(Reuters) — The U.S. Supreme Court on Monday agreed to hear an internet privacy case involving Google L.L.C. that could put the brakes on an increasingly common form of settlement in class action suits that funnels money to unrelated third parties and charities instead of to people affected by the alleged wrongdoing.
The justices will take up an appeal by opponents, led by a conservative group, challenging the $8.5 million that Google agreed to pay in 2013 to settle claims that the search engine operator allowed other websites to see users’ search queries, violating their privacy rights. The settlement was upheld by a lower court. Google is part of Alphabet Inc.
The settlement awarded most of the money to universities and organizations that promote internet privacy but nothing to the millions of Google users who the plaintiffs were to have represented in the class action.
The deal’s opponents were led by Ted Frank, director of litigation for the Competitive Enterprise Institute, a Washington-based conservative think tank. They said the deal violated procedural rules in U.S. law requiring settlements to be fair, reasonable and adequate.
Mr. Frank objected to the settlement on the basis of being one of the estimated 129 million Google users in the United States. Google has called Mr. Frank a “professional objector.”
At issue are what are known as “cy pres” awards in settlements that give money that goes unclaimed or cannot feasibly be distributed to unrelated entities as long as it would be in the plaintiffs’ interests. Critics have said such awards allow class action attorneys to benefit their own interests instead of their clients’ interests.
The San Francisco-based 9th U.S. Circuit Court of Appeals justified the Google settlement’s structure because each of the 129 million U.S. Google users who theoretically could have claimed part of it would have received “a paltry 4 cents in recovery.”
The case began when California resident Paloma Gaos filed a proposed class action lawsuit in 2010 in San Jose federal court claiming Google’s search protocols violated federal privacy law by disclosing users’ search terms to other websites.
Google agreed in the settlement to disclose on its website how users’ search terms are shared but was not required to change its behavior. Ms. Gaos and two other plaintiffs received $5,000 each for representing the class. Their attorneys received about $2.1 million.
Most of the rest of the money went to six entities including Stanford University, Harvard University and the Oregon-based World Privacy Forum, a privacy and data analytics research organization.
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