Supreme Court Orders New Look at Privacy Suit Settled by Google

(Bloomberg) -- The U.S. Supreme Court told a lower court to take another look at an $8.5 million Google settlement, raising questions about whether the consumers pressing the privacy suit had the legal right to seek damages.

The 8-1 ruling Wednesday didn’t resolve the issue the court took up the case to address -- the permissibility of class-action settlements that don’t provide any compensation to people affected by a defendant’s conduct. The case involves the Alphabet Inc. unit’s settlement of claims that it improperly disclosed users’ internet search terms to the owners of outside websites.

None of the money went directly to Google users. Challengers to the accord said it funneled money to attorneys and outside privacy advocates at the expense of people who were harmed.

Google originally defended the settlement, saying it wasn’t feasible to distribute a relatively small sum of money to an estimated 129 million class members.

But during arguments in October, the justices questioned whether the plaintiffs had legal standing -- that is, whether they suffered the type of alleged harm that would let them seek damages. After the Supreme Court ordered additional briefing, Google said the entire lawsuit should be thrown out, including the settlement.

In an unsigned opinion Wednesday, the Supreme Court said either a federal appeals court or a trial judge should take the first look at the standing issue.

The briefs "raise a wide variety of legal and factual issues not addressed in the merits briefing before us or at oral argument," the high court said.

‘Concrete’ Harm

Standing has become a major issue for technology companies seeking to fend off consumer lawsuits. In 2016 the Supreme Court said a man suing over an allegedly error-ridden internet profile had to show he suffered "concrete" harm, but that ruling was narrow and provided only limited clarity.

Justice Clarence Thomas dissented from Wednesday’s ruling, saying he would have found that standing existed and then thrown out the settlement. He wrote that "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."

Critics say such accords, known as "cy pres" settlements, are an increasingly common litigation tactic, used by Facebook Inc. as well as Google. But a brief filed by Harvard law professor William Rubenstein said that in the past two decades, federal judges have approved only 18 cy pres settlements in which all the money went to lawyers and outside groups.

The cy pres doctrine takes its name from a Norman French expression "cy pres comme possible," or "as near as possible." Judges have long used it in other types of cases.

The lawsuit focused on the design of Google’s search engine, which creates a unique web address for each search, with the terms typed by the user included as part of it. The address then becomes part of the information transmitted by the web browser as part of the "referral header" routinely sent to the destination website.

Google was sued in 2010 and later agreed to pay $8.5 million to settle the case, with a quarter of the sum going to attorney fees. Most of the rest went to six organizations, including four universities and the senior-citizen advocacy group AARP, for use in promoting the protection of internet privacy. A federal appeals court upheld the settlement.

The case is Frank v. Gaos, 17-961.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Laurie Asséo, Wendy Benjaminson

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