U.S. Supreme Court to hear case about who gets paid in class action lawsuits | Hacker News Reader

U.S. Supreme Court to hear case about who gets paid in class action lawsuits

reuters.com

53 pointschatmasta27 comments

For anyone who only reads the HN comments, the title does not really include the interesting part of the article. This case revolves around the question of who gets remunerated in class action lawsuits against a company. The case in question was a privacy lawsuit against google where the two representative plaintiffs received $5,000 each, the lawyers received $2.1m, and the rest of the money went to privacy non-profits.

Even then, the interesting part doesn't even seem to be in this article. Read the WSJ article for more clarity[1].

The issue raised was that the "privacy non-profits" were 1) law schools that the plaintiff's attorneys went to, or 2) non-profits that Google already consistently donated money to. So it's a settlement that predominantly consisted of altering the timing of regular donations by Google plus a kickback to the attorney's law schools.

[1] https://www.wsj.com/articles/supreme-court-will-take-a-close...

that's not true. The recipients weren't law schools (unless AARP is now running a law school), though a couple of the lawyers on the plaintiffs' side did have some affiliation with the parent institutions of the privacy projects getting the money. In fact, one judge on the three-judge Ninth Circuit panel dissented and thought the case should be sent back down to the trial judge to have an evidentiary hearing on those connections, just to be sure the lawyers weren't profiting in some way.

I don't even think Stanford and Harvard fit the bill of being 'privacy non profits'.

Also quite surprising that Google even bothered to defend themselves in the first place, you have to have sunk pretty low already not to realize that sharing search queries with third parties is an invasion of privacy post the AOL search engine scandal.

https://en.wikipedia.org/wiki/AOL_search_data_leak

> Also quite surprising that Google even bothered to defend themselves in the first place

Uh, they settled. There was no case defended in court, they cut a deal. That's what this is about. The settlement paid off the named plaintiffs and their attorneys, and gave money to some groups working toward this particular issue as non-profits. And everyone involved thought that was OK.

But the plaintiffs in this suit say that this was inappropriate and the damages should have been paid to those harmed and not to charities that claim to represent their interests. But the challenge itself is not filed on their behalf either.

Fundamentally this is an attack on the privacy groups, and more broadly on the idea of a class action settlement at all. Those are political goals. This is fundamentally a politically motivated suit.

But it's an interesting legal question nonetheless, IMHO.

> This is fundamentally a politically motivated suit.

Let me start with saying I agree fully with this.

But I don't necessarily agree with it being a broad attack on the idea of a class action settlement. [1] and [2] give decent breakdowns of why this settlement was problematic. The charities chosen were themselves political choices - it was distributed to convenient charities to both sides. Some were charities Google were already known to give funding/donations to, and the other were law schools which had ties to the plaintiff's lawyers.

If you're going to invoke the cy pres doctrine on a class action settlement, don't make the recipient selection of the charitable donations so obviously politically motivated. If you're just going to leverage cy pres doctrine to divert class action funds to favored recipients, then be ready to potentially have the cy pres doctrine re-examined and criteria tightened.

[1] https://searchengineland.com/google-involved-in-supreme-cour... [2] https://www.wsj.com/articles/supreme-court-will-take-a-close...

> But I don't necessarily agree with it being a broad attack on the idea of a class action settlement.

That doesn't really square with the evidence though. I mean, the points you cite are in fact arguments in this case, and I agree they're interesting legal arguments. But they don't explain why the case was brought.

I think it's reasonably clear that the plaintiffs here (not the ones in the original suit!) don't really care about whether or not millions of Google users get compensated a few dollars. What the plaintiffs want is a broad SCOTUS precedent putting a new requirement on class action settlements, and thus making future class action cases harder (i.e. more expensive, more risky) to pursue.

very much this last comment (but to be clear, they're not "plaintiffs" they're the appellants / petitioners; at the trial court they were "objectors").

