March 21, 2019 Practice Points

Cy Pres Lives Another Day: Supreme Court Remands Frank v. Gaos for Spokeo Standing Analysis

The case involves allegations that Google violated users’ privacy by disclosing their internet search terms to other website owners.

By Elizabeth Kramer

Today, the Supreme Court vacated the Ninth Circuit’s decision upholding a cy pres-only class action settlement and remanded for further proceedings—not on the merit of the settlement but regarding whether the plaintiffs have standing to sue.

The case, Gaos v. Frank, involves allegations that Google violated users’ privacy by disclosing their internet search terms to other website owners. The plaintiffs alleged that when the Google search engine processes search requests, users’ search terms are sent to marketers and data brokers without their knowledge or consent.

The parties reached a settlement: Google would pay a total of $8.5 million and disclose on its website how users’ search terms were shared with third parties. But because the class was so large (almost 130 million people), direct payments to class members would be pennies. Instead, the parties agreed to give the money to six cy pres recipients, including various universities’ information security programs and the World Privacy Forum.

The settlement withstood a challenge at the Ninth Circuit, which issued a split decision. The Supreme Court then granted certiorari.

At oral argument in October, however, the questions presented—whether and when a cy pres-only class action settlement can meet the “fair, reasonable, and adequate” requirement of Rule 23—were eclipsed by a different question: whether the plaintiffs had standing in light of the Court’s 2016 Spokeo, Inc. v. Robins ruling.

In Spokeo, the Court held that a bare statutory violation doesn’t give a plaintiff standing to bring her case in federal court—she must also allege concrete harm. The plaintiffs in Gaos alleged that Google violated the Stored Communications Act by sending their search terms to third parties, and the district court, hearing the issue before Spokeo was decided, held that the alleged statutory violation alone was enough.    

The Solicitor General, not the parties, raised the standing question, and the Supreme Court ordered supplemental briefing on the issue. Despite the additional submissions, today the Court concluded that the courts below should address the plaintiffs’ standing in the first instance.

Justice Thomas dissented, explaining that he would have reached the merits and held that the Gaos plaintiffs did not need to allege concrete harm because “a plaintiff seeking to vindicate a private right need only allege an invasion of that right to establish standing.” With standing thus satisfied, however, Justice Thomas would have further found that the settlement failed to satisfy Rule 23: “In short, because the class members here received no settlement fund, no meaningful injunctive relief, and no other benefit whatsoever in exchange for the settlement of their claims, I would hold that the class action should not have been certified, and the settlement should not have been approved.”

Many observers questioned whether Frank v. Gaos would bring an end to cy pres. For now at least, it lives to see another day.

Elizabeth Kramer is an attorney at Girard Sharp LLP in San Francisco, California.

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