Frank v. Gaos
Whether, or in what circumstances, a
cy pres award of class action proceeds that provides no direct relief to class members supports class certification and comports with the requirement that a settlement binding class members must be “fair, reasonable, and adequate.” Tab Group
Blog post: Frank v. Gaos and the importance of actual injury
In a welcome development, a case that was supposed to be about cy pres settlements has turned into one about the viability of no-injury class actions. The Supreme Court granted cert. in
Frank v. Gaos to consider the permissibility of cy pres settlements, which provide no direct relief to class members but instead benefit charitable entities and enrich class counsel. While observers generally expected the Court to restrict or even bar the use of such settlements, an interesting thing happened: the Court realized that the case presents a serious standing problem and requested supplemental briefing from the parties and the United States on that topic.
While the appropriateness of
cy pres settlements is an important topic, standing is an even more fundamental and far-reaching question—a point the Chamber made in its amicus brief. No-injury class actions have become a scourge precisely because many courts have not required class representatives to demonstrate an injury-in-fact, as required by Article III. Plaintiffs’ supplemental briefing underscores that point by arguing that an unauthorized disclosure of information is per se an injury-in-fact—even if the disclosure did not cause any real-world harm. That would eviscerate the injury-in-fact requirement in a broad swath of cases, encouraging a wave of abusive class actions that has already been building and could reach epic proportions if the Court were to adopt plaintiffs’ position.
Though a determination of no standing would require the Court to dismiss this case for lack of jurisdiction without resolving the permissibility of
cy pres settlements, it would address the cy pres problem in a different way—by greatly reducing the impetus for such settlements. Some class actions have ended in cy pres settlements precisely because the class members were not meaningfully harmed, and thus had not incurred any actual damages. Frank v. Gaos is a classic example. It does not appear that Google’s disclosure of search terms to website operators caused any meaningful, real-world harm to anyone. Named plaintiff Anthony Italiano, for example, searched only for publicly available information concerning his own divorce.
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U.S. Chamber files amicus brief in support of neither party in a merits-stage case concerning the validity of cy pres settlement of consumer class action
brief argues that cy pres settlements are a symptom of class action litigation that should not be allowed to proceed as a class action in the first place; and the first order solution to the problem of cy pres settlements is for courts to deny class certification. For those classes that are properly certified, courts should scrutinize certain aspects of cy pres settlements, such as conflicts between the class and its counsel and in the amount of attorneys’ fees awarded to class counsel.
Ashley C. Parrish and Justin A. Torres of
King & Spalding LLP served as co-counsel for the U.S. Chamber of Commerce on behalf of the U.S. Chamber Litigation Center.