Reversion
A reversion clause lets unclaimed or unspent settlement money go back to the company that agreed to pay it, instead of staying with the class.
Also called: reversion clause, reversionary settlement, reverter
A reversion clause lets unclaimed or unspent settlement money go back to the company that agreed to pay it, instead of staying with the class.
What it means
Reversion is a settlement term that sends unclaimed or unspent money back to the company that agreed to pay it. A deal with this term is reversionary. A deal that bars it is non-reversionary, meaning none of the fund can return to the defendant. The difference decides who keeps the money when many class members never file.
In a reversionary deal, the headline amount can be misleading. The company pays only what claims use up, and the rest comes back. If few people claim, the real cost is far below the number in the press release. A federal judicial handbook notes that courts generally disfavor reversion, especially when strict claim rules make it hard to claim and the lawyers' fee is based on the full headline amount.
Judges have other options for leftover money, such as sending it to class members in a second round or to a charity (cy pres). Some courts treat a reversion clause paired with a "clear sailing" agreement, where the company agrees not to contest the lawyers' fee request, as a sign the deal may be unfair.
What it means for you
Look for the word "reversion" or the phrase "non-reversionary" in the notice or on the settlement website. If the fund is non-reversionary, low participation does not lower the company's bill. The unclaimed money stays in the settlement, where it can go to a second round or a charity. If the deal is reversionary, the company can keep what is not claimed.
That affects how you read a headline number. A reversionary $20 million settlement may cost the company far less than $20 million. If strict claim rules and a reversion clause make the deal look one-sided, you can raise that in an objection.
Example
Say a retailer announces a $6 million settlement over mislabeled products. The deal is reversionary: the company pays each approved claim $15, and any money not paid out returns to the company. Only 100,000 people file valid claims, so $1.5 million is paid and $4.5 million goes back to the retailer. We are ignoring fees to keep the math simple. In a non-reversionary version, that $4.5 million would stay in the settlement for a second round or a charity.
FAQ
Only if the settlement allows it. In a reversionary deal, unclaimed money returns to the defendant. In a non-reversionary deal it stays with the class, and the agreement says whether it goes to a second round or a charity.
A company can benefit from tough claim rules, and lawyers' fees may be based on a headline figure the company never actually pays. A federal judicial handbook suggests tying fees to what is actually distributed.
Related terms
- Managing Class Action Litigation: A Pocket Guide for Judges, 3d ed. (Federal Judicial Center, 2010)
- Manual for Complex Litigation, Fourth, sections 21.61 and 21.662 (Federal Judicial Center)
Updated Oct 18, 2026. Plain-English definitions for general information — not legal or tax advice.