'Cookie Placement': 3rd Circuit Leaves Cy Pres-Only Settlement on the Menu, but With Reservations

The Supreme Court decision that was expected to resolve the appropriateness of cy pres-only class action settlements, Frank v. Gaos, ___ U.S. ___, 139 S.Ct. 1041 (2019) (per curiam), did not turn out the way most observers (including the Third Circuit) anticipated. Cy pres awards, which distribute part of a settlement fund to nonprofit organizations whose work is determined to indirectly benefit class members, are sometimes used as components of settlements in cases where it would not be practicable to distribute funds to every individual class member via a pro rata scheme. A cy pres-only settlement does not include any direct monetary relief to absent class members. Courts and commentators have raised questions regarding the permissibility of cy pres-only settlements. Instead of clarifying whether cy pres-only settlements satisfy the “fair, reasonable and adequate” requirements of Federal Rule of Civil Procedure 23(e)(2), however, the Supreme Court remanded and directed the lower courts to consider whether the named plaintiff had standing to bring her internet privacy claims in the district court in the first instance, in light of Spokeo v. Robins, 578 U. S. ––––, 136 S. Ct. 1540 (2016).

In the wake of Frank, the Third Circuit, which had been awaiting the Supreme Court’s guidance on the cy pres question, made its own call regarding the viability of the cy pres-only settlement before it (and made additional standing findings under Spokeo) in In Re Google Inc. Cookie Placement Consumer Privacy Litigation, 934 F.3d 316, 324 (3d Cir. 2019). That decision recognizes, for the first time in this circuit, the viability of cy pres-only class settlements generally, but does not state whether such a structure in the context of a Rule 23(b)(2) injunctive relief class settlement can bar future claims for money damages by absent class members. The circuit questioned whether a defendant “can ever obtain a class-wide release of claims for money damages” in a Rule 23(b)(2) settlement and, if so, “whether a release of that kind” would require heightened class notice, but left the issue to the district court for now.