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In re Google Inc. Cookie Placement Consumer Privacy Litigation

United States Court of Appeals, Third Circuit

August 6, 2019


          Argued November 14, 2017

          Appeal from the United States District Court for the District of Delaware (D.C. Civil Action No. 1-12-md-02358) District Judge: Honorable Sue L. Robinson

          Theodore H. Frank (Argued) Adam E. Schulman Competitive Enterprise Institute Center for Class Action Fairness Counsel for Appellant

          James P. Frickleton Bartimus Frickleton Robertson & Gorny Stephen G. Grygiel Silverman Thompson Slutkin & White Brian R. Strange (Argued) Strange & Butler Counsel for Appellees: Jose M. Bermudez; Nicholas Todd Heinrich; Lynne Krause.

          Anthony J. Weibell (Argued) Wilson Sonsini Goodrich & Rosati Michael H. Rubin Wilson Sonsini Goodrich & Rosati Counsel for Appellee, Google Inc.

          M. Duncan Grant Pepper Hamilton, Joseph A. Sullivan Pepper Hamilton Counsel for Amicus Curiae: Association of Pro Bono Counsel; Community Legal Aid Society Inc.; Community Legal Services; Legal Services of New Jersey; National Legal Aid & Defender Association; Pennsylvania Legal Aid Network; Philadelphia Bar Foundation.

          Oramel H. Skinner, III (Argued) Office of Attorney General of Arizona Counsel for Amicus Appellant: Attorneys General for the States of Alaska, Arizona, Arkansas, Kansas, Louisiana, Mississippi, Missouri, Nevada, North Dakota, Oklahoma, Rhode Island, Tennessee, Wisconsin.

          Before: AMBRO, KRAUSE, and RENDELL, Circuit Judges



         Cases with many plaintiffs, few to none of whom will sue solely for themselves because the costs far outweigh the benefits, frequently result in class actions under Federal Rule of Civil Procedure 23. Prerequisites are having (1) so many class members that joinder is impractical, (2) questions of law or fact that are common to the class, (3) one or more representatives whose claims or defenses are typical of those in the class, and (4) representatives who will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a). Besides these prerequisites, a class action must satisfy one of the subsections (1) through (3) in Rule 23(b). As pertinent here, Rule 23(b)(2) provides that a class action may be maintained if the requirements of Rule 23(a) are met and "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole."

         For the first time we review an order approving the settlement of a class action certified under Rule 23(b)(2) where the only benefit received by the class was the defendant's payment of a cy pres award to organizations the defendant approved.[1]

         The defendant, Google Inc., created a web browser "cookie" that tracks an internet user's data (think following the trail of cookie crumbs). For some Safari or Internet Explorer browser users, the cookie may have operated even if the user configured privacy settings to prevent it from tracking data. The class plaintiffs claim Google invaded users' privacy under the California constitution and the state tort of intrusion upon seclusion (meaning the intrusion into a private place, conversation, or matter in a highly offensive manner). In a disputed Rule 23(b)(2) class settlement, Google has agreed to stop using the cookies for Safari browsers and to pay $5.5 million to cover class counsel's fees and costs, incentive awards for the named class representatives, and cy pres distributions, without directly compensating any class members. The six cy pres recipients are primarily data privacy organizations, and all must agree to use the funds to research and promote browser privacy. In addition, Google would obtain, among other things, a class-wide release of all class- member claims, including for money damages that did or could stem from the subject matter of the litigation.

         The lone objector, Theodore H. Frank, challenges the District Court's certification of a settlement class and the terms of the approved settlement. He argues that the cy pres money properly belongs to the class as compensation. He asks us to vacate the settlement as unfair and require direct distributions to class members before resorting to cy pres awards. In the alternative, if direct distributions are truly infeasible, he asserts the class should not have been certified due to inadequate representation. Frank also challenges the parties' choice of cy pres recipients because of their pre-existing relationships with Google and class counsel.

         We believe that, in some Rule 23(b)(2) class actions, a cy pres-only settlement may properly be approved. But here the District Court's cursory certification and fairness analysis were insufficient for us to review its order certifying the class and approving the settlement. The settlement agreement's broad release of claims for money damages and its designation of cy pres recipients are particularly concerning. We thus vacate the order approving the settlement and remand for further proceedings consistent with this opinion.

