Google Pays 5.5M To No One: Cy Pres Problems Expert Cures

By Annie Dike, Esq.

Can you settle a case without compensating the injured party Of course. Google is making a go of it in a privacy case. The art of negotiating is learning what the other side truly wants.

Often it is money (and lots of it). Sometimes it is merely an apology.  Other times it is a tangible benefit: a job back, or a contract enforced. Maybe the plaintiff wants a donation made to cancer research. That sounds reasonable, common even, when the request comes from the injured party directly. What if it comes from someone else? What if the injured party has no say and the advocates and the judge determine what amount is to be paid and to whom? Does that bother you? Opponents of cy pres settlements say it should. Their recommendation to rectify the alleged impropriety? Expert testimony.

Cy Press Settlements

“I don’t want a dime of your stinking money,” she said. You remember that scene from the Rainmaker, where the mother, suing the insurance company that denied her deceased son’s claim for leukemia treatment, takes the stand to declare she would donate “every cent” to the American Leukemia Society. Clearly, the injured party’s desire was to punish the defendant. The aim was punitive, not compensatory. This, too, is the goal of the cy pres doctrine, where funds paid in settlement of claims are distributed not to the injured parties but, rather, to charitable organizations that (at least in theory) have some relation to the subject matter of the litigation. Cy pres settlements are also utilized when the injured parties are too numerous to identify and/or too tedious to pay. At least that is what counsel in the Google matter claims.

Cy pres settlements are also utilized when the injured parties are too numerous to identify and/or too tedious to pay.

Exposure

Class members claim Google used computer code to circumvent privacy settings, allowing advertisers and third parties to track their cookies and browsing activities. In settlement, Google offered to pay $5.5 million to a handful of internet technology and privacy rights institutions for internet privacy research. Class counsel agreed. With all advocates on board, the settlement was set to go through until the Center for Class Action Fairness at the Competitive Enterprise Institute (CEI) filed an objection on December 20, 2016 on behalf of class member Theodore H. Frank.

The CEI pointed out to the court that Google has made significant corporate contributions to the same internet technology institutions before. The settlement would not be forcing Google to do anything that it would not have already planned to do. Notably, the CEI also exposed some relationships between the fund recipients and class counsel, namely that one of the class counsel currently sits on the board of one of the cy pres recipients. Class counsel defended the cy pres proposal, arguing the class members would number in the millions and be nearly impossible to track down. In addition, the cost to distribute the funds to each member would likely exceed the nominal amount to be awarded to each.

In settlement, Google offered to pay $5.5 million to a handful of internet technology and privacy rights institutions for internet privacy research.

Tweet: In settlement, Google offered to pay $5.5 million to a handful of internet technology and privacy rights institutions for internet privacy research.

Conflicts of Interests

There is also the very small matter of the rather large fee. $2.5 million of the proposed $5.5 million will go to class counsel in the form of attorney’s fees, to which the CEI vehemently objected, claiming the percent ratio (45%) is unreasonable and only encourages class action counsel in every case to advocate for higher fee recovery and no distribution to class members. Conflicts of interests like these have brought about fierce objection from opponents of cy pres settlements, asserting the impropriety of counsel arguing for his own recovery. Their proposal to ensure the adequacy and fairness of cy pres settlements? Expert testimony.

While an attorney likely has the requisite experience to offer an educated opinion on the adequacy and fairness of a settlement proposal, it is hard to deny any bias when your fees are part of the recovery. Instead, cy pres opponents argue that the court should bring in a third-party expert witness to attest to the adequacy of the settlement. They could be lawyers, mediators or even fund administrators who specialize in class action settlements. The court could also appoint an adversary with the specific duty to oppose the cy pres proposal so that the judge will have evidence on both sides as to the reasonableness of the settlement. These are just some suggested solutions offered.

What do you think? When it comes to cy pres settlements where the class members cannot be determined, should we call in some experts?

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Annie Dike, Esq.

As a former trial and litigation attorney, Annie Dike has a keen eye for expert evidentiary issues and a clear voice for practical solutions.  Annie is a published author of both fiction, non-fiction, and a comprehensive legal practitioner's guide to hourly billing published by LexisNexis. Annie graduated from the University of Alabama School of Law cum laude.  While in law school, she served as Vice President of both the Bench and Bar Legal Honor Society and the Farrah Law Society and was a member of the Alabama Trial Advocacy Competition Team as well as Lead Articles Editor of The Journal of the Legal Profession.  Ms. Dike has published articles in The Alabama Lawyer and DRI MedLaw Update and has spoken on numerous legal issues at various conferences nationwide.

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