In Frank v. Gaos, the Supreme Court appeared poised to decide a divisive class action issue: whether settlement awards to third-party charities (known as cy pres awards) are valid.  On March 20, however, an 8-1 majority declined to resolve the cy pres issue and instead remanded for the lower courts to take a closer look at whether the plaintiffs have Article III standing under the Court’s 2016 decision in Spokeo, Inc. v. Robins, thus highlighting the continuing uncertainty about what constitutes a legally cognizable injury in statutory class actions.   

• The plaintiffs in Gaos alleged that Google had violated users’ privacy under the Stored Communications Act by disclosing their search terms to other websites.  Google settled the case for $8.5 million—but nearly all the proceeds went to the lawyers and charity, not the class members.  After all, there were so many putative class members (over one hundred million) that paying them a cut of the $8.5 million pie would be impossible.
• The standing issues raised by Gaos turn on whether a violation of the Stored Communications Act causes a concrete privacy injury, or instead, is the sort of bare procedural violation that is no longer enough after Spokeo.  You can read more about Spokeo here.   
• Spokeo came down while Gaos was still percolating in the Ninth Circuit, so the district court did not have the benefit of this precedent when it tackled the case’s standing issues.  As the majority explained, Spokeo overruled the prior standing case law that the lower court had relied on.  Thus, according to the majority, these standing issues should be considered by the lower court in the first instance.  Nevertheless, the Court reiterated that the class settlement posture of a case does not alter Article III requirements, since “[a] court is powerless to approve a proposed class settlement if it lacks jurisdiction over the dispute.” 
• Although the majority did not resolve any questions about cy pres awards, several justices have signaled their interest in the issue, with Chief Justice Roberts previously outlining various “fundamental concerns” raised by cy pres remedies.  The Court may soon have another opportunity to address the issue in a similar case briefed for cert right now, Perryman v. Romero, which you can read about here.
• Justice Thomas, the lone dissenter in Gaos, would have found standing here.  Thomas has said before that an invasion of privacy like the one plaintiffs allege in Gaos should fit the bill.  Thomas then turned to the class action issues that the parties had initially presented to the Court.  In a short opinion, he explained that a class settlement is a nonstarter if it does not afford the members some “meaningful relief.”  And an award solely to charity, lawyers, and the class representatives does not come close.  Thomas also expressed some skepticism about cy pres awards generally, but left that issue for another day.

Read the Supreme Court’s opinion in Gaos here.