         I. Background

         A. Prior Litigation

         We outlined the facts underlying the class's claims in In re Google Inc. Cookie Placement Consumer Privacy Litigation, 806 F.3d 125, 130-34 (3d Cir. 2015). In brief, news broke in early 2012 that a Stanford graduate student had discovered Google's cookies were bypassing Safari and Internet Explorer privacy settings and tracking internet-user information. Google settled the resulting Federal Trade Commission and state attorneys general lawsuits, agreeing to cease the practice and to pay a combined $39.5 million in fines, though admitting no past acts or wrongdoing. Plaintiff internet users also filed claims against Google that were later consolidated into a putative class action. The class complaint alleged violations of federal privacy and fraud statutes, California unfair competition and privacy statutes, the California constitution's right to privacy, and that state's privacy tort law. It sought injunctive and monetary relief. Google moved to dismiss, and the District Court granted the motion in full. On appeal we affirmed the dismissal of all but the California constitutional and tort claims. See id. at 153.

         B. Proposed Settlement

         On remand, the parties began discovery. They then sought to avoid further litigation and began mediation before a former federal judge. With the help of the mediator, the parties agreed to a settlement (the "Settlement Agreement") and simultaneously moved for certification of a Federal Rule of Civil Procedure 23(b)(2) class and approval of the settlement under Federal Rule of Civil Procedure 23(e). The latter states that "claims, issues, or defenses of a certified class . . . may be settled, voluntarily dismissed, or compromised only with the court's approval." Fed.R.Civ.P. 23(e). It also lays out the procedures that apply to any such settlement, dismissal, or compromise. Id.

         The proposed settlement defines the class as all persons in America who used Safari or Internet Explorer web browsers and "who visited a website from which . . . cookies were placed by the means alleged in the Complaint," excluding individuals who had already obtained relief from Google or submitted "a valid and timely Request for Exclusion." Settlement Agreement §§ 2.3, 2.5 (defining "Class" and "Class Member"). In sweeping language, the settlement would release all class member claims, including for damages, that did or could stem from, or relate to, the subject matter of the litigation. Settlement Agreement § 2.25 ("Released Claims").

         In exchange, Google would be required to assure it had "implemented systems configured to" abate or delete all third-party Google cookies that exist in Safari browsers. Settlement Agreement § 5.1 ("Assurance of Remediation"). And as noted, it would also pay $5.5 million, to be divided among the settlement administrator, class counsel, the named class representatives, and cy pres recipients. Settlement Agreement § 5.2 ("Settlement Fund").

         The Settlement Agreement requires both parties to agree to the cy pres recipients. The class must propose up to ten options, and Google may strike any for a non-arbitrary reason and request a replacement. Settlement Agreement § 5.3 ("Cy Pres Recipients"). The chosen recipients must agree "to devote the funds to promote public awareness and education, and/or to support research, development, and initiatives, related to the security and/or privacy of Internet browsers." Id. The parties ultimately agreed on six recipients: (1) the Berkeley Center for Law & Technology; (2) the Berkman Center for Internet & Society at Harvard University; (3) the Center for Democracy & Technology (Privacy & Data Project); (4) Public Counsel; (5) the Privacy Rights Clearinghouse; and (6) the Center for Internet & Society at Stanford University. Neither Frank nor the District Court were privy to the selection process.

         C. Class Action Settlements

         The settlement of a putative class action requires the approval of a district court, both for certifying the class and for determining whether the settlement is "fair, reasonable and adequate." Halley v. Honeywell Int'l, Inc., 861 F.3d 481, 488 (3d Cir. 2017). We have provided guidance on the factors a court should consider in deciding whether to approve class action settlements, most notably the Girsh factors[2] and the Prudential factors.[3] Where, as here, the parties seek simultaneous class certification and settlement approval, courts should be "even more scrupulous than usual when they examine the fairness of the proposed settlement." Prudential, 148 F.3d at 317 (quotation omitted). This heightened standard is designed to protect the interests of all class members. Id.

         Some class action settlements also require the sending of notice to members of the putative class. Before approving the settlement of a class action certified under Rule 23(b)(3), which is primarily used to pursue money-damages class actions, [4] a court "must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed.R.Civ.P. 23(c)(2)(B). For class actions certified under Rule 23(b)(1), which is often used to pursue class actions involving a common fund for injured stakeholders, [5] or Rule 23(b)(2), which is used to pursue injunctions in class actions, the Rules do not impose the same mandate of notice; rather, they state the court "may direct appropriate notice to the class." Fed.R.Civ.P. 23(c)(2)(A); see also Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 363 (2011). Of course, regardless what these rules say, the procedures for ...

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