On March 20, 2019, in Frank v. Gaos, the Supreme Court remanded a case challenging Google’s practice of disclosing users’ search terms to third parties, directing the lower courts to address whether class plaintiffs had Article III standing to bring the privacy action in light of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).[1]  Frank v. Gaos was originally notable because it had been resolved by a cy pres-only class action settlement, which had been appealed by objecting class members as inconsistent with Federal Rule of Civil Procedure 23.  As part of the remand, the Court vacated the settlement without opining on its validity.

This decision comes nine years after plaintiffs first brought a class action against Google in the Northern District of California, alleging Google harmed user privacy rights by disclosing users’ search terms to third parties and advertisers in violation of the federal Stored Communications Act (“SCA”) and state law.[2]  In 2014, the court approved a cy pres settlement of $8.5 million, $5.3 million of which was allocated to six internet privacy non-profit organizations that were not involved in the litigation, $2.2 million to attorneys’ fees, and the remaining $1 million toward administrative fees and incentive payments to named plaintiffs.  No funds were allocated as damages for the settlement class of more than 100 million consumers.  Two objectors appealed the settlement as inadequate because it failed to provide a direct benefit to class members and because the cy pres recipients had pre-existing relationships with Google and class counsel that created a conflict of interest.  The Ninth Circuit affirmed approval of the settlement.

Although the Supreme Court granted certiorari on the question of whether a cy press settlement satisfies the requirement that a settlement binding class members must be “fair, reasonable, and adequate” under Federal Rule of Civil Procedure 23(e)(2), it declined to address its merits and instead remanded so the lower courts could determine whether plaintiffs had Article III standing.  The Court noted that the district court had denied Google’s motion to dismiss the SCA claim based on Edwards v. First American Corp., a Ninth Circuit case that held an Article III injury exists whenever a statute provides individuals with a statutory cause of action.[3]  But Edwards was subsequently abrogated in Spokeo, which held that a plaintiff must allege both a violation of a federal statute and some cognizable real-world harm to establish Article III standing.  Despite the existence of Spokeo at the time, the Ninth Circuit affirmed approval of the Google settlement and did so without addressing Spokeo.  As a result, the Supreme Court vacated approval of the settlement and remanded for the lower courts to address standing in the first instance in light of Spokeo.[4]

While the brief per curiam opinion does little to resolve the many questions surrounding the establishment of standing in privacy litigation, it serves as a reminder to litigants and lower courts that “Article III standing requires a concrete injury even in the context of a statutory violation,” and that the Court requires this question to be confronted head-on.[5]

[1] Frank v. Gaos,—S. Ct.—, No. 17-961, 2019 WL 1264582 (Mar. 20, 2019) (per curiam).

[2] The SCA prohibits electronic communication service providers from knowingly divulging the contents of a communication in electronic storage, and creates a private right of action for any person aggrieved by violation of the SCA.  18 U.S.C. § 2701 et seq.

[3] See Frank v. Gaos, No. 5:10-cv-4809 EJD, 2012 WL 1094646, at *3 (N.D. Cal. Mar. 29, 2012) (citing Edwards v. First Am. Corp., 610 F.3d 514 (9th Cir. 2010)).  However, the district court dismissed the state law claims, holding that named plaintiffs failed to identify what actual harm resulted from Google’s dissemination of their search queries.  See id., 2012 WL 1094646, at *2.

[4] In dissent, Justice Thomas stated he would reach the merits and reverse.  Although he concluded that plaintiffs had established standing under Spokeo, he said that the cy pres-only settlement failed the requirements of Fed. R. Civ. P. 23.  In particular, class counsel and named plaintiffs settled without obtaining relief for the class in violation of Fed. R. Civ. P. 23(a)(4), and that lack of benefit for the class rendered the settlement unfair and unreasonable.  Justice Thomas also questioned whether the class action was superior to other methods of adjudication under Fed. R. Civ. P. 23(b)(3) when it served “only as a vehicle through which to extinguish the absent class members’ claims without providing them any relief.”  2019 WL 1264582, at *4.

[5] 2019 WL 1264582, at *2 (quoting Spokeo, 136 S. Ct. at 1549).