Term: 2018
Docket: 17-961
Frank v. Gaos
- Pro
17-961 FRANK V. GAOS DECISION BELOW: 869 F.3d 737 ORDER OF NOVEMBER 6, 2018 SUPPLEMENTAL BRIEFING: ADDRESSING WHETHER ANY NAMED PLAINTIFF HAS STANDING SUCH THAT THE FEDERAL COURTS HAVE ARTICLE III JURISDICTION OVER THIS DISPUTE. CERT. GRANTED 4/30/2018 QUESTION PRESENTED: Federal Rule of Civil Procedure 23(b)(3) permits representatives to maintain a class action where so doing "is superior to other available methods for fairly and efficiently adjudicating the controversy," and Rule 23(e)(2) requires that a settlement that binds class members must be "fair, reasonable, and adequate." In this case, the Ninth Circuit upheld approval of an $8.5 million settlement that disposed of absent class members' claims while providing them zero monetary relief. Breaking with decisions of the Third Circuit, Fifth Circuit, Seventh Circuit, and Eighth Circuit that require compensating class members before putting class action proceeds to other uses, the Ninth Circuit held that the settlement's award of all net proceeds to third-party organizations selected by the defendant and class counsel was a fair and adequate remedy under the trust-law doctrine of cy pres. The question presented is: Whether, or in what circumstances, a cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be "fair, reasonable, and adequate." LOWER COURT CASE NUMBER: 15-15858
The case Frank v. Gaos revolved around the issue of cy pres awards in class action settlements, which are funds that cannot be feasibly distributed to the plaintiffs and instead go towards a charity or other public interest cause. The lawsuit was initially filed against Google for alleged violations of privacy rights through its search engine functions. A settlement agreement proposed $8.5 million, with most going to six different charities as a cy pres award and none going directly to class members except for administrative costs and attorney's fees. However, this proposal faced opposition from certain parties who argued that it violated rules governing such settlements by not adequately compensating those affected. They also raised concerns about potential conflicts of interest due to relationships between the defendant (Google) and some recipients of the cy pres award. In 2018, when it reached Supreme Court level, rather than addressing these issues directly as expected, they remanded it back down to lower courts on grounds related to jurisdictional questions under Spokeo Inc v Robins - whether plaintiffs had suffered "concrete harm" sufficient enough for standing in federal court.
In the dissenting opinion for Frank v. Gaos, Chief Justice John Roberts, joined by Justices Clarence Thomas and Samuel Alito, argued that the Court should have addressed the fundamental issue of whether class action settlements that provide no direct relief to class members but instead distribute funds to third-party organizations under cy pres doctrine are consistent with Article III's requirement that federal courts only decide cases or controversies. The majority remanded this case back to lower court due to concerns about standing in light of Spokeo Inc. v Robins (2016). However, according to the dissenters, there was a missed opportunity here as they believed it was already clear from existing precedent that plaintiffs had standing. They expressed concern over potential abuse and fairness issues related with such settlements where lawyers get paid while their clients receive no benefits from a settlement designed supposedly for their benefit.
