Supreme Court Weighs Google Settlement That Paid Class Members Nothing

WASHINGTON — In a lively and freewheeling argument on Wednesday, the Supreme Court considered whether it should place limits on class-action settlements in which the plaintiffs’ lawyers receive millions and their clients get nothing. In the process, several justices mused about the nature of privacy in the digital age.

The case arose from an $8.5 million settlement between Google and class-action lawyers who said the company had violated its users’ privacy rights. Under the settlement, the lawyers were paid more than $2 million, but members of the class received no money.

Instead, the company agreed to make contributions to institutions concerned with privacy on the internet, including centers at Harvard, Stanford and Chicago-Kent College of Law, and AARP, the group once known as the American Association of Retired Persons.

“How can you say that it makes any sense?” Justice Samuel Alito asked a lawyer for the members of the class.

“The attorneys get money, and a lot of it,” Alito said. “The class members get no money whatsoever. And 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.”

Chief Justice John Roberts suggested that paying charities rather than plaintiffs was a recipe for abuse. “Don’t you think it’s just a little bit fishy that the money goes to a charity,” he asked, “that Google had contributed to in the past?”

The chief justice added that he was particularly puzzled by the award to AARP, noting that it “engages in political activity, having nothing to do with the inability of elderly people to conduct searches” on the internet.

Justice Brett Kavanaugh said he was concerned about “the appearance of favoritism” given that some of the grant recipients were schools the lawyers in the case had attended.

But Justice Ruth Bader Ginsburg said paying money to class members was not always possible, as the sums at issue were sometimes too small to justify the cost of distributing them. Payments to charities were preferable to trying to pay pennies to members of the class, she said. “Practically,” she said, “the class members would get nothing, nothing at all, and here at least they get an indirect benefit.”

Theodore H. Frank filed an objection to the settlement, saying it provided members of the class with “no money, no alteration of the defendant’s allegedly injurious conduct, not even coupons.”

Frank argued his own case Wednesday, a rarity in the Supreme Court, and he exhibited comprehensive knowledge of the law and an only occasionally halting style.

Much of the argument concerned whether paying the plaintiffs was practicable. A divided three-judge panel of the 9th U.S. Circuit Court of Appeals, in San Francisco, upheld the settlement, with all three judges agreeing that trying to pay compensation to the class would be inefficient, as the individual payouts would be about 4 cents.

Frank said few people submit claims in class-action settlements. Using typical response rates, he said, members of the class could have received $5 to $10 each.

Even a lottery, Frank said, would have been a better way to compensate the class.

Kavanaugh seemed to agree. “Imperfect or strange as that may be,” he said, “it seems to me potentially less strange, or why isn’t it less strange than giving it to people who weren’t injured at all, who have affiliations with the counsel and who in many cases don’t need the money?”

Jeffrey A. Lamken, a lawyer for the plaintiffs in the case, Frank v. Gaos, No. 17-961, said the payments to charities were sensible and proper.

“It is not at all even remotely the case that this is not benefiting the class,” he said. The programs supported by the grants, he said, were “targeted precisely to the type of injury and precisely the type of problem, privacy invasion, that that class is subjected to.”

Several justices appeared unsure about whether members of the class had suffered the sort of injury that gave them standing to sue. The case concerned Google’s disclosure of search terms to websites, and opinions varied about whether that harmed anyone.

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

Alito was curious about what Google did with his search information.

“All of us have probably done searches,” he said. “If I do a search and search for men’s shoes, I will immediately get all sorts of advertisements for men’s shoes or whatever other product I am searching for.”

Andrew Pincus, a lawyer for Google, said that issue was not part of the case, which concerned what he called “the referrer header.”

“When you conduct a search, you get a list of websites,” he said. “When you click on one of those sites, that site gets your search.”

That, Pincus said, hurts no one. “The mere disclosure of a search without more, your men’s shoes search, is not a harm because there’s no disclosure that you’re making the search. It’s a disclosure that somebody searched for men’s shoes.”