SCOTUS requires standing review of case challenging cy pres awards to groups rather than plaintiffs
Only Justice Clarence Thomas offered an opinion on the merits Wednesday in a case that challenges cy pres awards that give class-action awards to nonparty nonprofit groups rather than the plaintiffs.
Thomas said in Frank v. Gaos that he would rule the settlement before the court did not satisfy federal procedural rules requiring class action settlements to be adequate. The other justices, however, sent the case back to the lower courts to review standing issues.
The case challenged a settlement in a class action alleging that Google had violated federal law by sharing the search terms of users who clicked on hyperlinks with servers hosting the webpages.
Lawyers for the plaintiffs had sought to simultaneously certify and settle the class action. The settlement required Google to make additional disclosures on its website, but most of the monetary award—more than $5 million—would be paid to nonprofit groups pledging to use the money for internet privacy. The rest would go to administrative costs, incentive payments for the named plaintiffs and the plaintiffs’ lawyers, who would receive $2 million.
Thomas said in his dissent that the arrangement provided no meaningful relief to absent class members. “Whatever role cy pres may permissibly play in disposing of unclaimed or undistributable class funds,” he said, “cy pres payments are not a form of relief to the absent class members and should not be treated as such (including when calculating attorney’s fees).”
The court majority, however, said in a per curiam opinion that the plaintiffs’ standing needed to be evaluated in light of the Supreme Court’s 2016 decision in Spokeo v. Robins. In that case, the Supreme Court found a federal appeals court considering standing had focused on whether the plaintiff had a particularized injury, while overlooking whether the injury was concrete.
According to the court in Frank, the Spokeo decision “abrogated” a 2010 decision, Edwards v. First American Corp. Edwards had held that a statutory right automatically satisfies the injury-in-fact requirement whenever a statute authorizes a person to sue to vindicate the right.
The American Bar Association had filed an amicus brief noting that cy pres awards in class actions are important in funding legal services for low-income and indigent litigants.
Hat tip to SCOTUSblog, which live blogs on opinion days.
Related articles:
ABA Journal: “Court to consider challenge to cy pres remedies to settle class actions”
ABAJournal.com: “Chemerinsky: SCOTUS case on cy pres awards could have enormous impact on class actions”
Updated on March 21 to link to the ABA’s amicus brief in the case.
