Wednesday, August 23, 2017
Ninth Circuit Affirms $8.5 Million Settlement in Google Case
Judge Wallace, in Partial Dissent, Questions Cy Pres Awards to Class Counsels’ Alma Maters, While Judge McKeown Retorts That Suggestion of Impropriety ‘Can’t Be Entertained With a Straight Face’
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed a trial court’s approval of an $8.5 million settlement of a class action against Google for sharing users’ search terms with third parties, with one of the three members of the panel saying in a partial dissent that sworn testimony should have been required as to good faith of class counsel in earmarking about $2.5 million of the cy pres award for their alma maters.
Judge M. Margaret McKeown wrote the majority opinion in In re Google Referrer Header Privacy Litigation, No. 15-15858. The opinion approved a cy pres-only award of about $3.5 million, with approximately $3.2 in attorneys’ fees, administration costs, and incentive payments to the five class members who filed objections and became the plaintiffs.
In his partial dissent, Judge J. Clifford Wallace declared:
“[T]hree of the cy pres distribution payments in our case are to Chicago-Kent College of Law (16%), Stanford (16%), and Harvard (15%). Attorneys for the class attended all three of these institutions. We, along with other courts and observers, have pointed out the unseemly occurrence of cy pres funds being doled out to interested parties’ alma maters.”
He quoted a 2007 New York Times opinion piece as saying:
“Lawyers and judges have grown used to controlling these pots of money, and they enjoy distributing them to favored charities, alma maters and the like.”
Wallace suggested this approach:
“District courts should be required to scrutinize cy pres settlements when the proffered recipients of the fluids have a ‘prior affiliation’ with counsel, a party, or even the judge, especially when one of those players is a loyal alumni of a cy pres recipient. I do not mean to suggest that class counsel’s alma mater can never be a cy pres beneficiary. Rather, I propose that the burden should be on class counsel to show through sworn testimony, in an on-the-record hearing, that the prior affiliation played no role in the negotiations, that other institutions were sincerely considered, and that the participant’s alma mater is the proper cy pres recipient.”
Discussion of three recipients of awards being counsels’ alma maters comprised a small portion of McKeown’s opinion, in which she rejected the objectors’ position that funds should have distributed to class members, that there was impropriety in routing monies to institutions Google had previously favored with donations, and that the attorney fee award was too big.
Can’t Regard Seriously
Turning to Wallace’s concern, she scoffed that the contention of possible impropriety “can’t be entertained with a straight face.”
“[W]e reject the proposition that the link between the cy pres recipients and class counsel’s alma maters raises a significant question about whether the recipients were selected on the merits. There may be occasions where the nature of the alumni connections between the parties and the recipients could cast doubt on the propriety of the selection process. But here, we have nothing more than a barebones allegation that class counsel graduated from schools that house the Internet research centers that will receive funds.”
She pointed out that the objectors have not disputed the lack of any present link between counsel and the universities.
“In essence, the majority holds that despite the nascent dangers posed by apportioning cy pres funds to the distributing parties’ alma maters, the burden is entirely on the objectors to show that the settlement might be tainted.”
“In our case, we have a cy pres-only settlement. That alone raises a yellow flag. Furthermore, we have a class settlement before formal class certification. That raises another yellow flag. Lastly, we have almost half of the settlement fund, several million dollars, being given to class counsel’s alma maters. To me. that raises a red flag….Even with these red and yellow flags, under the majority’s holding, the burden is still on the objectors to prove more, despite the objectors’ lack of access to virtually any relevant evidence that would do so.”
Wallace argued that these factors, in combination, is enough to shift the burden to proponents of the settlement to show, “on a sworn record, that nothing in the acknowledged relationship was a factor in the ultimate choice.”
He noted that the only sworn declarations were to the effect that the lawyers had no persisting ties to their alma maters.
Battle of Footnotes
In a footnote, McKeown—who was joined by Judge Jay S. Bybee—questioned the need for sworn testimony while Wallace, also in a footnote, maintained there is a necessity for it.
“The dissent’s suggestion that what is needed is a hearing with sworn testimony seems superfluous in view of the extensive hearing held by the district court, the specific queries to counsel about the cy pres recipients, and the submission of sworn declarations.”
“I disagree with the majority’s assertion that ‘sworn testimony seems superfluous’ because counsel submitted one-line boilerplate declarations and the district court heard some unsworn argument from the lawyers. My experience as a trial judge taught me to be skeptical of unsworn statements from lawyers, especially when it comes to conflict of interest issues. To me. there is a significant difference between sworn and unsworn testimony.”
Wallace said he was “especially dubious” of the award to the Center for Information. Society and Policy at Chicago-Kent Law School because that center did not exist until a year before the settlement. McKeown pointed to the requirement that a cy pres recipient be linked to a cause fought for by the plaintiffs, and insisted that the center is actively involved in promoting Internet privacy.
Other award recipients are Carnegie Mellon University (21%), the World Privacy Forum (17%), and the AARP Foundation (15%).
Lottery Approach Rejected
In a portion of the opinion that drew no dissent, the court rejected the objectors’ contention that the proceeds should go to Google users. Given that the class is comprised of about 129 million persons—which would mean distributing 4˘ per user—they suggested such means as “random lottery distribution” or by offering “$5 to $10 per claimant” with the expectation that a small percentage of those eligible would apply.
“Objectors would also have us ignore our prior endorsement of cy pres awards that go to uses consistent with the nature of the underlying action.”
Under the settlement, Google now discloses on its website circumstances under which it shares users’ browsing activity. The advisory includes:
“We will share personal information with companies, organizations or individuals outside of Google when we have your consent to do so. We require opt-in consent for the sharing of any sensitive personal information.”
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