The Supreme Court recently granted review in a case that involves whether, or in what circumstances, cy pres relief may be used in class action settlements. In Frank v. Gaos, No. 17-961, the Court will review the Ninth Circuit’s decision in In re Google Referrer Header Privacy Litig., 869 F.3d 737 (9th Cir. 2017). The question presented in the petition for certiorari is: “Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be ‘fair, reasonable, and adequate.’”

The case involves claims under the Stored Communications Act and various state common law claims, alleging that Google violated users’ privacy rights by disclosing the search terms used to owners of websites. The district court approved a settlement that called for Google to provide a disclosure of how it shares users’ search terms, and for an $8.5 million settlement fund. $5.3 million of the settlement fund would be distributed to six cy pres recipients, non-profit organizations that would use the funds to promote Internet privacy, and the remaining $3.2 million would go to attorneys’ fees, administrative costs and incentive payments for the named plaintiffs. The Ninth Circuit affirmed. It explained that cy pres-only settlements are “the exception, not the rule,” but that they are appropriate where the settlement is “non-distributable” because it would not be feasible to distribute money to individual class members. Here, the class size is estimated at 129 million class members, who would be entitled to 4 cents each, and the cost of sending out the payments would exceed the benefit. The objectors argued that there should be a lottery system whereby some class members would receive say $5 or $10, and that if the settlement was nondistributable, the court should instead rule that the superiority requirement for class certification was not satisfied. The Ninth Circuit found that the district court’s rejection of these arguments and approval of the settlement was not an abuse of discretion.

The objectors also argued that the cy pres recipients were inappropriate because Google had previously donated to some of them, three of them previously received funds in other Google class settlements, and three of them were affiliated with class counsel’s alma maters. The Ninth Circuit rejected these contentions, noting that the organizations had a strong nexus to the interests of the class, Google had previously donated to hundreds of organizations, there was no fraud or collusion, and the mere fact that class counsel graduated from schools that had connections to some of the organizations did not warrant rejecting the settlement. The Ninth Circuit also found the attorneys’ fees reasonable because they were 25% of the settlement fund and consistent with a lodestar calculation.

Judge Wallace wrote an opinion concurring in part and dissenting in part. He dissented only on the issue involving the relationships between the cy pres recipients and the alma maters of class counsel, concluding that the district court should have looked into that issue further. He wrote that “I would vacate the district court’s approval of the class settlement, and remand with instructions to hold an evidentiary hearing, examine class counsel under oath, and determine whether class counsel’s prior affiliation with the cy pres recipients played any role in their selection as beneficiaries.” Id. at 748 (Wallace, J., concurring in part and dissenting in part). In my view, requiring such a hearing could present substantial concerns about the protection of the attorney-client privilege and work product doctrine – ultimately it is the clients on both sides who are making settlement decisions, and examining counsel as to their thinking (or their advice to their client) behind such decisions seems problematic, although that may not be something the Supreme Court addresses in this case.

From a defense perspective, this case may present a challenge with respect to what position industry organizations may wish to take in amicus briefs. If the Court were to rule that cases where settlements would be “non-distributable” do not satisfy the superiority requirement and should never be certified class actions at all, defendants might welcome that result. But how would such a rule be applied, and where would the line be drawn? In most cases like this, one might be able to calculate a theoretical class recovery (e.g., with punitive damages) that might, in theory, be large enough to be distributable, although such an amount is very unlikely to be awarded. If a “non-distributable” settlement means only that the settlement is rejected and the parties are forced to continue to litigate, that forces defendants to incur large litigation expenses and risk in cases that they would prefer to resolve. The reality is that there needs to be a route to settling cases like this when appropriate. To the extent the Court is granting certiorari to provide some guidance around when to use cy pres relief and how to do it, that may be welcomed by both sides, provided the Court does not make it unduly difficult to satisfy whatever criteria are ultimately adopted.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.