More than $2.12 million of the settlement went to the lawyers who brought the case, some went to administrative costs and the rest went to a handful of organizations and universities that pledged to use it for Internet privacy education.
The whole thing, Chief Justice John G. Roberts Jr. suggested during the hour-long oral argument, might be “a little bit fishy.”
Roberts specifically was talking about the fact that some of the groups that received part of the settlement had previously received donations from Google. But in the past he has voiced general reservations about what are called “cy pres” awards in class-action settlements, in which lawyers get paid, organizations and charities get what’s left over and the folks supposedly harmed by the challenged wrongdoing get nothing at all.
His concerns were shared by some of his fellow conservatives on the court.
“The attorneys get money, and a lot of it. The class members get no money whatsoever,” said Justice Samuel A. Alito Jr. “And money is given to organizations that they may or may not like and that may or may not ever do anything that is of even indirect benefit to them.
“How can such a system be regarded as a sensible system?”
Justice Brett M. Kavanaugh noted an “appearance” problem in this case. Three of the organizations that received funds were affiliated with Harvard, Stanford and the Chicago-Kent College of Law, which happened to be the alma maters of lawyers representing the class.
Kavanaugh suggested it might be better to distribute the money to only some of the class members, drawn perhaps in a lottery.
“Imperfect or strange as that may be, it seems to me potentially less strange — or why isn’t it less strange than giving it to people who weren’t injured at all, who have affiliations with the counsel, and who in many cases don’t need the money?” he asked.
Washington lawyer Andrew J. Pincus, representing Google, and Jeffrey A. Lamken, representing those who agreed to the settlement, defended the process.
“If it’s not possible to give this money out to people without it becoming practically zero, or there’s a grave risk of that happening, then you can take the money and give it to institutions for particular uses that serve the interests of the individual class members,” said Lamken.
That resonated with some justices.
“Practically, the class members would get nothing, nothing at all, and, here, at least they get an indirect benefit,” said Justice Ruth Bader Ginsburg.
Justice Sonia Sotomayor said it has been estimated that after deducting for identifying the millions of people in the class, preparing and executing a mailing telling them of the settlement and then processing the claims, the payout would be in the neighborhood of 67 cents per person.
Sotomayor said it did not seem odd that a California district judge and a panel of the U.S. Court of Appeals for the 9th Circuit would find that the settlement met the requirement that class settlements be “fair, adequate and reasonable.”
“Why would it have been an abuse of discretion for the court to believe that processing 67 cents didn’t make sense because the cost would outweigh what they would pay?” Sotomayor asked Theodore H. Frank, director of litigation at the Competitive Enterprise Institute.
Frank is a frequent objector to class-action settlements, but on Wednesday became a rarity: someone who represents himself at the Supreme Court.
In reality, he said, a small percentage of class members claim their share of a settlement, so the payouts could be larger. And while Sotomayor noted that such cy pres settlements are rare, Frank said more will be on the way because of the 9th Circuit’s standards.
He and Deputy Solicitor General Jeffrey B. Wall, who represented the government, said the court should also find objectionable the way attorney’s fees were awarded in the case.
They contend that lawyers would look harder for ways to distribute money to those harmed if their fees depended on it.
With all the debate about the issue, several justices seemed to have problems with the case that might keep them from addressing the merits. It seemed possible the case, Frank v. Gaos, might be returned to lower courts for more work.