The case, , No. 17-961, involves a pre-certification settlement of a class action against Google for alleged violations of the federal Stored Communications Act and California privacy laws. The district court approved the settlement, which allocated approximately $3.2 million to the plaintiffs’ attorneys, administrative costs, and the named plaintiffs, and awarded the remaining $5.3 million to six not-for-profit cy pres recipients that had submitted proposals detailing the ways in which they planned to use the proceeds to promote internet privacy initiatives. On appeal, the Ninth Circuit affirmed the district court’s decision that the settlement was “fair, adequate, and free from collusion.” It noted that while cy pres-only settlements are “the exception, not the rule[,]” such a settlement was appropriate here, where there were approximately 129 million class members, each of whom would have been entitled to a mere 4 cents. Moreover, the panel held that the district court did not abuse its discretion by approving the selection of the cy pres recipients, notwithstanding objectors’ claims that, among other things, defendant Google and class counsel had “significant prior affiliations” with the recipient organizations. Finally, the Ninth Circuit upheld the reasonableness of the $2.125 million award to class counsel, which the district court had determined to be acceptable under either the percentage-of-recovery or lodestar method.
In their petition for certiorari, two individuals—objectors in the district court, and appellants before the Ninth Circuit—take issue with the cy pres remedy on a categorical level, arguing that a cy pres-only settlement awards absent class members “no relief at all” and accordingly cannot be deemed “fair, reasonable, and adequate.” They urge heightened scrutiny of cy pres settlements, which they claim “present a heightened risk of conflict between class counsel and their putative clients” and in turn fail to serve the interests of absent class members.
The Frank case will be the Supreme Court’s first look at the cy pres remedy. In passing on an earlier case involving a cy pres settlement, however, Chief Justice John Roberts expressed an interest in addressing “more fundamental concerns surrounding the use of such remedies in class action litigation, including when, if ever, such relief should be considered; how to assess its fairness as a general matter; whether new entities may be established as part of such relief; if not, how existing entities should be selected; what the respective roles of the judge and parties are in shaping a cy pres remedy; how closely the goals of any enlisted organization must correspond to the interests of the class; and so on.”
Frank seems likely to bring these issues into focus. In particular, we can expect opponents of the cy pres mechanism to argue that such awards permit plaintiffs’ attorneys to reap substantial proceeds from class settlements without providing any meaningful benefit to aggrieved class members, while at the same time allowing defendants to handpick recipients. On the other side, those who support the mechanism, including the Frank respondents, will look to decisions upholding cy pres settlements, which have pointed out that class members do benefit from cy pres awards insofar as the recipients work to promote the causes underlying the plaintiffs’ suit, and that cy pres ensures that defendants do not get away scot-free simply because distribution of settlement proceeds to class members is infeasible.