Supreme Court to Decide Permissibility of Cy Pres Awards in Class Action Settlements

JD Supra cited Ted Frank on his objection towards the cy pres-only settlement approved by the Supreme Court. 

In exchange, Google created an $8.5 million settlement fund that was used to pay plaintiffs’ attorneys’ fees (25% of the fund), “incentive awards” of $5,000 to each of the named plaintiffs, and cy pres awards to six educational institutions and other organizations to promote research, education, and initiatives relating to protecting privacy on the Internet. None of the settlement fund was disbursed to class members. Although the settlement required Google to disclose on its website how users’ search terms are shared, Google was not otherwise required to make any changes to its practices.

The cy pres-only settlement was approved by the district court despite objections by certiorari petitioner Ted Frank, Director of Litigation for the Competitive Enterprise Institute and a frequent objector to class action settlements. The U.S. Court of Appeals for the Ninth Circuit affirmed the order approving the settlement. The Court of Appeals agreed with the district court that dividing the $5.3 million in net settlement proceeds remaining after payment of the attorneys’ fees among 129 million class members would be “infeasible” because they would each receive “a paltry 4 cents in recovery,” which is “a de minimus amount if ever there was one.”

The Google case is significant because it represents the first time the Supreme Court has agreed to decide the parameters of cy pres relief in class action settlements. When certiorari was denied in a different case raising this issue in 2013, Chief Justice John Roberts noted the “fundamental concerns” raised by cy pres relief, including “when, if ever, such relief should be considered” and “how to assess its fairness as a general matter.” He suggested that, “in a suitable case, this Court may need to clarify the limits on the use of such remedies.” The Court has now decided that the Google case represents its opportunity to provide such clarification.

Read the full article here.