WASHINGTON _ The Supreme Court agreed Monday to consider reining in deals in class-action cases that yield millions of dollars in fees for lawyers, millions more in awards for their favored universities and nothing for the plaintiffs who were allegedly injured.
The justices will review an $8 million settlement in a privacy suit against Google that was upheld last year by the 9th Circuit Court of Appeals as "fair, reasonable and adequate." It awarded about $2.2 million to the lawyers who sued and $5.3 million to several universities and think tanks they had selected. None of the money would go to the estimated 129 million plaintiffs.
Critics of these settlements described them as a kind of suspect "collusion" between plaintiffs' lawyers and corporate defendants, since both benefit by arranging a settlement. Leading the challenge to these deals is Ted Frank, a Washington lawyer who regularly objects to class-action settlements.
In an unusual move, the Supreme Court voted to hear his appeal over the objections of both Google and the plaintiffs. In Frank vs. Gaos, he urged the court to "correct a serious abuse of the class-action mechanism that puts the interests of those it is intended to protect _ class members _ dead last."
At issue is a so-called cy pres settlement, a French term meaning "as near as possible." This idea was originally used in trust settlements where it was no longer possible to use the money for the intended purpose. Lawyers cited the 19th century case of a trust fund devoted to supporting the abolitionist movement that was used after the Civil War to provide aid to African Americans.
The same idea has been used in class-action settlements when it is not possible or practical to distribute the money as originally intended. The Google suit was said to speak for 129 million Google users whose privacy was infringed when their search terms were passed on to "third parties," like advertisers. Google offered to provide more disclosures online.
The $5.3 million portion of the settlement would have yielded each of the plaintiffs about $.04. Instead, the attorneys proposed to distribute the money among six universities, research centers or groups that are concerned with privacy on the internet. They included the World Privacy Forum, Carnegie Mellon University, the Chicago-Kent College of Law, the Berkman Center at Harvard University, Stanford's Center for Internet and Society and AARP.
A federal judge in Northern California approved the settlement, and the 9th Circuit affirmed that decision. The high court said it will hear a challenge to such arrangements in the fall.
"We are hopeful that the Supreme Court's review will result in a standard forbidding attorneys from misusing class-action settlements to selfishly put themselves and third parties ahead of their clients?," Frank said Monday in response to the court's action.