Ted Frank has been trying to radically remake class action law for years. He raises money for his non-profit expressly for this purpose.

no, there was a case in court. It was litigated for 3+ years before Google decided to settle. Ted Frank filed an objection, which the trial judge denied. He then took it up on appeal.

So yes, the appeal is most definitely politically motivated. But the original suit was not.

Ok, we've added that to the title above. Thanks!

I think there is a risk that some will say something along the lines of that in the example you give it is unfair for the plaintiffs to only get $5k and the lawyers $2.1M. Reality though is that not only would a lot of these cases never see the courts at all if the Lawyers were not paid, but also it is expensive as fuck to bring these cases and to the research and front end work, with a huge risk that you may not win the case at all.

I would be for courts to calculate compensation to plaintiffs as a ratio of, but on top of the award, i.e., if the punitive or compensatory award is X, the plaintiff's ratio is a minimum of 1/5, with total award being 1.2X.

I am not all that against blood sucking lawyers taking a pound of flesh and am open to the notion of their compensation being controlled and limited (which would NEVER happen considering the power and strangle hold the legal profession has on government ... bar (yes, that's intentional) lawyers from government and lobbying maybe???).

in class actions, the compensation is very much "controlled and limited." The lawyers have to make a separate motion to be awarded fees and there is intense scrutiny by the court and potential objectors of every dollar requested.

The benchmark in the Ninth Circuit is 25% of the common fund, but district courts almost always also ask for a "lodestar cross-check," which is the hours expended by the plaintiffs' firms multiplied by their customary hourly rates, plus expenses. It's often a very contentious battle to establish a reasonable hourly rate and will turn on the relevant legal market (SF has higher rates than, say, Tulsa even for the same sort of work), the attorney's experience, the results obtained, and so on. And the judges often cut hours, saying they were duplicative or excessive for whatever reason. This can be used to increase or (more commonly) decrease from the 25% benchmark.

The problem with this case is not the fees themselves, but the fact that part of the settlement was a payout to the attorneys' law school. That seems like an attempt to sidestep the limits on how much can be awarded to the lawyers.

> The deal’s opponents were led by Ted Frank, director of litigation for the Competitive Enterprise Institute, a Washington-based conservative think tank. They said the deal violated procedural rules in U.S. law requiring settlements to be fair, reasonable and adequate.

What's the Competitive Enterprise Institute's goal in this lawsuit? I once read an editorial once by a CEI guy that was very pro-forced-arbitration, a view which often goes hand-in-hand with an opposition to class action lawsuits.

Is this lawsuit part of the legal campaign to to neuter class actions?

I think this is the interesting question about the situation; what is the conservative movement's agenda here? I don't see a clear one. (Let me be clear: I'm not writing this to criticize or support the movement or its agenda in this case; I'm just wondering what the agenda is.)

It's broader than the Competitive Enterprise Institute. For example, the U.S. Justice Department under Sessions instituted a policy banning (or reducing?) settlements with the Justice Department that paid money to 3rd parties. When the Sessions' Justice Department did it, I assumed they wanted to defund 'liberal' institutions (meaning, those not in the conservative ideological movement). As another example, there is also the effort to defund Planned Parenthood and the successful one to defund ACORN.

Note that the Supreme Court case matches a modus operendi of the conservative movement: Change policy and law via the courts rather than through Congress. They develop legal strategies, find good test cases, get Federalist Society judges appointed (especially to the Supreme Court), and incrementally change law and cement policy changes that way. Other groups in other parts of the political spectrum adopt the same approach, of course; it's not just the conservative movement, but they have been particularly strategic.

But why this issue? Perhaps someone in the conservative movement decided that these settlements are a valuable revenue stream for "liberal" groups. If someone read through the literature, I'd bet we could find the reasoning and the strategy. Perhaps someone here already has and will share with us?

the pro-business agenda is to eliminate or reduce class actions as much as possible because they can be a huge cost of doing business. Litigation generally is how businesses are held accountable for their actions because in the US there tends to be very little governmental regulatory enforcement in most industries.

