Supreme Court Remands Class Action Challenge

The Supreme Court today remanded Frank v. Gaos to the Ninth Circuit after determining there were still questions about whether or not the named plaintiffs have standing to challenge the settlement at issue. The standing question has followed the plaintiffs throughout this litigation, and was further complicated by the Supreme Court’s decision in Spokeo, Inc. v. Robins, which was decided while Gaos was making its way through the Ninth Circuit. The Supreme Court has ordered the lower court to determine the standing question in light of these new developments.

Recently, CIR filed an amicus brief in another case that challenges the cy pres doctrine – Perryman v. Romero.  If the Ninth Circuit determines that the plaintiffs in Frank v. Goas lack standing, the Supreme Court could hear a similar challenge to cy pres settlements in Perryman. In Gaos, several Justices expressed an interest in reigning in cy pres abuse. At oral arguments, Justice Alito seemed concerned about the free speech implications that CIR pointed out in our amicus brief. And Justice Thomas dissented from the Court’s order to remand the case, expressing his argument that “cy pres payments are not a form of relief to the absent class members and should not be treated as such.”

You can read the Court’s full opinion here.

The rules governing class action litigation are often fundamentally unfair to the plaintiffs. The rules tend to favor awarding settlement funds to attorneys and third parties at the expense of the actual plaintiffs who were injured in the case. A prime example of this is the recent settlement in Gaos v. Google.

In that case, 129 million people accused Google of violating their privacy. A lower court approved an $8.5 million dollar settlement, but the plaintiffs in the case never saw a dime of the money. Thanks to a legal doctrine known as cy pres, the money was split between the attorneys and third party charities that promised to use the money advocating for privacy on the internet.

Cy pres awards are problematic because they are easily abused. In this case, for instance, the charities selected had ties to both sides of the case. According to the Wall Street Journal, Google already supported the charities chosen, and several were housed at the alma maters of the plaintiff’s attorneys.

With Frank v. Gaos before the Supreme Court, the justices will have the opportunity to end this unfair practice of giving plaintiff’s money away to third party groups. And in the process, the Court will have the chance to protect important First Amendment rights. CIR’s amicus brief urging the Supreme Court to review the case argued that cy pres awards violate the First Amendment by compelling plaintiffs to support third party charities without their consent. CIR’s position in this case is similar to its position in Friedrichs v. CTA and Yohn v. CTA. Just as public sector workers shouldn’t be compelled to support third party unions, class action plaintiffs should not be required to fund third party charities without their consent.

The case will likely be argued this fall and will give the Supreme Court an important opportunity to reign in class action abuse and protect the First Amendment rights of class action plaintiffs.

You can read our full brief here.

And you can read more about the case from the Competitive Enterprise Institute here.

Case Status: Remanded and Dismissed

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