US Appeals Court Set to Eye Test of Cy Pres Doctrine in $5.5M Google Accord

When class members are owed a few pennies from a settlement, how hard must you try to make sure they get paid?

That's the question before the U.S. Court of Appeals for the Third Circuit in a petition to reverse a $5.5 million settlement with Google Inc. over privacy claims that gives money to the plaintiffs' attorneys and six nonprofit organizations but nothing to the class. On Wednesday, attorneys general from 11 states filed an amicus brief insisting that the Delaware judge who approved the settlement didn't go far enough in attempting to put class members above the use of cy pres, a controversial practice used to distributed unclaimed funds in a settlement to third parties.

The same issue has come up in other cases, particularly those involving millions of internet users whose payouts are considered too small to be worth distributing.

"The proposed settlement releases millions of consumer claims related to Google's electronic 'cookie' placement practices in exchange for $5.5 million from Google, and yet it diverts the class members' $3.5 million portion of the settlement to cy pres charities when that money could be feasibly distributed to class members," wrote Oramel Skinner, an attorney at the Arizona attorney general's office. 

The case involves multidistrict litigation challenging Google's practice of overriding cookie blockers on Apple's Safari and Microsoft's Internet Explorer to gain access to user information. In 2012, Google paid $22.5 million to the Federal Trade Commission to resolve similar claims; a year later, it settled complaints by 28 state attorneys general for $17 million.

In 2015, the Third Circuit partially reversed dismissal of the multidistrict litigation.

In her Feb. 2 approval of the settlement, U.S. District Judge Sue Robinson found that delivering money to the class would have been "logistically burdensome, impractical, and economically infeasible, resulting (at best) with direct compensation of a de minimus amount." She also reduced a $2.4 million request for attorney fees to about $1.9 million.

In its June 28 opening brief, objector Ted Frank, founder of the Washington, D.C.-based Competitive Enterprise Institute's Center for Class Action Fairness, alleged that four of the cy pres recipients in the case, including Harvard University's Berkman Klein Center for Internet & Society and Stanford University's Center for Internet and Society, have conflicts of interest because they have accepted donations and other benefits from Google. In addition, the chairman of another recipient, Public Counsel, the nation's largest pro bono organization, is Brian Strange, one of the plaintiffs' attorneys in the case.

"That's a pretty obvious conflict of interest," Frank said. "He put his interests of the nonprofit ahead of the interests of the class."

Strange, of Strange & Butler in Los Angeles, declined to comment. In a Jan. 4 filing before Robinson, Strange noted that he was one of 70 board members at Public Counsel, all of whom are lawyers. Michael Rubin, co-chairman of the privacy and data protection practice at Wilson Sonsini Goodrich & Rosati in San Francisco who represents Google, didn't respond to a request for comment.

Frank raised similar objections in another case against Google before the U.S. Court of Appeals for the Ninth Circuit. In that case, he argued that an $8.5 million class action settlement steered funds to the alma maters of two of the plaintiffs' attorneys. The cy pres recipients in that case also included Harvard's Berkman Center and Stanford's Center for Internet and Society.

But in Google cookie case, both Frank and the attorneys general said Robinson failed to follow the Third Circuit's 2013 holding in In re: Baby Prods. Antitrust Litig., which mandated that judges prioritize class member payments over cy pres funds whenever possible.

"The district court made no reasonably accurate estimate of the actual distribution of funds to individual class members that could have occurred," Skinner wrote. "The district court's failure to apply this court's economic feasibility precedent was reversible error."

Upholding the settlement also would create a split with the Seventh, Eighth and Fifth circuits, Frank wrote. As he did in the Ninth Circuit case, Frank relied on a California case called Fraley v. Facebook, a $20 million settlement in which lawyers managed to arrange the distribution of $15 to each class member.

In a separate amicus brief filed on Wednesday, a group of legal aid organizations in Pennsylvania, New Jersey and Delaware, led by the National Legal Aid and Defender Association and the Association of Pro Bono Counsel, defended the use of cy pres while not taking a position in the case.

"The availability and effectiveness of cy pres awards should not be eroded by unreasonably narrow and mechanical constraints," wrote Duncan Grant, a partner at Pepper Hamilton in Philadelphia.

Copyright The Recorder. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Amanda Bronstad covers mass torts and class actions for ALM. Contact her at abronstad@alm.com. On Twitter: @abronstadlaw

Contributing Author

Amanda Bronstad

Amanda Bronstad is a reporter at Inside Counsel affiliate The National Law Journal. You can reach her at abronstad@alm.com.

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