The U.S. Supreme Court will hear a privacy case involving Google that considers making it more difficult for companies to pay settlements in class-action lawsuits to unrelated third parties, rather than to those who are members of the class action. Bloomberg first reported the court's decision to hear arguments about Google's "cy pres" settlement in a 2010 case that paid a quarter of the $8.5 million decision to lawyers and the bulk of the remaining proceeds to six organizations that would promote internet privacy.
The decision was upheld in the Ninth Circuit Court of Appeals. Google, now part of Alphabet Inc., argued it wouldn't have been feasible to distribute the money to the 129 million members affected by the class action suit, and the court agreed, noting that each of the 129 million would have received "a paltry 4 cents."
Ted Frank and Melissa Holyoak, of the Competitive Enterprise Institute, a conservative think tank in Washington, D.C., filed the challenge, asking the Supreme Court to weigh in on the circumstances under which a cy pres action "that provides no direct relief" to the members of the class action comports with the requirement that a settlement that binds class members be "fair, reasonable and adequate," as required by Federal Rules of Civil Procedure.
"The Google settlement epitomizes cy pres abuse in class actions where the money is being funneled to class counsel's alma maters and to entities that Google already supports," Holyoak said in a statement on CEI's website. "Class counsel chose their favorite charities over their clients while Google is getting credit for donations they are already making."
The cy pres settlement was split among these groups: AARP, Inc., the Berkman Center for Internet and Society at Harvard University, Carnegie Mellon University, the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy, the Stanford Center for Internet and Society, and the World Privacy Forum. Objectors noted that Google had prior relationships with some of the organizations.
CEI objected to the fact that the money went to "three of class counsel's alma maters and at least five organizations with previously budgeted donations from Google."