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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