Supreme court appears divided on Google settlement that gave to charities

Two US Google users sued the company in 2010 for sharing their search terms with third party websites. Google settled the case four years later for $8.5 million, promising to give the bulk of the money to charitable organizations with plans to improve user privacy.

But before the lawyers on both sides could finalize the deal, there was an objection.

Lawyer Theodore Frank wanted to know why none of that money was going to Google users like him. On Wednesday, the US Supreme Court heard his objections during oral arguments and seemed divided as to whether he had a point.

What’s more, some justices questioned the very idea that Google users were harmed when the company turned over their search terms to third parties without their consent.

The case has the potential to upend an unusual form of settlement that some tech companies — and other companies too — have signed onto in order to resolve legal claims against them. Called a “cy pres” award, this type of settlement goes to charitable organizations that submit proposals to address problems identified in the lawsuit.

Critics like Frank take issue with settlements that only reap cy pres awards and give no funds directly to the plaintiffs. Proponents say it’s a good solution when a settlement would only give pennies to each individual plaintiff.

In the case Frank objected to, lawyers determined each affected Google user would receive less than one dollar. But Frank said that lawyers said those numbers weren’t realistic. What’s more, he said, letting plaintiffs’ lawyers claim large fees — about $2 million in the Google case — for themselves without giving any of the settlement funds to the class members sets up “perverse incentives” for plaintiffs’ lawyers to give the money to third parties instead of their clients. 

“When courts have insisted that attorneys don’t get paid unless their clients get paid, the attorneys find a way to improve the claims process and make money get to the class,” Frank said.

Who benefits from cy pres awards?

Associate Justice Samuel Alito took issue with the idea that organizations that receive cy pres awards may engage in political advocacy that the class members don’t agree with. 

“Money is given to organizations that they may or may not like and that may or may not ever do anything that is of even indirect benefit to them,” Alito said.  “How can such a system be regarded as a sensible system?”

Chief Justice John Roberts appeared to side with Frank’s arguments, raising concerns that the organizations winning the cy pres money weren’t known for protecting online privacy and also some of them had already received money from Google. 

“Don’t you think it’s just a little bit fishy that the money goes to a charity or a 501(c)(3) organization that Google had contributed to in the past?” Roberts asked Jeffrey Lamken, an attorney for the plaintiffs who originally sued Google.

Lamken countered that the federal judge who approved the settlement found the cy pres award recipients to be appropriate. What’s more, he said, the organizations that receive funds are obligated to use the money for specific programs related to internet search privacy and not for political advocacy.

“This is targeted precisely to the type of injury and precisely the type of problem, privacy invasion, that that class is subjected to,” Lamken said.

Other justices questioned whether there was a legal basis for the Supreme Court to rule that cy pres awards shouldn’t be allowed. Associate Justice Sonia Sotomayor raised this question, adding that it appears federal courts are doing a good job of weeding out cy pres settlements that don’t benefit the class members.

“You do point to some potentially abusive situations, but in all those situations, it’s the cases where the circuit court rejected a cy pres award.” Sotomayor said. “It seems like the system is working, not not working.”

What makes a breach of privacy harmful?

Several justices wondered if they should be considering the question of cy pres awards at all. That’s because they weren’t sure the plaintiffs had any legal grounds to sue Google for privacy violations in the first place. 

That means the justices could direct the federal court where the case started to re-examine the lawsuit before the Supreme Court can make any ruling on the settlement.

The plaintiffs claimed in their lawsuit that Google harmed them by sharing their search terms in a specific circumstance. When users enter words into the Google search engine, they’ll see a list of results. Once the user clicks on one of those results and is directed to another website, that second website gets to collect the search terms the user entered. 

Associate Justice Stephen Breyer questioned whether that was harmful to Google users. The Supreme Court ruled in 2016 in a case called Spokeo v. Robins that plaintiffs in privacy lawsuits have to prove an “injury in fact,” or that there was a true harm caused by a privacy violation. That means just proving a privacy violation occurred isn’t enough to base a lawsuit on.

The federal court in the case against Google didn’t rule on whether the plaintiffs had successfully claimed they suffered an injury-in-fact. That made Associate Justice Ruth Bader Ginsberg wonder aloud on Wednesday whether that means the Supreme Court should send the case back to the federal court for a decision on that question.

Associate Justice Brett Kavanaugh, however, said he thought “common sense” shows that Google users don’t want third parties to see everything they search for.

“I don’t think anyone would want the disclosure of everything they searched for disclosed to other people,” Kavanaugh said. “That seems a harm.”

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