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Google, at the Supreme Court, Defends Settlement That Would Leave Class With Pennies

14 March 2018
The National Law Journal

Google Inc. has told the U.S. Supreme Court there was nothing unfair or unreasonable about the tech company’s $8.5 million settlement of a class action in which $5.3 million of the funds go to third parties and none to members of the class.

In urging the justices to deny review in Frank v. GaosMayer Brown partner Donald Falk, representing Google, argued the cy pres-only settlement “will benefit the class as a whole by funding closely targeted projects that are directly connected to the internet privacy issues raised by plaintiffs’ claims.” Falk, a partner in the firm’s Palo Alto, California, office, said the “recipient institutions are of the highest quality and specialize in internet consumer issues.”

Google is not the only party in the high court defending a cy pres settlement provision. The Trump administration’s Justice Department recently found itself in the awkward position of urging the justices to deny review of challenges to $380 million that third parties are set to receive as part of a larger U.S. government settlement with Native American farmers and ranchers.

The Justice Department’s position was awkward because it had called the cy pres provision “regrettable” in the lower court. U.S. Attorney General Jeff Sessions in June announced a new policy that prohibits, with a few exceptions, government attorneys from entering into settlement agreements that require so-called “cy pres” payments—funds that are given to persons or entities that are not direct parties to the dispute.

The Google case in the Supreme Court stems from a class action claiming that Google illegally shared the search queries of its users. The U.S. Court of Appeals for the Ninth Circuit in August affirmed the district court’s approval of the settlement and the trial judge’s finding that the settlement fund was not distributable to a class of an estimated 129 million Google users. Distributing the fund would result in each class member receiving about 4 cents, according to the appellate court—”a de minimis amount if ever there was one,” the panel remarked.

Instead, the Google settlement directs the funds to be distributed proportionally to six recipients that are devoted to web privacy: Carnegie Mellon University; World Privacy Forum; Chicago-Kent College of Law Center for Information, Society and Policy; Stanford Law School Center for Internet and Society; Berkman Klein Center for Internet & Society at Harvard University; and AARP Foundation.

Ted Frank, director of litigation and the Center for Class Action Fairness at the Competitive Enterprise Institute, and Melissa Ann Holyoak were objectors to the settlement in the district court and in the Ninth Circuit.

In their Supreme Court petition, they argued: “An $8.5 million class action settlement that awards absent class members no relief at all in exchange for their claims—no money, no alteration of the defendant’s allegedly injurious conduct, not even coupons—is not ‘fair, reasonable, and adequate’ by any measure.”

Their high court counsel, Andrew Grossman, partner at Baker & Hostetler, noted in the petition that Chief Justice John Roberts Jr., writing in a 2013 case, said cy pres relief raised “fundamental concerns.”

The justices, Roberts suggested then, may need in a suitable case “to clarify the limits” on use of those remedies. Grossman contends: “This is that case, and the need for clarification is acute.”

Mayer Brown’s Falk disagrees. All of the circuits agree with the Ninth, he told the Supreme Court, that “a cy pres-only settlement is appropriate in the rare circumstance where direct distribution to class members is infeasible, and all insist on a close nexus between the cy pres remedy and the interests of settling class members.”

The number of cy pres-only settlements has dropped dramatically, said Falk, who was once described as “California’s class action killer.” The Google case, he said, is “especially well-suited” to a cy pres remedy because class members have not alleged any actual harm from the alleged anti-consumer practices.

“At bottom, then, the petition presents a case-specific disagreement with the findings below that distribution was infeasible in this case, with its class estimated at 129 million members,” Falk wrote. O’Melveny & Myers partner Randall Edwards in San Francisco also represents Google in the Supreme Court.

The three named plaintiffs in the class action against Google also have urged the justices to deny review. Like Falk, their counsel, Kassra Nassiri of San Francisco’s Nassiri & Jung, argued there is no circuit conflict on the legal standards for determining the fairness and reasonableness of cy pres provisions. He also said the petition challenging the deal presents a “fact-bound question” that has no significance beyond the Google settlement itself.

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Reprinted with permission from the March 14, 2018 edition of National Law Journal © 2018 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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