Code of Civil Procedure § 384 governs the disposition of unpaid residuals in class action lawsuits. When a claims-made settlement results in some of the checks being returned as undeliverable, and some of the checks are never cashed, the unpaid funds constitute "unpaid residue" required to be paid under Code of Civil Procedure § 384 to "nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons," notwithstanding the claims-made nature of the settlement. Cundiff v. Verizon California, Inc. (2008) 167 Cal.App.4th 718.
In Cundiff, the parties reached an agreement for a claims-made settlement. Some of the class members submitted claims, but then did not receive or did not cash their settlement checks. At the end of the administration, more than $400,000 in funds remained undisbursed. Verizon wanted that money returned to Verizon, to be treated as if the intended recipient of the uncashed checks had never submitted a claim in the first place. Instead, the money must go to a charitible organization.
Consider the possibility, however, that in wage and hour class actions, a different rule may apply. Code of Civil Procedure § 1513 provides that
“Subject to Sections 1510 and 1511, the following property held or owing by a business association escheats to this state: … (g) Any wages or salaries that have remained unclaimed by the owner for more than one year after the wages or salaries become payable.”
Adhering to that provision, it would appear that any unclaimed checks in a wage and hour settlement should escheat to the State of California’s unclaimed property program, at least to the extent that the checks represented wages.