Google's 4-cent Checks to 129 Million Class-Action Plaintiffs: The Doctrine of 'Cy Pres' Shows Up at the U.S. Supreme Court

 In 2015, a federal district court developed a solution for Google's struggle to issue 4-cent checks to 129 million Google and G-mail users as a settlement for violation of their privacy rights. The total settlement in the case was $5.3 million, with the lawyers being given 25% of that amount, the three lead plaintiffs being given $5,000 each, and the remaining amount distributed to the members of the plaintiff class. The plaintiffs had successfully established that Google had taken their private information obtained through Google's search engine and sold that information to marketing firms. Sarah Randazzo, "For Some Class-Action Lawyers, Charity Begins and Ends at Home." Wall Street Journal, March 24-25, 2018, p. B4

The parties proposed a settlement using the trust doctrine of cy pres (pronounced sigh pray and means "as near as possible," meaning trying to carry out the intent of those who established the trust). Under this doctrine, when the expense and difficulty of finding beneficiaries is great, the trustee (in this case the court) can exercise discretion and make charitable distributions in lieu of finding the beneficiaries.  Google proposed giving the funds to the World Privacy Forum, AARP Foundation, Carnegie-Mellon University, and the Center for Internet and Society. In re Google Referrer Header Privacy Litigation, 87 F. Supp. 3d 1132 (N.D. Ca. 2015).  The court approved the settlement and some of the parties appealed. 867 F. 3d 737 (9th Cir. 2017). However, the 9th Circuit affirmed the decision.  The case has been appealed to the U.S. Supreme Court and the decision on certiorari is pending. 

The effect is that the settlement in this case will go to third parties who were not involved in the litigation.  In addition, the 9th Circuit has established a precedent for the use of cy pres in class-action suits. Along with the Google appeal is another case with the same cy pres issue that involves a class action suit between the United States and Native American farmers. Chief Justice John Roberts has expressed concerns about the 9th Circuit's approach to the distribution of class-actions, particularly when the funds are distributed to those who were not parties to the litigation.  Ted Frank, "For Some For Some Class-Action Lawyers, Charity Begins and Ends at Home." Wall Street Journal, March 23, 2018, p. A19. Prior to the Google case, the federal standard had followed the cy pres principles that the amount involved was de minimis and that distribution was just not feasible.  In re BankAmerica Corp. Securities Litigation,  775 F.3d 1060 (8th Cir. 2015). In cases before the Google case, the 9th circuit held that the cy pres distribution need not be perfect, and applied a standard of "next best distribution."  However, in some situations, that "next" choice meant that the alma maters of the class-action plaintiffs' lawyer received donations from the settlement.  Lane v. Facebook, 696 F.3d 311 (8th Circ. 2012). 

DISCUSSION STARTERS

Explain the doctrine of cy pres.


What concerns does the Chief Justice have about using the doctrine in class-action settlements?