Case No. 17-961 | 9th Cir.
Preview by Michelle Divelbiss, Online Editor
In the world of remedies, the doctrine of cy pres permits money from a class action settlement to be distributed, in whole or in part, to a charitable organization. The basis for this type of award is rooted in the law of equity, and cy pres is derived from a phrase that translates to “as close as possible.” Democratic Cent. Comm. v. Washington Metro. Area Transit Comm’n, 84 F.3d 451, 455 n.1 (D.C. Cir. 1996). A cy pres award may be deemed appropriate when it is not possible to put wronged individuals back in a rightful position. In some situations, class members may receive their share of the damages but there may be extra money that was not distributed. The extra money is then distributed to one or more charitable organizations related to the class plaintiffs’ alleged injuries. In other situations, the amount of money may be too small to justify its distribution to class members, and the entire sum is donated to one or more charitable organizations.
Paloma Gaos filed a putative class action against Google, alleging invasion of privacy and other causes of action. The parties entered into settlement negotiations and ultimately agreed that Google would pay $8.5 million. The attorneys for the class sought more than $2 million in legal fees (despite a lodestar of less than half that amount). Unnamed class members would receive none of the $8.5 million and, after attorneys’ fees, the remainder would be paid as a cy pres award to charitable organizations. The class attorneys and Google selected six organizations, some of which are associated with Chicago-Kent College of Law, Stanford Law School, and Harvard University.
In bringing this appeal, the petitioners and unnamed class members Theodore H. Frank and Melissa Holyoak object to the class certification, the settlement, and the attorneys’ fees. Frank and Holyoak also allege that the selection of the organizations was improper because both Google and the attorneys failed to disclose their personal connections to the cy pres recipients and the aforementioned educational institutions are alma maters of the class attorneys. Further, the Ninth Circuit did not take issue with the fact that Google has existing connections to and business arrangements with these institutions.
Under Federal Rule of Civil Procedure 32(e)(2), a class action settlement may be approved by a court only if it is “fair, reasonable, and adequate.” Respondents claim that the cy pres award is proper because it meets the three required criteria. They argue that (1) direct distribution to class members is not feasible because it would provide for only four cents to each class member; (2) that the organizations meet the nexus requirement because they focus on internet and privacy rights; and (3) that the organizations are independent of the parties and the petitioners have failed to prove otherwise.
The Circuits are somewhat split on this issue. Distribution of class action settlements to class members is required in the Third, Fifth, Seventh, and Eighth Circuits before any settlement money can be used for other purposes. The Ninth Circuit found that distributing the award to charitable organizations under the cy pres doctrine and not to class members satisfied the “fair, reasonable, and adequate” requirement.
It seems that the Supreme Court has been waiting for the right cy pres case in order to address multiple issues associated with class action remedies. In a denial of certiorari for Marek v. Lane in 2013, Chief Justice Roberts hinted that the Court was waiting for a case that would allow it to weigh in on equitable remedies and provide criteria for the use of such remedies. This case presents a prime opportunity for the Supreme Court to finally do just that.