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SCOTUS punts on cy pres issue; Millions would be paid to lawyers and causes of their choosing, while class members get nothing

By John Severance | Mar 21, 2019

The AFB has endorsed Judge Gorsuch, the recent nomination by President Trump to the U.S. Supreme Court   Photo by kconnors at Morguefile.com

WASHINGTON (Legal Newsline) – The U.S. Supreme Court on March 20 sent an internet privacy case back to the lower courts, refusing to rule on the merits of an appeal that questioned why class members received nothing in a multimillion-dollar settlement.

In Frank v. Gaos, a class action-related case initiated by former Competitive Enterprise Institute attorneys, the Supreme Court wants the lower courts to address the plaintiffs' legal right to sue.

CEI President Kent Lassman said in a statement that certain aspects of the case were unresolved and he was disappointed with the High Court decision.

“While we are disappointed the Supreme Court did not rule on the merits of Frank v. Gaos, CEI is proud of our role shepherding the case to the Supreme Court and the work of Ted Frank and Melissa Holyoak, now with the Hamilton Lincoln Law Institute,’’ Lassman said. 

"Together we have steadfastly advocated for consumers and for reform of a system that allows unscrupulous attorneys to put their own interests ahead of their clients’. We are confident the standing issue will be resolved in the lower courts and the Supreme Court can take the case again.

‘’Regardless, the precedents set by Frank and Holyoak help ensure the class action system is reformed to the benefit of consumers and class members.”

Should the issue get back to the Supreme Court, it seems Frank would have a vote in Justice Clarence Thomas.

"Because the class members here received no settlement fund, no meaningful injunctive relief, and no other benefit whatsoever in exchange for the settlement of their claims, I would hold that the class action should not have been certified, and the settlement should not have been approved," Thomas wrote in a dissenting opinion.

A class action suit was brought against Google over alleged violations of the Stored Communications Act.

The Supreme Court ruling said that "parties negotiated a settlement agreement that would require Google to include certain disclosures on some of its webpages and would distribute more than $5 million to cy pres recipients, more than $2 million to class counsel, and no money to absent class members."

Cy pres recipients receive funds from class action settlements when there is money left over or it is too hard to identify the members of the class. In this case, class members would have received pennies, making the process of paying them a questionable exercise. Charitable causes and institutes of higher education are often chosen to receive these grants.

"We granted certiorari to review whether such cy pres settlements satisfy the requirement that class settlements be 'fair, reasonable, and adequate.' Because there remain substantial questions about whether any of the named plaintiffs has standing to sue in light of our decision in Spokeo Inc. v. Robins, we vacate the judgment of the 9th Circuit and remand for further proceedings," the majority opinion said.

CEI attorneys had been challenging the cy pres awards in the case.

The Center for Class Action Fairness was founded in 2009 by Frank, and the organization represents class members against what it felt were unfair class action procedures and settlements.

The case began in 2010 when plaintiffs, including Paloma Gaos, brought suit against Google for allegedly leaking information about web searches made by private citizens to third parties.

The case was settled in four days and funds were awarded to case attorneys and cy pres beneficiaries but none was made available to class members.

Frank and Holyoak, who were a part of the class, said the settlement was not fair, reasonable or adequate. The U.S. Court of Appeals for the Ninth Circuit affirmed the settlement, saying if it awarded monetary damages to the 129 million class members, each only get 4 cents in the settlement.

"After reviewing the supplemental briefs, we conclude that the case should be remanded for the courts below to address the plaintiffs’ standing in light of Spokeo. The supplemental briefs filed in response to our order raise a wide variety of legal and factual issues not addressed in the merits briefing before us or at oral argument. We are a court of review, not of first view,” the court ruled.

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