Before jumping into my first post, I wanted to quickly introduce myself. I'm Mike Landis, Litigation Director for U.S. PIRG. (Obligatory disclaimer: my posts express my individual views only and not those of U.S. PIRG.) I've been a reader of this blog for sometime, and I'm excited to now participate as a contributor. My goal is to add to the great updates, analysis, and insight on consumer law and policy that this blog is known for. You can follow me on Twitter at @MLandisPIRG. On to the post…
Recently, a Ninth Circuit panel affirmed the district court's order approving a cy pres-only settlement in In re Google Referrer Header Privacy Litigation, 15-15858. (The panel's opinion is available here.) Under the terms of the settlement, Google is to pay a total of $8.5 million. Of that amount, $3.2 million will go to attorney fees, administration costs, and incentive payments to the named plaintiffs. The remaining $5.3 million will be split between six nonprofits that work on internet privacy issues: AARP, Inc., the Berkman Center for Internet and Society at Harvard University, Carnegie Mellon University, the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy, the Stanford Center for Internet and Society, and the World Privacy Forum.
First, the panel unanimously rejected the objectors' request that the appellate court "impose a mechanism that would permit a miniscule portion of the class to receive direct payments." According to the panel, the objectors had suggested that the court could "compensate an oversized class with a small settlement fund by random lottery distribution" or by offering "$5 to $10 per claimant" on the assumption that few class members will make claims. The panel "quickly disposed" of this argument by stating that appellate review is "not predicated simply on whether there may be 'possible' alternatives." Rather, the appellate court simply makes sure that the settlement approved by the district court is "fair, adequate, and free from collusion." The panel also "easily reject[ed]" the objectors' argument that, if the settlement fund is non-distributable, then a class action cannot be the superior means of adjudicating the dispute under Rule 23(b)(3). The panel said that "[t]he two concepts are not mutually exclusive" and, in fact, a class action makes most sense where "recovery on an individual basis would be dwarfed by the cost of litigating on an individual basis."
Perhaps the most interesting part of the opinion, and where the panel split 2-1, was with regard to the cy pres recipients themselves.
The objectors argued that the settlement should be nixed because Google has, in the past, donated to some of the cy pres recipients, three of the cy pres recipients previously received Google settlement funds, and three of the cy pres recipients are organizations housed at class counsel's alma maters. On the last point, a majority of the panel concluded that "a prior relationship or connection between [the cy pres recipient and the parties or their counsel], without more, is not an absolute disqualified." Instead, district courts should look at "a number of factors," including "the nature of the relationship, the timing and recency of the relationship, the significance of dealings between the recipient and the party or counsel, the circumstances of the selection process, and the merits of the recipient." The majority concluded that, while there "may be occasions where the nature of the alumni connections between the parties and the recipients could cast doubt on the propriety of the selection process," in this particular settlement, there was "nothing more than a barebones allegation that class counsel graduated from schools that house the Internet research centers that will receive the funds." The majority pointed out that "[a]ll class counsel swore that they have no affiliations with the specific research centers" and that "[c]lass counsel repeated that attestation at the final settlement approval hearing and added that they sit on no boards for any of the proposed recipients." The dissenting judge was uncomfortable with the high percentage of the settlement going to the alma maters (47%) and would have vacated the settlement and told the district court to "hold an evidentiary hearing, examine class counsel under oath, and determine whether class counsel's prior affiliations with the cy pres recipients played any role in their selection as beneficiaries." The dissenting judge explicitly cited his experience as a trial judge for his skepticism of "unsworn lawyer talk during an oral argument."