Google Play Deal Rebuke Puts Settling Defendants on Notice

A federal judge’s rejection of a $700 million settlement brokered by Alphabet Inc.‘s Google and state attorneys general over the Google Play app gives warning to defendants hammering out similar class action deals.

Judge James Donato of the US District Court for the Northern District of California last week was severe in his rebuke of a deal with US states and consumers who claimed the tech company’s Google Play app store abuses its market power, calling the deal “a bag of not great.” He raised particular concerns about how little the settlement will pay out to 127 million consumers, many of whom may only get $2, and its provision to essentially release the Google Play Store from any legal claims for the next seven years.

Donato’s reaction highlights the need for companies to ensure class members are fairly and adequately compensated for their injuries, said Eduardo Robreno, who’s been a partner with McCarter & English LLC since September. In an era of strict antitrust enforcement under the Biden administration, companies should be thinking even harder about the terms of their agreements, he said.

“It isn’t just a matter of submitting a piece of paper and getting the judge to approve it,” said Robreno, who as a federal judge in 2023 rejected Google’s proposal for a $5.5 million class settlement in a separate case related to the company’s web browser privacy settings. That case has since been reassigned to another judge and stayed.

Companies need to “be able to defend it, and be sure we can say with a straight face that it’s fair and adequate,” he added.

Earlier: Google Play Judge Faults $700 Million Deal as ‘Bag of Not Great’

Donato’s reaction shows judges do view defendants’ conduct as inappropriate and will take that into account when assessing the fairness of deals, said Kathleen Bradish, vice president and director of legal advocacy at the American Antitrust Institute. The states accused Google of extracting large sums of money from consumers by steering them to Google Play’s billing system to buy apps and in-app content, and prohibiting app developers from suggesting alternative ways to purchase content.

“You are seeing a lot of judges more willing to find that Big Tech is harming consumers,” she said.

Attorneys for Google didn’t immediately respond to a request for comment on the judge’s concerns and how they plan to resolve them. Donato last week gave both parties 30 days to convince him the settlement is fair, reasonable, and adequate. All 50 states, as well as the District of Columbia, Puerto Rico and the Virgin Islands joined the settlement.

Proposed Deal

Scrutiny over class actions isn’t a new phenomenon; the 2005 passage of the Class Action Fairness Act was designed to ensure more equitable outcomes for class members. Proponents of the bill thought it necessary to create uniform standards for certifying a class, as state and federal courts had been doing it differently for years, said Christine Bartholomew, a law professor at University at Buffalo School of Law who studies class actions.

Each case has its own unique circumstances, but judges typically look at various factors when approving settlements, including the odds of plaintiffs and defendants winning a suit, the total amount awarded to consumers, attorneys’ fees, and how funds would be distributed, she said.

The judge’s reaction in this particular case attracted more attention because it involves Google, a high-profile tech company that has faced multiple antitrust suits and enforcement scrutiny on both sides of the Atlantic. The US Justice Department also alleges Google illegally maintained a monopoly over search and advertising.

“I’m not surprised to see him looking at the scope of the release so that the class is not giving up more than it needs to,” Bartholomew said. “It’s not a mom-and-pop shop. You’re talking about a big-deal case.”

Under the proposed settlement terms, $630 million would be distributed to eligible consumers while $70 million would go to the states. The deal also aims to change Google’s business practices by requiring it to simplify the process for installing apps from outside Google Play and allowing developers to steer consumers away from the Google Play Store and toward alternative billing systems.

In the settlement, states attorneys general said that the deal provided “significant, immediate, and certain relief to consumers,” while opening up competition in the market for apps.

Settlement Tweaks

Richard Wolfram, an independent lawyer in New York who focuses on antitrust litigation and counseling, called the plaintiffs’ approach to the Google deal “very, very aggressive” and said the settlement will likely have to be revisited by the states.

Donato’s strong reaction to the provision to essentially release the Google Play Store from some future claims will likely be a lesson to other plaintiffs’ counsel and attorneys representing defendants considering similar terms, he said.

“Do you frankly tick off the judge in going for something that you are almost surely not going to get?” Wolfram said.

Bartholomew said Donato was doing his job when pushing both parties to justify what they agreed to.

“I wouldn’t want to go back in front of that judge without having at least tweaked that release a bit,” she said.

Google and the states can now either try to convince Donato that his concerns are misplaced, or tweak the terms of the deal with various strategies, such as raising payouts higher than the $2 minimum per eligible consumer, Bradish said.

“All the parties have information about where Judge Donato was leaning,” Bradish said. “They could always provide more money. The judge definitely seemed to be upset by how little the individuals would be getting out of this. Or they could be creative and come up with modification of some sort to their processes.”

The states are represented by their attorneys general. Google is represented by firms including Morgan, Lewis & Bockius LLP, Munger, Tolles & Olson and Hogan Lovells.

The case is Utah v. Google, N.D. Cal., No. 3:21-cv-05227.