Supreme Court to dig into Google's very cosy $8.5m deal with lawyers over web search leak

Legal eagles funneled class-action windfall to favorites

A dodgy deal cooked up between Google and the lawyers that successfully sued it for violating user privacy is heading to the US Supreme Court.

On Monday, America's top court agreed [PDF] to hear just three cases out of more than 100 applications – and one of them covers a $8.5m payout from Google for revealing users' search terms to third-party websites. The information was included in HTTP referrer headers in violation of Google's own privacy policy at the time.

That class-action lawsuit was brought on behalf of 129 million users but not a single cent of the multi-million-dollar settlement will go to the plaintiffs – the actual people whose private web activity was leaked. Instead, the lawyers that brought the case will get $2.1m and the remaining $6.4m will go to so-called "cy pres recipients."

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The lawyers and Google agreed on those recipients but, as numerous judges, class action members and other lawyers have pointed out, the seven selected don't pass much of a sniff test. Three are the alma maters of the attorneys – cash-strapped Harvard University, Stanford University and the Chicago-Kent College of Law – and the other four are all frequent recipients of Google's corporate largesse: AARP Inc, Carnegie Mellon University, the MacArthur Foundation and the World Privacy Forum.

Back in 2014, US District Judge Edward Davlia complained about the disbursement: "The elephant in the room is that many of them are law schools that you attended," he said, adding that recipients were the "usual suspects."

Davlia also complained that there was a complete lack of transparency over what was going to be done with the money, which resulted in Google and the opposing lawyers going back to the seven recipients and asking for a breakdown of how they would spend the money. With millions of dollars of free money on the line, the institutions then wrote up wonderful-sounding spending plans that were then submitted to the court.

Bad smell

The situation is so stark in this case, however, that it was appealed to the Ninth Circuit – which unhappily approved the settlement 2-1, and then to the Supreme Court.

It even attracted the attention of no less than 16 US state attorneys general who urged the Supreme Court to dig into the issue and consider drawing up stricter rules.

"Consumers should be the first priority in any class action settlement," wrote Arizona Attorney General Mark Brnovich, who is leading the charge. "Class action lawsuits can serve an important role in protecting consumers, but the settlements should be focused on benefiting consumers, and not diverting money to unrelated interests."

Google and the opposing lawyers argue that due to the huge number of class action members – 129 million Google users between 2006 and 2014 – the settlement would only result in a payout of four cents per person.

The cost and hassle of getting such a tiny amount to such a huge group of people isn't worth it, they argue, and so it should go to organizations that can put it to better use.

But the man who appealed the case to the Supreme Court, Ted Frank of the Center for Class Action Fairness at the Competitive Enterprise Institute, told The Register he doesn't buy that argument.

"It's a fallacious argument," he told us. "You never pay every class member. On small dollar settlements there is 0.25 per cent claim rate, so even if you quadruple that rate, you can still pay people $5 or so. Or you could have a lottery."

Bright lines

Frank wants to see some clear rules emerge from the Supreme Court hearing that are focused on ensuring that the cy pres approach is a last resort and that there is no conflict of interest when lawyers decide where to place large settlements.

The extraordinary details in this case – with no money at all going to class action members and the rest of the money going to organizations closely associated with the two parties - make it a "clean vehicle" for the Supreme Court, Franks argued, to provide some federal guidelines for future cases.

Center for Class Action Fairness senior attorney Melissa Holyoak argued in a statement that the case was an important one.

"The Google settlement epitomizes cy pres abuse in class actions where the money is being funneled to class counsel’s alma maters and to entities that Google already supports," she said. "Class counsel chose their favorite charities over their clients while Google is getting credit for donations they are already making." ®

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