What Happens to Unclaimed Class Action Money?

A court divides a settlement in a class action suit among many individual recipients. The court attempts to contact each person so that he can claim this money, but sometimes the court cannot find a recipient, or he doesn't send in a claim. According to "The Judge's Journal," the court can also decide not to send a settlement if the recipient would receive a tiny claim, such as 10 cents, which is less than the cost of postage to mail the notification letter. The court has a lot of flexibility in deciding what to do with the unclaimed class action money.

The court combines all of the class action money into a fund while it determines who is eligible to receive payments. After the court sends out the money to each recipient it can find, there may still be a large amount of money in the fund. According to "The Judge's Journal," in one case where a company paid out a $100 million settlement, there was $32 million left over after the court awarded claims.

A state can donate some of the unclaimed money in the fund to a charity. Illinois law allows the court to give the money to a nonprofit charity. A qualifying charity must meet eligibility requirements, such as filing tax returns as a nonprofit for several years and performing a service that the court approves of. Several charities may receive a portion of the unclaimed funds.

Each state keeps a record of unclaimed property, including cash as well as other property. When the state knows the name of the class action recipient, the recipient has a limited amount of time to submit a claim to the state Treasurer. If she does not submit a claim during this time period, which Utah sets at 1 year for a class action award, the state keeps the unclaimed money.

A court can return the class action money to the defendant. The court can order the defendant to reduce the price it charges for its products in proportion to this refund, to ensure that the firm does not gain any income from the refund. According to "The Judge's Journal," this type of decision can give the defendant a competitive advantage, since the firm must sell its products at a low price that its competitors may not be able to match to remain profitable.

The point of the class action award is to protect wronged consumers, so the court may use the money to set up an organization to protect consumers. A large settlement can be used to create a consumer trust fund, which pays lawyers to research class action law and helps lawyers file other class action lawsuits.