Attorneys' Fees, Class Actions, U.S. Supreme Court

Standing in the Way of a Supreme Court Decision on Cy Pres-Only Class Action Settlements

What is the value of the class action mechanism if no redress is provided to plaintiffs at all? Is the class action about providing a remedy to plaintiffs, is it just about getting the defendant company to pay something to someone…or has it evolved simply into a mechanism for plaintiffs’ attorneys to collect fees? These are several of the questions raised by Frank v. Gaos, (No. 17-961), which presents the U.S. Supreme Court with an extreme case of the use of the cy pres doctrine in the context of class action cases. The High Court is faced with a cy pres-only settlement in which the terms of the agreement called for distribution of all funds paid by the defendant directly to charitable organizations and plaintiffs’ attorneys (in the form of attorneys’ fees) and there was no attempt at all to distribute any funds to the plaintiff class. Oral argument was held in Gaos on October 31st and the Justices probed several aspects of the heart of the issue – when, if ever, is it appropriate to use cy pres in this context and what are the standards to be applied in that determination? However, standing as an obstacle to an immediate resolution of this issue, is the jurisdictional question of whether the class plaintiffs had standing to bring the privacy-based lawsuit against Google in the first instance. The issue was not originally briefed before the Supreme Court, leaving the High Court probing whether remand was appropriate to illuminate the issue or whether they should dismiss the case as improvidently granted. On November 6, 2018, the Supreme Court ordered the parties to file supplemental briefing on standing to aid in its determination of whether to reach the merits of this case. We highlight below several of the key points that shaped the discussion during oral argument regarding the standing issue. In a companion post, we highlight key points raised during argument regarding the merits of the appeal.

The Internet of Standing – Understanding Technology, Privacy & Injury

The named plaintiffs filed a class action on behalf of Google internet search users because the company disclosed their search terms to third-party websites through a particular mechanism known as referral headers. Plaintiffs must have suffered sufficient injury from Google disclosing their search information to third parties to establish standing to bring the lawsuit. Neither party contested standing in the matter below, but the U.S. Solicitor General’s Office proffered a brief as amicus curiae in support of neither party that raised the question regarding plaintiffs’ standing before the Supreme Court. The Supreme Court Justices questioned whether the lower court judge’s determination was in fact that the disclosure in this case met the requirements of concrete and particularized harm required to establish standing or whether the lower court judge merely determined that the statutory prohibition was enough. The Petitioner urged in argument that “one of the named plaintiffs, Anthony Italiano, alleges a statutory violation that corresponds to the common law tort of public disclosure of private facts. And the lower courts are unanimous in holding that that kind of statutory claim satisfies Spokeo,” the Supreme Court’s recent decision addressing standing to bring lawsuits based on statutory violations alone. The Solicitor General’s Office participated in oral argument advancing its position that it is likely that plaintiffs did not have standing.

Named plaintiffs asserted a theory of harm based on the idea that the websites receiving their search information could “reverse-engineer” and identify them as the individual conducting the search. At first blush, we know that when we run searches on the internet we sometimes begin to see advertising and other information that appears targeted towards our searches. So, is it a given that this identification through “reverse-engineering” is occurring? And is there actually harm caused merely from the disclosure of our search terms or must there also be the revelation of the identity of the individual coupled with the search terms to establish harm? Must the disclosure at issue give rise to a common law cause of action? These are several of the issues the Justices probed during argument and their questions illuminate how critical an understanding of the nuances of technology at the center of these types of disputes can be.

Counsel grappled with questions from Justices Alito, Sotomayor, and Kagan on the particulars of the technology and plaintiff’s theory underlying standing – distinguishing the use of cookies on one’s internet browser and other mechanisms to support targeted advertising from the disclosure of searches through referrer headers at issue in this case. Google’s counsel explained “there are lots of cookies and other things that…generate the — the serving up of ads to your particular computer. The question here is the referrer header, which is that the search terms…when you conduct a search, you get a list of websites. When you click on one of those sites, that site gets your search. That’s the issue here.” Justice Kagan asked for an explanation that ties the technology at issue directly to plaintiffs’ standing theory: “you talked about the re-identification theory, and I’m not quite sure I understand it. So, could you tell me the technology that I need to know to understand it and what plaintiffs would have to show to prove their own theory of harm?” Google’s counsel offered her an answer, while noting the lack of information and the need for re-briefing or remand on the standing issue: “what would have to be alleged would be that enough referrer headers went to a single website operator that that website operator could combine them and say: A-ha, I can now figure out that this is the person who made the search and tie the search terms to that person.”

The United States and Google questioned whether Plaintiffs’ reverse-engineering theory would be enough to support standing for several reasons, including the Restatement’s requirements for establishing privacy violations. Justice Kavanaugh inserted the notion that disclosure of what someone searched for may be a harm in and of itself and Spokeo does not exactly require a cause of action at common law:

isn’t disclosure of what you searched for a harm in and of itself, even if it is not a cause of action?…Isn’t that an injury, disclosure of what you searched?…I don’t think anyone would want the disclosure of everything they searched for disclosed to other people. That seems a harm…It may not — may or may not be a cause of action, but it’s a harm…Just as a common sense matter.

These and additional standing arguments will be fleshed out in supplemental briefs due to be submitted to the Supreme Court this week. Following oral arguments, the Court issued an order requesting the parties to brief the issue “whether any named plaintiff has standing such that the federal courts have Article III jurisdiction over this dispute.” Briefs from all parties are due on November 30th, and reply briefs are due by December 21st.

Tony Lathrop

About Tony Lathrop

Tony Lathrop brings experience and a high level of analytical ability, professional credibility and creativity to handling litigation matters. He rigorously represents his clients' interests in a diverse range of claims and actions. A certified mediator, Mr. Lathrop has extensive experience representing business clients in mediation. His service to the legal profession in North Carolina has allowed him to develop relationships across the state that benefit the firm's clients.

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