Supreme Court’s review of class-action settlements could have huge implications for consumers

But then, imagine that when the attorneys settle the case, they take all the money for themselves, plus a few other class members, and funnel the rest to pet causes favored by themselves and the big company you were suing.

Next week, the Supreme Court will hear a lawsuit challenging this sort of unfair settlement. Frank v. Gaos challenges the controversial use of a doctrine called “cy pres” (pronounced “sigh-pray”) to pay class-action settlement funds to those pet causes instead of the consumers whose claims are at issue.

The case, brought by my colleagues Theodore H. Frank and Melissa Holyoak at the Competitive Enterprise Institute, addresses the use of cy pres in a settlement arising from alleged privacy violations by Google. The settlement in Frank v. Gaos offered nothing whatsoever to class members while paying $2.1 million to attorneys and $5.3 million to third parties with no connection to the case — including class counsel’s alma maters and nonprofit organizations that were already being funded by Google anyway.

The doctrine of cy pres, short for the French phrase “cy pres comme possible,” or “as near as possible,” originated in trust law. It allows a court to reinterpret the terms of a trust to protect the creator’s intent when the original terms can’t be implemented. The current problem, however, arises from the more recent and improper use of cy pres in class actions like the one in this case.

Read the full article at the Washington Examiner.