Cy Pres Settlement Approved in Google Privacy Action

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Last month, a Northern District of California judge finally approved an $8.5 million settlement of a class action challenging Google Inc.’s privacy policies. The plaintiffs alleged that Google invaded their and class members’ privacy rights by sharing personal information with third parties without authorization. Specifically, the plaintiffs alleged that Google improperly shared search terms—including credit card numbers, medical information, and other private data—with advertisers and other third parties. See Order Granting Motion for Final Approval, In re Google Referrer Header Privacy Litig., No. 10-4809 (N.D. Cal. March 31, 2015) (available here).

The settlement is notable in that Google is not required to compensate the class members directly. Rather, the company will distribute proceeds to the AARP Foundation, the World Privacy forum, and to four university-based, Internet-related foundations. The court justified its decision by noting that it would be impractical to distribute the settlement fund to the nearly 130 million class members affected by the challenged practices. Under these circumstances, the Court found that the proper approach would be to put the funds to the next best use (i.e., donating them to public interest organizations focusing on privacy issues) under the cy pres doctrine.

The cy pres doctrine provides a solution for cases where the class members are difficult to identify and/or where the individual class member damages are minimal. These cases include consumer class actions, because few class members maintain records of purchases of inexpensive goods, as well as cases where the costs of class settlement administration would exceed class members’ individual recoveries. In such instances, the obvious alternative to the defendant keeping its ill-gotten gains is for the court to award the settlement funds or judgment to non-profit organizations that promote the policies underlying the laws that the defendant violated. With a growing number of class actions brought on behalf of millions of affected class members, such as data breach cases, we expect cy pres awards to become increasingly common.

Authored by: 
Stan Karas, Senior Counsel