On The Case

Justices revisit Spokeo standing at oral arguments over cy pres settlements

(Reuters) - A funny thing happened on the way to a U.S. Supreme Court determination of the propriety of paying charities instead of class members in so-called cy pres class action settlements. At oral arguments on Wednesday in Frank v. Gaos – in which the Supreme Court granted review to decide whether cy pres settlements are fair and reasonable under the federal rules governing class actions – at least three justices suggested the court can’t reach the cy pres issue because plaintiffs in the underlying class action hadn’t established their constitutional right to sue in federal court under the Supreme Court’s 2016 ruling in Spokeo v. Robins.

Justices Elena Kagan, Neil Gorsuch and Stephen Breyer seemed particularly concerned about the constitutional standing of the named plaintiffs who had sued Google for privacy violations under the Stored Communications Act. (The allegation, in a nutshell: When a user visits a website via Google Search, that website may be able to discern the specifics of the user’s search.)

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Justices Breyer and Kagan noted that the trial judge who approved an $8.5 million cy pres settlement didn’t evaluate the plaintiffs’ standing under the Spokeo standard, which holds that plaintiffs cannot merely allege a statutory violation but must plead a concrete injury to meet constitutional requirements. (In fairness, the settlement was approved before the Supreme Court’s Spokeo ruling.)

They weren’t the only justices to chime in on standing, either. Chief Justice John Roberts asked both Google counsel Andrew Pincus of Mayer Brown and objectors’ counsel Ted Frank of the Competitive Enterprise Institute to address the implications if the court were to conclude class plaintiffs hadn’t established standing. “Obviously, if there’s no standing, the whole class action is thrown out, right?” Roberts asked Frank, who agreed and suggested the solution might be to remand the case to the lower courts to decide if the class action meets post-Spokeo standing requirements. (Frank said it does.)

Justice Alito suggested the Supreme Court might be able to step into the breach and decide the standing question without a remand back to the lower courts. But in addition to Frank, the other three advocates who argued Wednesday – Principal Deputy Solicitor General Jeffrey Wall on behalf of the government as an amicus, Jeffrey Lamken of MoloLamken on behalf of the class and Pincus for Google – said a remand would allow full briefing on the complex and relatively unexplored question of Spokeo standing and the Stored Communications Act. Lamken and Pincus suggested the court might also dismiss the case as improvidently granted, though Wall urged the court not to go that route.

In an email Thursday, Frank said he couldn’t predict how the court would deal with the standing question. “I don’t know where they shake out on this; I can’t count to five in either direction,” he said. Frank added that the plaintiffs in the Google class action obviously didn’t draft their complaint to meet Spokeo standards since the complaint pre-dated the Supreme Court’s decision. But he said it’s “inconceivable” to him that a lower court would toss the case on jurisdictional grounds. (For what it’s worth, the Supreme Court’s newest member, Justice Brett Kavanaugh, also seemed to consider standing a no-brainer, telling Wall that the disclosure of a user’s search history is an injury as a matter of “plain common sense.”)

Deepak Gupta of Gupta Wessler, who wasn’t involved in the Google case but has been following it closely, said the most likely outcome is a limited remand so lower courts can examine the standing question. The Supreme Court can’t decide the case unless it has jurisdiction, Gupta noted, so the justices can’t get to the cy pres issue without addressing standing.

We should know sooner than later how the justices intend to deal with the question. If the court decides to tackle that threshold jurisdictional issue itself, it will probably order supplemental briefing within the next few weeks.

You may be wondering why the Supreme Court granted certiorari to resolve questions about cy pres in a case that could be sidetracked by jurisdictional concerns. The answer is that none of the briefing on Ted Frank’s cert petition raised the question of the plaintiffs’ standing. Google had moved to dismiss named plaintiffs’ claims years ago in the trial court but, as I mentioned, the case settled before the Supreme Court’s Spokeo ruling. When the 9th Circuit upheld the $8.5 million settlement in 2017, it addressed only Ted Frank’s challenge to the settlement’s cy pres provisions.

It was the Justice Department that first raised jurisdictional concerns in an amicus brief filed in July, after the justices agree to hear the case. The parties responded to DOJ in subsequent briefs. Google agreed with the government that the class action would likely not have survived under the Spokeo standard but said defendants “should be able to compromise standing disputes when the answer is not clear under governing law at the time of the settlement.” The class seized on the government’s standing argument to urge the Supreme Court to drop its grant of review. Ted Frank said in his reply brief that the named plaintiffs had standing under the Spokeo test. If there was any doubt, Frank said, the Supreme Court should remand rather than dismiss as improvidently granted.

When I highlighted the Justice Department’s standing argument in a story last summer about its surprise amicus brief, I suggested that DOJ’s aggressive stance on post-Spokeo jurisdiction could be an omen that the government will oppose more class action settlements at the trial-court level. I asked Frank on Thursday whether the Supreme Court’s interest in the issue will embolden DOJ to mount more post-Spokeo standing challenges.

He suggested no, pointing out that it’s the Civil Division that decides whether to oppose approval of class action settlements, not the solicitor general’s office, which posited the standing argument in the cy pres case. Frank also said plaintiffs in the post-Spokeo era have learned to plead allegations to meet the Supreme Court standard.

Gupta similarly said it would be a stretch to read DOJ’s amicus brief as a warning sign of a more aggressive stance on class action standing. “I think the SG’s office was just discharging its responsibility to bring issues to the court’s attention,” he said.