Google Privacy Case Risks Disrupting a Key Source of Nonprofit Funding
March 23 2018 - 05:59AM
Dow Jones News
By Sara Randazzo
In 2015, a court overseeing a privacy class-action settlement
involving Google agreed to send $5.3 million to six organizations
focused on internet-privacy issues instead of doling out 4-cent
checks to 129 million plaintiffs.
Now, some objectors are trying to blow up the deal and others
like it.
The U.S. Supreme Court is expected to review in the coming weeks
appeal requests in the Google case and in a class action between
the U.S. government and Native American farmers that involves $380
million in settlement funds going to third parties.
The petitions are the latest attempt to catch the attention of
Chief Justice John Roberts, who has hinted he would like the court
to take up a case about cy pres, as the longstanding practice of
sending leftover money from class-action settlements to nonprofits
and other parties not affiliated with the litigation is known.
The chief justice's expression of interest came in 2013 while
denying an appeal involving a settlement Facebook Inc. reached over
its controversial Beacon program that awarded $6.5 million to a
newly formed nonprofit, a few million to lawyers and nothing to
Facebook users.
Cy pres (pronounced "sigh pray"), derived from a French term
meaning "as near as possible," started in trust law and hopped into
class actions in the 1970s. It usually comes into play after the
bulk of a settlement is distributed to class members and leftover
funds then go to a nonprofit that matches the focus of the class
action. In privacy or data-breach cases, where the number of
potential plaintiffs reaches into the millions, the majority of a
settlement can go to cy pres recipients.
Proponents including the American Bar Association and legal-aid
organizations say handing out the leftover money is the most
efficient solution when it isn't practical to distribute every
penny to class members.
Giving that money to legal services groups is "especially
appropriate because legal aid and class actions both provide access
to justice for those who need help," said Bill Boies, an attorney
at McDermott Will & Emery who has written amicus briefs in
support of cy pres awards.
Critics say the practice can be subject to favoritism and boosts
plaintiffs' attorney fees because those fees are based on the total
money in the settlement, regardless of who gets it.
Serial class-action objector Ted Frank doesn't think it is the
court's place to dole out money to charities. He has objected to cy
pres awards and other aspects of class actions for years, and the
Google case is his latest attempt to sway the Supreme Court.
In 2010, internet users sued Google, now a unit of Alphabet
Inc., for alleged federal privacy violations related to its
practice of sharing user search terms with other companies. Google
agreed to an $8.5 million settlement to cover the estimated 129
million people who used the search engine from 2006 to 2014.
Of that, Google agreed to pay $5.3 million to groups including
the World Privacy Forum, AARP Foundation, Carnegie Mellon
University and the Stanford Law School Center for Internet and
Society, plus $2.2 million to attorneys and awards to the named
plaintiffs. The payouts have been held up by the appeal. Mr. Frank
noted in his Supreme Court appeal that three university recipients
were the alma maters of attorneys who signed the settlement.
A Stanford Law spokeswoman said the center was never contacted
directly about the settlement. The other organizations declined to
comment or didn't respond to a request for comment.
Mr. Frank's objection argues the deal "awards absent class
members no relief at all in exchange for their claims -- no money,
no alteration of the defendant's allegedly injurious conduct, not
even coupons" and shouldn't pass muster.
A coalition of 16 mostly Republican state attorneys general,
including from Arizona, Colorado, Rhode Island and Texas, filed a
brief in support of the appeal.
Google and lawyers for the plaintiffs, meanwhile, say the
settlement is a fair use of cy pres and are urging the Supreme
Court not to take the case. Google's lawyers argue settlements in
which third parties receive all the funds slated for class members
are extremely rare, and that lower courts have agreed such
distributions are appropriate when it is infeasible to send money
to the class.
For nonprofits, receiving the money is often a welcome
surprise.
Jessie Kornberg, president and chief executive of legal services
provider Bet Tzedek, said the Los Angeles group receives around
$150,000 to $750,000 a year in leftover class-action funds.
Sometimes, she knows in advance. Other times, a check arrives
unannounced in the mail.
The money can typically be used at their discretion and has
funded much-needed website and technology upgrades, Ms. Kornberg
said. Once, an award of more than $300,000 to Bet Tzedek from a
mortgage-lending class action was earmarked for counseling
homeowners who were victims of real-estate fraud.
"We live in a world of treacherously scarce resources," Ms.
Kornberg said. "They really are precious dollars."
Write to Sara Randazzo at sara.randazzo@wsj.com
(END) Dow Jones Newswires
March 23, 2018 05:44 ET (09:44 GMT)
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