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Supreme Court Scrutinizing Class Action Settlements That Leave Consumers Empty-Handed (marketwatch.com)
If a multimillion dollar class-action settlement basically doesn't pay a single consumer, is it fair? That's not the start of a lawyer joke; it's the crux of a case being argued Wednesday in the U.S. Supreme Court that, advocates say, has serious implications for the ways consumers benefit from duels with businesses in large-scale litigation. From a report (paywalled): "This is potentially billions of dollars going from everyday consumers to lawyers' slush funds," said Ted Frank, the litigation director at the Competitive Enterprise Institute, who's disputing the $8.5 million settlement between Google and 129 million class members before the Supreme Court. The case, Frank v. Gaos, focuses on the question of whether it's fair and reasonable to ever have class action settlements that give money to outside groups instead of the class members themselves. A decision for Frank -- who also happens to be a class member in the Google case and is a longtime gadfly questioning class action settlements -- could require the money go directly to consumers and upend a class action pay out method that's been around for decades.
The underlying case has to do with Google's 2013 agreement to pay $8.5 million to settle a case claiming widespread privacy rights violations. When any web surfer looked up topics on Google, the search engine beamed the search terms -- like "depression" and "medical leave" -- in the URL string to the third-party websites. The search term revelations broke various state and federal laws, plaintiffs said. After about three years of litigation, the parties settled. Google added more online disclosures and opened its wallet without admitting liability. The settlement's payouts included a $5,000 award for each of the three named plaintiffs and $2.12 million for the legal fees of the plaintiffs' lawyers. The remaining $5.3 million was divvied up among six universities and organizations pledging to put the money towards improving internet privacy. Lawyers for both Google and the class members say Frank's objections to the settlement are unfounded.
The underlying case has to do with Google's 2013 agreement to pay $8.5 million to settle a case claiming widespread privacy rights violations. When any web surfer looked up topics on Google, the search engine beamed the search terms -- like "depression" and "medical leave" -- in the URL string to the third-party websites. The search term revelations broke various state and federal laws, plaintiffs said. After about three years of litigation, the parties settled. Google added more online disclosures and opened its wallet without admitting liability. The settlement's payouts included a $5,000 award for each of the three named plaintiffs and $2.12 million for the legal fees of the plaintiffs' lawyers. The remaining $5.3 million was divvied up among six universities and organizations pledging to put the money towards improving internet privacy. Lawyers for both Google and the class members say Frank's objections to the settlement are unfounded.
If a lawsuit makes a company stop doing something bad to millions of people, isn't that a good thing?
Getting someone to stop engaging in illegal behavior is step one of setting things right. But there's also a step two: making reparations for harm done. That didn't happen here. Instead, the plaintiff's lawyers arranged for the settlement money to be funneled into groups to which they or their friends belong. Despite millions of people being harmed by Google's behavior, only the three named plaintiffs received even a cent.
The suit is on behalf of class members. If there's a settlement; 99% of the proceeds ought to go to benefit the class members whose right to sue is being exhausted by the settlement. The lawyers can keep up to 1% for their expenses.
Just stopping a company from doing it AGAIN doesn't mean you get compensation for when it was done to YOU, which is what a class-action lawsuit should usually be about.
If class-action lawsuits don't make money for the lawyers, then they won't happen at all.
You should think of class-actions as an outsourcing of regulation to the private sector. If the government won't regulate corporate behavior, then profit-seeking law firms will.
Ask yourself this: Should we have more class actions, or fewer? Answer: I dunno.
On the other hand the lawyers can't bring the cases all on their own without an injured party, so if the civilians don't see any benefit to going through the hassle of a trial (because let's face it, most of us don't have the time or resources for that just to make sure bad things don't happen to OTHER people) then we'll lose that avenue of regulation anyway.
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