifies the challenges of both LSC and IOLTA funding for civil legal aid:  In December of 2008, the Federal Reserve slashed federal benchmark rates to an historical low of .25-0.0% range, resulting in a near leveling of IOLTA interest rates.  In 2009, IOLTA revenue was reduced by more than 60% over the previous fiscal year and IOLTA grants reflected the reduction.  Record low IOLTA funding and cuts to LSC funding from 2009-2012 forced MLSA to restructure its service delivery model, reduce staff and drastically reduce legal representation in dissolutions and parenting plans.  New pathways for sustainable funding for civil legal aid was vital.

Residual Fund Awards

Enter cy pres, or residual fund awards, as the hero of the hour.   The cy pres doctrine in the context of class action litigation has been an effective way to enhance revenue for funding civil legal aid.  At the conclusion of a class action, after class members’ claims are paid, there is often an amount remaining because members of the class could not be located, not all members of the class collect their portion of the award, or it is not possible to determine each plaintiff’s actual damages or share of the settlement fund. Under the doctrine of cy pres, Montana law and Montana Rules of Civil Procedure, at least 50% of residual funds remaining in class action matters are allocated to an access to justice organization, such as MJF and nonprofits funded by MJF.   

In Montana, 2012 heralded the age of a game-changing cy pres award of over $1.2 million contributed to MJF as a result of inspired action by attorney and MJF board member, John Heenan, in partnership with the Montana Commissioner of Securities and Insurance office.  The 2012 award, received during Montana’s recovery from an economic recession, not only facilitated MJF’s sustained support for its diverse programs, but also seeded the MJF reserve fund. Demonstrating foresight, MJF board members allocated a significant portion of this money into a reserve fund that was established for the purpose of sustaining and stabilizing grant funding for civil legal aid program grantees in the event of a decline in future IOLTA or other revenues.  The seed money planted back in 2012 has flourished over the past decade, resulting in substantial growth through astute investment strategies and sound financial management practices.  

In 2023, attorneys John Heenan (Heenan & Cook, PLLC) and David Paoli (Paoli Law Firm) brought word of another residual fund award that made our jaws drop- in the amount of $1.5 million. These residual funds stem from a class action lawsuit against a Montana healthcare company, citing a data breach impacting hundreds of thousands of Montana patients. Notably, the plaintiff class in this case exceeded 200,000 individuals.  “This class action lawsuit provided an essential avenue for patients to seek justice, hold the healthcare institution accountable, and drive systemic improvements in data security, ultimately ensuring that patients’ trust and privacy remain paramount in the healthcare system,” said David Paoli.  David told me he went to law school to help people and class actions such as this one allow him to do just that.  Paoli also expressed that he has learned over the course of his career that every action we take as lawyers has a ripple effect, for good or bad.  

Helena attorney John Morrison recently directed $100,000 in residual funds to MJF, along with additional contributions to MLSA and Montana CASA/GAL. These funds stem from a successful legal case chaired by Morrison, benefiting over 2,600 Montana businesses. This marks Morrison’s second residual fund donation to MJF in the past year.  MJF’s ability to weather uncertain times ahead and sustain its mission has a brighter forecast thanks to the actions and choices of these lawyers.

The contributions by Heenan, Paoli and Morrison enabled MJF to fund a dedicated consumer protection attorney at MLSA for the next three years.  It is fitting that John Heenan played a large part in funding this position.  When asked what drives his work, John Heenan explained that his passion for the law stems from a genuine concern for people and a desire to advocate on their behalf, recognizing the law as a potent means to champion his values. MLSA’s consumer protection attorney is committed to standing up for individuals against formidable adversaries, symbolized here by a few prominent regional debt buying companies initiating the majority of debt collection actions in Montana courts.  These cy pres funds also enabled MJF to double its grant awards from the prior year.  In the summer of 2023, MJF awarded over $600,000 in grants to over 18 organizations such as CASA programs, domestic violence shelter legal programs, the Senior Defense Fund conducting will clinics and other services to the elderly, mediation programs, MLSA and other organizations.  The ripple effect from the 2023 cy pres award will be felt for generations to come.  This is a legacy to be proud of.

MJF is committed to being responsible stewards of the trust you placed in our organization and will continue to work tirelessly to ensure that every dollar from these transformative contributions is used efficiently and effectively, maximizing its impact on those who need it most.  If you or your law firm are interested in learning more about cy pres contributions and resources available for lawyers directing residual funds to access to justice organizations, please contact Alissa Chambers at