Congratulations to Ted Frank, profiled Oct. 15 by Adam Liptak at the New York Times for arguing his own case (Frank v. Gaos, on class action settlements) before the U.S. Supreme Court. The article does not mention one of Ted’s most salient public roles, namely co-blogging for years as my most inspired recruit at Overlawyered and at Point of Law.
Frank v. Gaos is a challenge to the cy pres elements of a privacy class action against Google [Federalist Society podcast with Ted, NLJ via CEI]. Ilya Shapiro at Cato (which has filed an amicus brief) describes some of the factual background:
Attorneys’ fees of $2.125 million were awarded out of the settlement fund, amounting to 25 percent of the fund and more than double the amount estimated based on class counsel’s actual hours worked.
But no class members other than the named plaintiffs received any money! Instead, the remainder of the settlement fund was awarded to six organizations that “promote public awareness and education, and/or…support research, development, and initiatives, related to protecting privacy on the Internet.” Three of the recipients were alma maters of class counsel.
This diversion of settlement money from the victims to causes chosen by the lawyers is referred to as cy pres. “Cy pres” means “as near as possible,” and courts have typically used the cy pres doctrine to reform the terms of a charitable trust when the stated objective of the trust is impractical or unworkable. The use of cy pres in class action settlements—particularly those that enable the defendant to control the funds—is an emerging trend that violates the due process and free speech rights of class members.
James Beck at Drug and Device Law writes that the settlement in question “features just about everything we don’t like about cy pres.” Quoting:
- Excessive counsel fees – class counsel stands to walk away with fully 38% of the settlement as fees. 869 F.3d at 747.
- Lack of classwide recovery – the court declared the entire settlement “non-distributable” because, even without opposition, neither the class members nor their damages could be determined. Id. at 742.
- Excessive cy pres – nothing is more excessive than 100% ? six uninjured charities took 100% of what class counsel left behind, and the 129 million supposedly injured class members took nothing. Id. at 743.
- Rampant conflict of interest? Three of the charities were law schools – and they all had ties to counsel in the case.
Litigation industry self-perpetuation – cy pres recipients were expected solicit more lawsuits by “educat[ing]” the public and “publiciz[ing]” privacy issues. Id. at 746-47.
Oral argument before the Court will be held Oct. 31.