Cy pres settlements are generally easy headlines: "Charities get $X million, lawyers get $Y million, regular folks get nothing." Which means it's easy to demagogue.

The larger picture is that having to pay $8.5 million plus whatever O'Melveny & Meyers was charging for defense costs led Google to change its business practices. Where that money goes is largely beside the point, though plenty of free market legal scholars will note that large attorneys' fees encourage more such suits, which means more zealous enforcement of consumer protection laws.

In general, CEI and their brethren would love class action lawsuits to go away. Without them, it's much easier to deceive a large group of customers/consumers just enough to avoid being held accountable for their actions; they know the vast majority will never sue because they couldn't afford to.

Forced arbitration is one key to this strategy, but occasionally that fails. This looks like a step towards covering that corner case.

If it is, did they really need to do that? Just about every service everywhere already has clauses banning users from joining them, requiring users to waive their Constitutional rights.

I recall somes states are [going to?] simply making any forced arbitration clauses unenforceable (much like no compete clauses in California)

can't. There's a federal law from 1928 (I kid you not) that says no state can impair the ability of parties to agree to arbitration. The fiction is that clicking on a terms-of-service button is "consent" to all the terms therein, including arbitration and class action waivers.

California for years said such things were unenforceable but the US Supreme Court in 2011 struck it down. (AT&T Mobility v. Concepcion, 563 U.S. 333 (2011))

I believe there is an argument to make that banning forced arbitration is not impairing the ability of parties to agree to arbitration. All that would do is ensure that the parties are actually agreeing to it, instead of one party bullying the other into arbitration.

> There's a federal law from 1928 (I kid you not) that says no state can impair the ability of parties to agree to arbitration.

Do you have a citation for to the statute or the USC for that?

This is something that I'd like to write my reps about.

I was wrong, it was passed in 1925. More here, including a link to the Concepcion decision by the USSC:

https://en.wikipedia.org/wiki/Federal_Arbitration_Act

That would be a very, very good thing.

So just to be clear because I don't think this article does a very good job of explaining the background.

Google was sued in 2010 for a privacy violation as a class action. They chose to settle and the terms of that settlement (according to Federal Rule of Civil Procedure 23) were carefully reviewed by Judge Davila, an experienced federal district court judge in San Jose. He approved the settlement's terms as fair based on the transaction costs of giving small amounts of money to a large number of persons. Instead, Google would make a donation to a charity, some of which would be diverted to the attorneys who brought the case. This is called a "cy pres" award, from the latin meaning "as near as possible." Cy pres only settlements are quite rare in class action practice and are strongly disfavored.

Here are the terms, as described by the Ninth Circuit:

   Of the $8.5 million settlement fund, approximately $3.2
   million was set aside for attorneys’ fees, administration
   costs, and incentive payments to the named plaintiffs. The
   remaining $5.3 million or so was allocated to six cy pres
   recipients, each of which would receive anywhere from 15 to
   21% of the money, provided that they agreed “to devote the
   funds to promote public awareness and education, and/or to
   support research, development, and initiatives, related to
   protecting privacy on the Internet.” The six recipients were
   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. Each of the recipients submitted a detailed proposal
   for how the funds would be used to promote Internet privacy.[1]

Between preliminary approval and final approval, Ted Frank from the CEI filed an objection. (He's done this dozens of times and cy pres is a particular hobby horse of his.) When Judge Davila overruled his objection, he took an appeal. The Ninth Circuit denied that appeal, so he asked the US Supreme Court for a writ of certiorari.

The news is that this was granted. It takes four sitting US Supreme Court justices to grant cert so it doesn't necessarily mean the law is going to change, just that at least a significant minority of the court want to opine on this particular issue.

[1] See page 6 -- http://cdn.ca9.uscourts.gov/datastore/opinions/2017/08/22/15...

Apart from the case, why are privacy non-profits accepting donations from Google? This seems like a huge conflict of interest.

why not? If Google wants to give them money knowing their particular interests and motivations, take every penny.

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