Ninth Circuit Affirms $8.5 Million Google Settlement

SAN FRANCISCO (CN) — The Ninth Circuit agreed Tuesday that Google can settle privacy claims by giving $8.5 million to six nonprofit privacy organizations instead of class members, despite ties between the organizations, Google and class counsel.

The three-judge appeals panel found that U.S. District Judge Edward Davila did not abuse his discretion by approving the cy pres settlement, almost half of which went to the alma maters of class counsel, and another chunk to organizations to which Google regularly donates or which received Google settlement funds in the past.

“A prior relationship or connection between the two, without more, is not an absolute disqualifier,” U.S. Circuit Judge M. Margaret McKeown wrote for the panel.

Cy pres, legal French for “as near as,” is an equitable doctrine by which a court reforms a contribution as closely as possible to the donor’s intention.

McKeown said multiple factors, including the nature of the relationship and the circumstances of the selection process also “play into the analysis.” She called the two objectors’ allegation by two objectors that Davila abused his discretion “unfair and untrue.”

But Senior U.S. Circuit Judge J. Clifford Wallace dissented in part, suggesting in a scathing 5-page opinion that the circumstances surrounding the choice of recipients was “unseemly.”

Lead plaintiff Paloma Gaos accused Google in 2010 of violating its own privacy policy by sharing users’ search terms with third-party websites without telling users or asking their permission, in violation of the Stored Communications Act and California law.

The search terms were included in referrer headers, which identify the page containing the link that the user clicked on to request the webpage. Some of the information can identify users, the plaintiffs said.

Under a 2015 settlement, Google agreed to establish an $8.5 million settlement fund, but none of the money went to class members. Instead, $5.3 million went to six cy pres recipients proposed by the settling parties to fund internet privacy initiatives. The remaining $3.2 million went to covering attorneys’ fees, costs, and $15,000 in incentive awards for three named plaintiffs.

The recipients are Carnegie-Mellon University; the World Privacy Forum; Chicago-Kent College of Law Center for Information, Society, and Policy; the Stanford Law School Center for Internet and Society; the Berkman Center for Internet & Society at Harvard and the AARP Foundation.

The Center for Class Action Fairness at the Competitive Enterprise Institute objected to the settlement on behalf of two class members, arguing that “the class members will not see one penny.”

On appeal, the objectors argued that a cy pres settlement was inappropriate and that the $8.5 million should have been used to fund a claims process or lottery distribution to class members.

They took particular issue with the relationships some of the recipients have with class counsel and Google: Class attorney Michael Aschenbrener attended Chicago-Kent, and class attorney Kassra Nassiri attended Stanford and Harvard. Google donates to the Berkman Center, the Stanford Center, AARP, and Chicago-Kent.

Though Davila expressed discomfort with the proposed settlement, he approved it. The judge reasoned that the recipients had a substantial connection to the interests of the class members, and that there was no evidence that the parties’ preexisting relationships factored into the selection.

The Ninth Circuit agreed Tuesday, calling the objectors’ argument “a barebones allegation that class counsel graduated from schools that house the internet research centers that will receive funds.”

McKeown noted that class counsel swore they had no affiliation with the research centers, and that the objectors never disputed it.

“The claim that counsel’s receipt of a degree from one of these schools taints the settlement can’t be entertained with a straight face,” McKeown wrote in the 27-page ruling.

The panel came to a similar conclusion regarding Google, finding that its role in vetting the recipients, its donations to them, and the fact that some received Google settlement funds in the past “does not cast doubt on the settlement.”

“Given that, over time, major players such as Google may be involved in more than one cy pres settlement, it is not an abuse of discretion for a court to bless a strong nexus between the cy pres recipient and the interests of the class over a desire to diversify the pick via novel beneficiaries that are less relevant or less qualified,” McKeown wrote.

Class attorney Nassiri, with Nassiri & Jung in San Francisco, said Tuesday he was pleased with the ruling.

“On this record it’s pretty clear that the recipients were chosen on the merits, and not because of any alumni affiliation,” he said in an interview. “The thought leaders around these issues are law schools, and Judge Davila called them the ‘usual suspects,’ and they’re the usual suspects for good reason. They’re the center of thinking here in this field.”

In his partial dissent, however, Wallace faulted class counsel and Davila for not doing enough to prove that the settlement was appropriate.

He said he was “especially dubious” of the decision to include the Center for Information, Society and Policy at Chicago-Kent among the recipients because it was inaugurated only a year before the parties agreed to the settlement.

Wallace said he would vacate Davila’s approval of the settlement and remand with instructions to hold an evidentiary hearing, examine class counsel under oath, and determine whether their prior affiliation with the recipients played a role in their selection.

“The combination of a cy pres-only award, a pre-certification settlement, and the fact that almost half the cy pres fund is going to class counsel’s alma maters, is sufficient to shift the burden to the proponents of the settlement to show, on a sworn record, that nothing in the acknowledged relationship was a factor in the ultimate choice,” Wallace wrote.

“Here, the only sworn-to items in the record on this issue are boilerplate, one-line declarations from class counsel stating ‘I have no affiliation’ with the subject institutions,” he continued. “While the majority asserts that the district court conducted a ‘careful review,’ these terse declarations are the only shred of sworn-to evidence in the record. There was essentially nothing for the district court to review — carefully or not. Although there was some discussion between counsel and the district court during the hearings on the settlement, this was nothing more than unsworn lawyer talk during an oral argument.”

Ted Frank, one of the objectors and an attorney with the Competitive Enterprise Institute, said Tuesday that Wallace’s dissent didn’t go far enough. He said the majority opinion created a circuit split with the Third, Seventh, Eighth, and possibly Fifth Circuits, and he plans to file a petition for a rehearing before a three-judge panel or a full panel of the court.

“These aren’t close questions, and just turning it into letting lawyers say things under oath, it doesn’t change the perverse incentives, and you need to void those perverse incentives entirely and you need a bright-line rule,” Frank said in an interview.

“We’re going to see tens of millions of dollars diverted from class members to lawyers’ favorite charities.”

Wallace concurred with the majority that a cy pres-only settlement was appropriate and that Davila did not abuse his discretion in calculating attorneys’ fees.

Davila had ruled that a cy pres-only settlement was appropriate because the settlement fund was non-distributable. McKeown noted in Tuesday’s decision that class members would have received 4 cents each in a payout.

Ninth Circuit Judge Jay Bybee joined McKeown and Wallace on the panel.

Google was represented by Donald Falk with Mayer Brown in Palo Alto. He directed a request for comment to a Google spokesperson, who said the company was pleased with the decision.

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