On October 31, 2018, the U.S. Supreme Court will hear oral argument in the case Frank v. Gaos. On appeal from the Ninth Circuit, this case originates from an unfair class action settlement in Gaos v Google, a privacy lawsuit where plaintiffs sued Google for trillions of dollars in statutory damages for alleged federal privacy violations over their search engine.
CEI’s Center for Class Action Fairness (CCAF) objected to the class action settlement negotiated by the plaintiffs’ lawyers and Google because it provided $0 to class members, but divided $8.5 million between the plaintiffs’ lawyers and cy pres recipients. Under the settlement, the class members who claim harm are entirely ignored, while the class attorneys collect more than $2 million and a handful of third-party organizations—called cy pres recipients—receive over $5 million.
What’s worse is in this case, the cy pres recipients include class counsel’s alma maters and several organizations that Google already supports through donations. This means Google was able to get rid of a lawsuit brought by 100 million class members by making no material changes to its practices and simply donating to many of the same groups it supports anyway. This unfair settlement is a textbook example of cy pres abuse and should be struck down by the court.
Cy pres is an old legal doctrine that roughly translates to “as close as possible,” and it originated in trust law to allow a court to reform a trust or charitable gift that had become impossible to administer according to its terms. More recently, the doctrine has been used by courts to distribute unclaimed dollars in class action settlements to a third-party organization rather than allowing the defendants to keep the funds when those funds cannot be feasibly distributed to the class. Even though these dollars rightfully belong to the class members, oftentimes, the parties claim that it is too difficult to distribute these leftover dollars to class members, usually arguing the class is too large or the award is too small.
The Ninth Circuit approved the settlement citing that district courts can approve cy pres in class action settlements as long as the settlement is “fair, adequate, and free from collusion.”
We strongly disagree that the settlement in this case meets this standard.
The court’s decision on this case will affect the future of class-action settlements. If this type of abuse of cy pres is allowed to stand, it will only encourage more attorneys to structure settlements to benefit their own interests by directing settlement funds to their pet causes instead of their clients’ interests that they have a duty to represent.
CEI’s Center for Class Action Fairness has been a pioneer of protecting consumers and shareholders from the abusive practice of cy pres, winning landmark appellate decisions on the question in 2011, 2013, 2014, and 2015.
The court filings in CEI’s Supreme Court case, Frank v. Gaos, are below. For the previous filings in this case, please click here.
ABOUT: The Competitive Enterprise Institute’s Center for Class Action Fairness represents class members against unfair class action procedures and settlements. Originally founded by Ted Frank in 2009, the center has secured millions of dollars for consumers and shareholders and won landmark precedents that safeguard consumers, investors, and the courts.