Opinion ID: 1681614
Heading Depth: 2
Heading Rank: 5

Heading: Application of the Doctrine of Cy Pres to the Fund

Text: Our previous disposition of the issue of improper venue requires reversal of the trial court's application of the doctrine of cy pres to the fund as to the claims against Homewood, Mountain Brook, Trussville, and Vestavia Hills, and a remand for further proceedings in the event those claims are transferred to the Birmingham Division. The appeal by the Bessemer Division Cities requires consideration of their argument that the doctrine of cy pres is inapplicable because of the absence of difficulty in ascertaining a class of beneficiaries. The consumers who paid the cigarette tax are smokers or tobacco users. Common sense suggests that the bulk of the people who paid this tax reside in Jefferson County. Because of the difficulty in ascertaining the identity of the taxpayers, the trial court awarded the fund to Cooper Green Hospital, the entity responsible for providing indigent health care in Jefferson County for tobacco-related illnesses. A representative of Cooper Green Hospital testified that in a 10-year period this charity hospital had expended $16,302,000 treating indigent victims of tobacco-related diseases. The representative stated that the Hospital would use taxes illegally collected by the municipalities to treat indigent patients with tobacco-related diseases such as emphysema, cancer, and chronic obstructive pulmonary disease, along with other diseases such as heart disease and diabetes. In their opening brief, the Bessemer Division Cities contend that Cooper Green Hospital has no relationship with the consumers who paid the tax. For the first time in their reply brief, the Bessemer Division Cities argue that, assuming that the doctrine of cy pres is applicable, the fund should be awarded to all the school systems located in the cities that enacted the tax to educate children against smoking. We decline to consider an argument made for the first time in a reply brief. See Byrd v. Lamar, 846 So.2d 334, 341 (Ala.2002), noting the settled rule that this Court does not address issues raised for the first time in a reply brief. Because we conclude that a rational connection exists between consumers who paid the tax and Cooper Green Hospital, we consider only the question as to the applicability of the doctrine of cy pres. The Bessemer Division Cities argue that the identity of the beneficiaries of the fund is not difficult in that the distributors who have paid the funds to the State are the only entities entitled to recover monetary damages. Under the peculiar circumstances of this case, the distributors are obligated to pay the tax, yet the added cost is passed on to the retailer and ultimately to the consumer. By participating in proceedings leading to an award of the funds to Cooper Green Hospital and by urging the affirmance of that award on appeal, AWDA, acting on behalf of the distributors, has waived any interest in the funds. Consequently, the funds are essentially unclaimed, and we must therefore consider other options for the disbursement of the funds. The Bessemer Division Cities remind us that our caselaw dealing with the doctrine of cy pres is limited to instances where a trust cannot be administered in accordance with the terms of the trust instruments and a court is called upon to vary such details of administration to secure the object for which the trust was created. Tumlin v. Troy Bank & Trust Co., 258 Ala. 238, 242, 61 So.2d 817, 820 (1952). Whether the doctrine of cy pres should be applied to the facts here presented is a question of first impression under Alabama law. Federal courts have recognized the utility of cy pres in the distribution of the funds collected on behalf of a class under circumstances where identifying the beneficiaries is difficult. See Powell v. Georgia-Pacific Corp., 119 F.3d 703, 706 (8th Cir.1997) (Because neither party has a legal right to the unclaimed funds, the court correctly turned to traditional principles of equity to resolve the case. There are four ways in which courts have distributed unclaimed funds of this sort: Pro rata distribution to the class members, reversion to the defendant, escheat to the government, and cy pres distribution. See generally 2 Newberg and Conte, Newberg on Class Actions § 10.15 at 10-38, 10-39.). See also In re Airline Ticket Comm'n Antitrust Litigation, 268 F.3d 619, 625 (8th Cir.2001): `The term cy pres is derived from the Norman French expression cy pres comme possible, which means as near as possible.' Democratic Cent. Comm. v. Washington Metro. Area Transit Comm'n, 84 F.3d 451, 455 n. 1 (D.C.Cir. 1996). The cy pres doctrine originated as a rule of construction to save a testamentary charitable gift that would otherwise fail, allowing `the next best use of the funds to satisfy the testator's intent as near as possible.' Id. (internal quotation omitted). Courts have also utilized cy pres distributions where class members `are difficult to identify or where they change constantly,' or where there are unclaimed funds. Powell [v. Georgia -Pac. Corp.], 119 F.3d [703] at 706 [(8th Cir.1997)]. `In [703] these cases, the court, guided by the parties' original purpose, directs that the unclaimed funds be distributed for the indirect prospective benefit of the class.' Id. (quoting 2 Newberg and A. Conte, Newberg on Class Actions, § 10.17 at 10-41 (3d ed.1992)); see also Democratic Cent. Comm., 84 F.3d at 455 (cy pres distributions to `the next best class'). The Court in Airline Ticket Comm'n Antitrust Litigation noted that cy pres distributions of unclaimed funds have been controversial in various cases. Nevertheless, precedent for the applicability of the cy pres doctrine under circumstances similar to those here presented is firmly established in federal courts. While the instant case is not a class action, the policies underlying the applicability of cy pres are equally applicable. We affirm the trial court's application of the doctrine of cy pres.