On November 6, 2018, the U.S. Supreme Court ordered post-argument supplemental briefing in Frank v. Gaos, No. 17-961 (U.S.). The primary question on which the Court granted certiorari in Frank is whether a class action settlement that contains cy pres relief, i.e., settlement funds that are not distributed to the class members but do not revert to the defendant, is fair, reasonable, and adequate under Rule 23(e)(2) of the Federal Rules of Civil Procedure. After hearing oral argument on October 31, the Court directed the parties and the Solicitor General to submit supplemental briefing on a threshold jurisdictional question, namely “Whether any named plaintiff has standing such that the federal courts have Article III jurisdiction over this dispute.”

The Frank caseis before the Court on a petition filed by certain class members, represented by Ted Frank, a “professional objector” who routinely objects to class action settlements in general and cy pres relief in particular. The underlying class complaint alleges that Google operates its search engine in a manner that violates the Stored Communications Act, which prohibits certain service providers from disclosing the contents of electronic communications. According to plaintiffs, a violation occurs because, when a user clicks on a link after conducting a Google search, the search engine allegedly discloses a user’s search terms, and potentially personal information, to third parties.

Although no named plaintiff alleged any concrete injury as a result of the alleged statutory violations, the District Court certified a settlement class on the premise that a statutory violation on its own is sufficient to satisfy the standing requirements of Article III of the U.S. Constitution. According to the District Court, the “injury required by Article III . . . can exist solely by virtue of statutes creating legal rights, the invasion of which creates standing.”  The Ninth Circuit upheld the District Court’s approval of the proposed settlement.

The proposed settlement provided that Google would pay a total of $8.5 million and post information on its website about how users’ search terms are shared with third parties. A total of $3.2 million was set aside for attorneys’ fees, administration costs, and incentive payments to the named plaintiffs, with the remainder to be allocated to six cy pres recipients that have programs dedicated to Internet privacy: AARP, Inc.; the Berkman Center for Internet and Society at Harvard University; Carnegie Mellon University; the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy; the Stanford Center for Internet and Society; and the World Privacy Forum. The objectors challenged the proposed settlement, arguing that cy pres settlements create unacceptable conflicts of interest between counsel, who profit from the attorneys’ fees, and the class members, who receive no monetary recovery from a settlement that releases their claims. The objectors also raised concerns that the cy pres settlement proposed to distribute the funds to institutions with close ties to class counsel.

After the Supreme Court granted certiorari, the Solicitor General filed an amicus brief in support of neither party, arguing that a substantial jurisdictional question exists. The government noted that the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), vacated a Ninth Circuit opinion that relied on the same standing analysis that had been applied by the Frank District Court. The government noted that Spokeo had rejected the premise that “a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” A similar argument was advanced by the U.S. Chamber of Commerce, represented by King & Spalding, in an amicus brief also filed on behalf of neither party, which raised concerns that lower courts continue to certify what are known as no-injury class actions. The Chamber took no position on the appropriateness of the particular cy pres settlement at issue, but argued that “the explosion of cy pres settlements in class-action litigation is symptomatic of a deeper problem—the failure of lower courts to comply with” Supreme Court precedent “and rigorously police the requirements of Rule 23,” including the requirement that class members must suffer actual, not abstract, harm.

At oral argument on October 31, several Justices expressed skepticism as to whether any of the named plaintiffs had alleged a concrete injury sufficient to establish standing under Spokeo. The objectors argued that plaintiffs had standing, but suggested that the Court should remand if it found that the complaint did not contain sufficient allegations to establish standing under Spokeo. The government, which was granted time to argue its position as an amicus, suggested that the Court could either remand or resolve the standing question on its own, while Google agreed with the government that “there’s a serious question about whether this action was ever properly in federal court and that the standing issue has to be addressed before the court could determine the questions presented.” Google added that the Court’s options are to dismiss as improvidently granted, remand, or decide the standing question on its own. Plaintiffs’ counsel suggested either remand or dismissal as improvidently granted, while noting that neither the District Court nor the Ninth Circuit had addressed standing under the Spokeo standard with respect to the Stored Communications Act claim or the other causes of action alleged by plaintiffs.

The parties’ and the government’s supplemental briefs are due November 30, 2018, with reply briefs due on December 21. The Court is expected to issue a decision before the end of its term in June 2019. The transcript from the October 31 oral argument is available here.