Google is at the center of a dispute up for review in the US Supreme Court

Who gets awards in class actions?
Who gets awards in class actions?
Image: Reuters/Joshua Roberts
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Google isn’t a named party in Frank v. Gaos, the case that will be heard today (Oct. 31) by the US Supreme Court. Yet a class-action lawsuit against the search giant is what spawned the matter leading to the review. And how the high court decides this case could have a major influence on American law for many years to come.

The court will have to decide when damages awards resulting from a class-action suit—in which one or a few plaintiffs represent many who have been similarly injured—are “fair, reasonable, and adequate” but provide no direct relief to class members. In other words, is it OK for a payout to go to nonprofit institutions instead of individuals if a class is so massive that it’s impractical and meaningless to split the damages among millions of members?

The doctrine that allows for this transfer of damages awards is called “cy pres,” stemming from the French legalese “cy pres come possible,” or “as close as possible.” The principle is meant to protect public interests, ensuring that awards aren’t trivialized by very wide distribution and that the money defendants pay out is put to good use.

In the case in question, plaintiffs filed a class-action suit seeking damages and a change of policy by Google for invasions of privacy. The class alleged that the “headers” that Google transmits when a user clicks on a link in search results disseminate users’ private information in violation of the federal Stored Communications Act.

Google settled the claim, created disclosures on its website, and agreed to pay damages of $8.5 million, about $2 million of which went to the plaintiffs’ attorneys (in fairness to the lawyers, a class action of this kind is an extremely complex and costly case to pursue). The remaining $6.5 million, if it had been distributed to the 129 million class members who arguably made up the class of Google users, would have ended up with pennies each. In view of this, the money went to major institutions, like Harvard and Stanford universities under the “cy pres” doctrine.

The plaintiffs, however, were not all satisfied with this outcome and challenged it as unfair. And because there is no uniform rule to guide justices on these kinds of settlements, the high court agreed to hear their case. If the justices decide the matter based on the merits question presented, they will presumably lay out a clearer set of guidelines for deciding when to approve these kinds of settlements, possibly even restricting them somewhat.

Theodore Frank, the petitioner in the case, wants settlements that don’t directly benefit class members to be eliminated altogether. That seems unlikely to happen. Still, the justices could provide a clear standard for assessing these case and that will transform how class actions are resolved, which would change the legal landscape and potentially affect millions of consumers and plaintiffs for years to come.