Several U.S. Supreme Court justices on Wednesday made clear their disdain for a rare type of class action settlement that critics say provides funds mainly to third parties and class counsel, but not to class members.
“How can you say this makes any sense?” Justice Samuel Alito Jr. asked at one point during the oral argument in Frank v. Gaos. “At the end of the day, what happens? The attorneys get money, and a lot of it. The class members get no money whatsoever.”
But, as angry as the justices were about so-called cy pres settlements during the hourlong argument, a serious jurisdictional “standing” issue cropped up that could spoil the chances that a majority would put an end to the practice. Justices and lawyers in the case wondered aloud whether the case should be remanded or even dismissed.
In the case before the court, plaintiffs sued Google for violation of privacy, claiming that personal information stemming from their routine Google searches was being turned over improperly to third parties for commercial purposes.
The parties reached a cy pres settlement—translated from the French for as “near as possible” and pronounced by most justices Wednesday as “sigh pray,” though Justice Ruth Bader Ginsburg called it “see pray.”
In such settlements, funds are distributed to third parties when awarding the millions of class members—in this instance there were as many as 129 million members—would be impractical or impossible. Google’s $8.5 million settlement was designated to be distributed instead to organizations that educate the public about internet privacy issues, as well as $2 million to the lawyers in the case. The money has not been distributed, pending the outcome of the Supreme Court case.
Theodore Frank, director of the Center for Class Action Fairness at the Competitive Enterprise Institute, challenged the settlement as a class member, and argued the case himself—a rarity before the Supreme Court. Frank, who has been fighting cy pres settlements for years, spoke easily about the issue but was not as quick as veteran advocates are to rebut arguments of the other side.
The Justice Department, which did not take sides in the case, told the court in a brief that the plaintiffs had not suffered enough injury to achieve standing to sue Google. Last year’s Supreme Court decision in Spokeo Inc. v. Robins made the hurdle even steeper by requiring that plaintiffs allege an “injury-in-fact” that is both “concrete” and “particularized.”
Justices Neil Gorsuch, Elena Kagan and Stephen Breyer, among other justices, questioned whether the class plaintiffs were injured at all.
Referring to one plaintiff, Gorsuch asked, “Do we know that he was injured? Is there any evidence that his personal information, for example, wasn’t already available through the white pages and otherwise published so that there is no injury-in-fact?”
Frank asserted that the injury to plaintiffs was sufficient for standing but allowed that “maybe the appropriate decision is to remand” the case to assess the standing issue in light of Spokeo.
If the court overcomes the standing issue and reaches the merits of the case, several justices’ comments and questions indicated that Frank might still win. In a previous case, Chief Justice John Roberts Jr. said there were “fundamental concerns” about the propriety of such settlements. And a Justice Department directive has barred government participation in future cy pres settlements.
Justice Brett Kavanaugh noted that some of the Google settlement funds may go to organizations and universities that the lawyers had connections to. He decried “the appearance of favoritism” caused by giving money to the “alma maters of counsel.” Efforts should have been made, Kavanaugh said, to get at least some of the money to class members.
“Don’t you think it’s just a little bit fishy that the money goes to a charity or a 501(c)(3) organization that Google had contributed to in the past?” asked Roberts.