Class Action News

High Court Could Shoot Down Google Settlement on Standing (1)

Oct. 31, 2018, 3:22 PMUpdated: Oct. 31, 2018, 7:53 PM

The justices of the U.S. Supreme Court couldn’t get past standing issues raised by a $8.5 million privacy settlement between Google and consumers at oral argument Oct. 31.

Eight of the nine justices asked questions about standing. Justice Clarence Thomas remained silent, as usual.

If the court holds that Google users weren’t actually injured by Google’s practice of disclosing their search terms to third-party websites, it could resolve the case without getting to the class settlement issue that brought it to the court.

Under the deal, consumer privacy education and research programs would get $5.3 million of the settlement fund as cy pres. Cy pres refers to distributing settlement funds in a way that indirectly benefits class members because it isn’t feasible to compensate them directly.

Class counsel would get $2.1 million of the rest of the settlement fund. Class members get nothing.

Outstanding Standing Issue

If the consumers don’t have standing, the court doesn’t have jurisdiction to consider the case. The U.S. Solicitor General brought up the potential problem in an amicus brief.

Justice Stephen G. Breyer asked why it would be a privacy violation for Google to share that someone googled his own name. “I don’t see alleged anywhere how they were hurt,” he said.

But Justice Brett M. Kavanaugh saw a potential injury. “I don’t think anyone would want the disclosure of everything they searched for disclosed to other people,” he said.

The justices were so clearly focused on standing that the third attorney to argue—Andrew J. Pincus on behalf of Google—opened with, “Maybe I’ll just say something about standing because someone’s probably going to ask about it.”

The court has three options if it decides standing prevents it from getting to the cy pres question. It can write an opinion addressing standing, remand the case for the lower court to reconsider standing, or dismiss the case as improvidently granted.

If it DIGs the case, the settlement stands. Principal Deputy Solicitor General Jeffrey B. Wall, arguing for the government in support of neither party, argued against a DIG.

“It would leave standing a judgment that I think the court had no jurisdiction to enter, and I think it would encourage parties not to flag jurisdictional issues at the cert. stage as the parties here should have,” he said.

But Jeffrey A. Lamken, counsel for the class members defending the settlement, said a DIG is the proper answer because “the case is so rife with vehicle problems.”

‘Perverse Incentives’

Ted Frank, who brought the case before the court, did get to make a few points about why he thinks use of cy pres creates problems in class settlements.

In the Google settlement, all of the money went to cy pres. But cy pres is often used as a last resort to deal with money left over in a settlement fund after class member payouts have been made.

Justice Sonia Sotomayor asked Frank if he approves of this “residual cy pres.”

Even that “creates perverse incentives for class counsel to divert money away from their clients and to third parties,” he said.

“When courts have insisted that attorneys don’t get paid unless their clients get paid, the attorneys find a way to improve the claims process and make money get to the class,” Frank said. “You can’t reward class counsel for it.”

Chief Justice John G. Roberts Jr. pushed back. “I don’t understand your argument on the fee,” he said. If cy pres “doesn’t provide relief, you don’t get a fee for it. But if it does provide relief, then I don’t know why the fee should be cut back just because it’s not money.”

Lamken pointed out that the lower courts already have the discretion to reduce attorneys’ fees if they believe “that the cy pres distribution is less valuable to the class than its cash equivalent.”

‘System Is Working’

Sotomayor wasn’t convinced that cy pres is a problem that warrants the court’s attention.

“You do point to some potentially abusive situations, but in all those situations, it’s the cases where the circuit court rejected a cy pres award,” she told Frank. “It seems like the system is working, not not working.”

But if the court affirms the Ninth Circuit’s standard, “the system will cease to work” and parties will direct settlements to the Ninth Circuit, Frank said.

Ted Frank of the Competitive Enterprise Institute’s Center for Class Action Fairness in Washington argued on his own behalf. Jeffrey B. Wall of the U.S. Department of Justice argued for the government.

Andrew J. Pincus of Mayer Brown LLP in Washington argued for Google. Jeffrey A. Lamken of MoloLamken LLP in Washington argued for the class.

The case is Frank v. Gaos, U.S., No. 17-961, argued 10/31/18.

(Updated with additional reporting.)

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.