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If a multi-million dollar class action settlement does not pay a single consumer, is it fair?
This is not the beginning of a lawyer's joke; This is the crucial point of a case that was debated on Wednesday in the US Supreme Court and which, according to the lawyers, would have serious consequences on the benefits for consumers to duel with companies in the United States. large-scale litigation.
"It's potentially billions of dollars that go from ordinary consumers to lawyers' slush funds," said Ted Frank, director of litigation at the Competitive Enterprise Institute, which challenges Google's $ 8.5 million settlement.
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and 129 million members of the group before the Supreme Court.
The case of Frank v. Gaos addresses the question of whether it is fair and reasonable to conclude at any time class-action settlements giving money to outside groups instead of group members themselves.
A decision for Frank – who happens to be a member of the group in the Google case and who has long challenged class action settlements – may require that the money be returned directly to consumers and reverse the payment process class actions in force for decades.
Google's $ 8.5 million settlement paid only $ 15,000 to three consumers
The underlying case relates to Google's 2013 agreement to pay $ 8.5 million to settle a case of widespread violation of the right to privacy. When a user was browsing topics on Google, the search engine passed search terms – such as "depression" and "medical leave" – into the URL string of third-party websites. Revelations of the search terms have violated various federal and federal laws, said the complainants.
After about three years of litigation, the parties agreed. Google added more information online and opened its wallet without acknowledging its responsibility.
Settlement payments included $ 5,000 for each of the three named plaintiffs and $ 2.12 million for plaintiffs' counsel fees. The remaining $ 5.3 million was divided between six universities and organizations that committed to allocate these funds to improve the confidentiality of data on the Internet.
Google's lawyers and class members believe that Frank's objections to the settlement are unfounded. The compensation paid to six well-known institutions is valuable, rare and more than a four-cent check sent to each member of the group, they argue.
Frank has never explained "why a settlement that provides a benefit to the class members and forces the defendant to pay compensation is unfair, unreasonable or inappropriate, while the alternative is nothing," said members' lawyers. of the group.
The Google settlement money went to Harvard and other elite schools
Among the beneficiaries of the agreement are the Berkman Center for Internet and Society at Harvard University, the Information Center, Society and Policy of Kent-Chicago College, and the Center for the Internet and Society. Stanford Law School.
Frank, who is also one of the many members of the group, opposed the result. Among other things, he noted that three of the plaintiffs' lawyers had graduated from schools ready to receive money. The school's links had nothing to do with the sentences approved by the court, insisted plaintiffs' lawyers.
A federal judge from San Francisco signed the settlement. A group of three judges of the Ninth Circuit Appellate Court, consisting of appointees to the George W. Bush administrations, Richard Nixon and Bill Clinton, confirmed it.
Constable J. Clifford Wallace partially dissented, stating that 47% of the award went to General Counsel – Harvard, Stanford and the Chicago-Kent Law School – the lower court should have dig deeper to be sure that the links between school and football are not played "any role in their selection as beneficiaries."
The Supreme Court decided to hear the case in April.
'Cy pres' distributions reviewed
The allocation of a sum of money to third-party organizations is the result of an arrangement called "cy pres." It is legal lingo from ancient French that means "cy pres as possible" which translates as "as close as possible".
As a legal concept, "cypres" distributions have their roots in the law of trusts and estates. For example, court documents have noted that cyprus doctrine allowed a Massachusetts judge, following the civil war, to reconfigure a trust fund for the abolitionist movement to help poor African Americans.
Federal lawmakers approved the distribution of cypres for class actions in 1966. Cyfer distributions to charities are often used once all possible members of the group have been located and paid, observers said. The case of Google, where payments to third-party groups came before payments to individuals, is a rare exception to the rule, they said.
Consumers are private, say some
But Frank said the cypress rewards have risen rapidly since the 1980s, have accelerated sharply recently, depriving consumers.
Cypr prices are a symptom of bigger problems, says Frank. He says many class action lawyers do not care about the best interests of the class, Frank said. "When the courts consider a dollar dollar as equivalent to a dollar of direct class recovery, the natural preference of the class's lawyers will be to favor their charities and their preferred causes in comparison to thousands, if not millions, anonymous group members.
But the group's lawyers in the current case pointed out that lawmakers have repeatedly considered the rules on class actions. They have always maintained the cy se provisions, recognizing their usefulness.
Google has acknowledged in the courts that some class actions and regulations may lead to abuse and excesses – but the result is a good example of agreement, the company said.
Frank was looking for a ban on cy distributions, said the tech company.
Getting rid of "cypres" will make these lawsuits more costly for businesses, they say.
Getting rid of these types of payments would make it even more difficult to handle huge cases where direct payments were impossible, Google insisted. "Banning online transactions would make class-action lawsuits even more expensive and ineffective, and would impose a cure that would worsen the disease," Google's lawyers said.
Brian Fitzpatrick, a professor at Vanderbilt Law School, an expert in class action law, said the recipient selection process in the Google case was "more rigorous than usual" .
"Usually, someone chooses something," he said, without much clarity on the reasoning behind the attribution.
Fitzpatrick said the case concerned a narrow problem.
There are about 350 class action lawsuits in federal courts each year, Fitzpatrick said. About 40% are related to securities fraud, with shareholders suing companies for alleged misstatements of share prices. Collective redress against consumers accounted for 10% of the pacts, he said.
Class actions are often the headlines. Recently, working-class investors have alleged that President Donald Trump huddled them several years ago while trying to invest in a marketing company. Meanwhile, a short seller claimed that Elon Musk had made a material misstatement in the facts by publishing his infamous tweet of August on taking Tesla.
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private.
Various donors for both sides
Cyren payments have their allies and enemies.
The attorneys general of 19 states, mostly Republicans, echoed Frank's concerns about the sentences handed down by the president and asked for the dismissal of the case. The US Chamber of Commerce has not taken a position on the Google regulation but in its own brief, but said companies often face "abusive" lawsuits.
Consumer groups such as the Education Fund, the US Public Public Research Group and the National Consumer Law Center say the regulation should not be disrupted.
Class actions are not just about restitution, consumer groups said, but they also correct wrongdoing on a systemic level.
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