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By: Samantha Skolnick
At the end of April, the U.S. Supreme Court accepted a certiorari petition in the case Frank v. Gaos, No. 17-961, 2018 WL 324121 (U.S. Apr. 30, 2018). The Supreme Court will determine if a class-action settlement involving Google met federal law requirements when $5.3 million of the $8.5 million settlement fund was given to outside groups. The question presented: “Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class member must be ‘fair, reasonable, and adequate.’”
Cy pres is a doctrine where the original objective of the settlor or testator becomes impracticable, impossible and in some instances illegal to perform. Cy pres allows the Court to alter terms of the charitable trust to get as close to the original intention of the testator or settlor as to allow the trust to remain and not flounder.
The core issue in this case is whether this settlement complied with Rule 23(e)(2) which sets the requirement that proposed class action settlements be “fair, reasonable and adequate.” In certain class action situations, funds can be unclaimed when the members claims are small or the process is difficult. To prevent the unclaimed amounts from entering the defendant’s pocket, the money can be directed to other causes, charities and foundations.
Here, the class action stems from allegations that web browsers disclosed Google searches to third-party websites. Three of the named plaintiffs received $15,000 incentive awards, and the rest of the class received nothing. The cy pres award was allegedly given to organizations who promised to use the money to protect internet privacy. The cy pres recipients included: World Privacy Forum; Carnegie Mellon University; the Center for Information, Society and Policy at Chicago-Kent College of Law; the Berkman Center for Internet and Society at Harvard University; the Stanford Center for Internet and Society; and AARP. According to the cert petition, class members that were absent received “no relief at all in exchange for their claims—no money, no alteration of the defendant’s allegedly injurious conduct, not even coupons.”
The implications of this decision and how settlement funds are distributed particularly in class actions can be huge. Class actions span from internet privacy to self-driving cars to the on-going tobacco litigation. For now, we wait and see.
If you have any questions or would like more information, please contact Samantha Skolnick at [email protected].