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Ninth Circuit:
Class Action Proceeds Need Not Go to Class Members
Panel Says There’s No Impediment to a Settlement Under Which Funds Go to Nonprofit Advocacy Groups; Bade Applies Theory That Cy Pres Awards Do Benefit Class—Then Questions Validity of Notion
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals declared yesterday, in a case involving a $13 million pay-out by Google in a class action over the illegal gathering of personal Wi-Fi data by Street View vehicles, that there is no impediment to a settlement under which class members receive no money and the funds are diverted to nonprofit advocacy groups.
Writing for a three-member panel, Judge Bridget Shelton Bade said that “although no binding Ninth Circuit precedent specifically addresses the propriety of settlements where, as here, the only monetary relief comes in the form of cy pres payments to third parties,” such awards have been approved in the past without considering whether they are authorized.
“In upholding the validity of cy pres arrangements,” she wrote, “we have repeatedly recognized that class members do benefit—albeit indirectly—from a defendant’s payment of funds to an appropriate third party.”
While relying on that theory in her opinion for the court, Bade, in a concurring opinion, questioned its validity. The judge opined that “it is time we reconsider the practice of cy pres awards.”
Pirated Data
Bade’s opinions come in a case stemming from Google’s admission in 2010 that its fleet of roving cars taking photographs for viewing on a feature of Google maps were sapping data from Wi-Fi networks, collecting usernames and passwords, along with emails, videos, photographs, and text. The company insisted the snooping was accidental.
Eight of 13 putative class actions were consolidated and transferred to the District Court for the Northern District of California. A class of an estimated six million persons, certified by Judge Charles R. Breyer, consists of “all persons who used a wireless network device from which Acquired Payload Data was obtained” during the period from Jan. 1, 2007 through May 15, 2010.
In approving a proposed settlement on March 18, 2020, Breyer granted the plaintiffs’ motions for $3,039,625 in attorney fees, $750,000 in costs, and “service” payments of $5,000 to each of the 18 named class representatives. He directed that the balance of the funds to be paid by Google be divided among nine privacy advocacy groups, including the Center on Privacy & Technology at Georgetown Law and the American Civil Liberties Union Foundation, and approved the agreed-upon injunctive relief.
Breyer’s Reasoning
Breyer said in his order:
“Given the 60 million person class size and the $13 million Settlement Fund, ‘the settlement would provide only an estimated $0.22 per class member even absent any attorneys’ fees, expenses, or even mailing costs.’…Moreover, it is unusually difficult and expensive to identify class members in this case….This appears, therefore, a prime example of a non-distributable Settlement Fund.”
He declared that “the cy pres-only award is adequate in this case.”
Ninth Circuit Opinion
In her opinion affirming Breyer’s order approving the settlement, Bade said:
“Considering the unique challenges plaintiffs would have faced in proving their claims, we hold that the district court did not err by concluding this injunctive relief, together with the indirect benefits conferred by the cy pres provisions, was fair, reasonable, and adequate compensation to the class members.”
She rejected the contention of objector David Lowery that moneys should have been distributed among those who came forward and identified themselves as class members. Even if the number of persons submitting claims were small enough to render distribution to them feasible, Bade said, “Lowery does not identify a viable way for a claims administrator to verify any claimant’s entitlement to settlement funds.
Verification, she pointed out, would require ascertainment that the claimant was a user of an unencrypted Wi-Fi network during the relevant period, that a Street View car was within the range of the network, and communications of a protectible nature were transmitted at the very time the Street View car was in the vicinity and that it picked up the data.
Bade noted that it “took three years of intensive investigation and analysis to verify the claims of eighteen named plaintiffs,” and concluded:
“Because self-identification would be pure speculation, and any meaningful forensic verification of claims would be prohibitively costly and time-consuming, we affirm the district court’s finding that it was not feasible to verify class members’ claims as would be necessary to distribute funds directly to class members.”
The cy pres awards, she declared, meet the requirement of bearing a “direct and substantial nexus to the interests of absent class members.” Joining in Bade’s opinion were Judges Marsha S. Berzon and Morgan Christen. In her concurring opinion, Bade said the opinion she authored for the panel is in conformity with decisional law of the circuit, but questioned whether an underlying premise is realistic, commenting: “Courts have upheld cy pres awards based on the premise that they provide an indirect benefit to the class when a direct monetary payment is not feasible….
“But there is an increasing skepticism about whether cy pres provisions actually provide an indirect benefit to class members….
“[D]espite the acceptance of the theory of indirect benefit, there is, in my view, a compelling argument that class members receive no benefit at all from a settlement that extinguishes their claims without awarding them any damages, and instead directs money to groups whose interests are purportedly aligned with the class members, but whom they have likely never heard of or may even oppose.”
The judge questioned whether such awards are not punitive in nature, “with defendants paying millions of dollars in what are essentially civil fines to class counsel and third parties while providing no compensation to injured class members.”
The case is In re Google Inc. Street View Litigation, 20-15616.
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