Supreme Court, over Thomas Dissent, Dodges Cy Pres Mechanism in Class Settlement

Last year in this space, we reported on the continuing debate concerning the use of cy pres awards in class action settlements.  Since 2013, Chief Justice Roberts has provided cautionary comments about this practice.  See Marek v. Lane, 134 S. Ct. 8 (2013).  We also reported on the Ninth Circuit’s approval of a cy pres settlement in In Re Google Referrer Header Privacy Litigat., 869 F.3d 737 (9th Cir. 2017), which awarded plaintiffs’ counsel $3.5 million and six nonprofits/educational institutions another $5.3 million, all while awarding class members the proverbial goose egg.

On March 20, 2019, the Supreme Court issued a per curiam decision vacating the Ninth Circuit’s decision.  See Frank v. Gaos, Slip Op., 586 U.S. ___ (2019).  But the Supreme Court declined to clarify the parameters of the cy pres doctrine.  The Ninth Circuit, the Supreme Court observed, had never addressed whether plaintiffs had standing to bring the claims under Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).  And the Solicitor General had urged the Court to consider whether any plaintiff actually had standing to bring the case.  We previously wrote in this space that we have seen an increase in the spokes on the Spokeo wheel, and it remains to be seen what the Ninth Circuit will do on remand.

Justice Thomas dissented.  He indicated that he would reach the merits and reverse.  For him, the allegation of a violation of the Stored Communications Act alone would suffice for standing under Spokeo.  As to the class relief, Justice Thomas would have no part of it.  He argued that “cy pres settlements are not a form of relief to the absent class members and should not be treated as such.”  In his view, the settlement provided no form of meaningful relief to the class, and he indicated that the substance of the settlement “strongly suggest[ed] that the interests of the class were not adequately represented.”  He felt the “lack of any benefit for the class rendered the settlement unfair and unreasonable,” and questioned the so-called “superiority” of a class proceeding “when it serves only as a vehicle through which to extinguish the absent class members’ claims without providing them any relief.”

At a minimum, these cautionary words should chill the facile approval of cy pres settlements.  But we’ll have to wait a few more years, at a minimum, to see if the Supreme Court will jettison the practice for all time.