Have you ever received a class action notification? The e-mails and letters contain a lot of legalese—“You might be entitled to an award as a member of this class”—but the end result is usually the same: You sign up, and you receive nothing of value.
When class actions settle, everyone wins except for the little guy. Plaintiffs’ lawyers get a bonanza, and the corporate defendants obtain a guarantee that no one else can sue them. As for the rest of the money, because it is hard to direct the multi-million-dollar settlements to class members, courts often spend the money in a system called “cy pres,” giving the money awards to charitable trusts. Sometimes it goes to a charity run by the spouse of the judge. And sometimes it goes into setting up worthless nonprofits designed to “educate” people about the harms that led to the lawsuit in the first place.
Today, the Supreme Court denied certiorari in Marek v. Lane, in which a class action was filed against Facebook on privacy grounds related to Facebook’s “Beacon” program. This program sent data from outside websites to Facebook, automatically sharing with friends one’s potentially embarrassing information, such as online purchases.
The class action was settled for $9.5 million, of which $3 million went to the lawyers and the named plaintiffs. The other $6.5 million set up a new charitable foundation, partly run by Facebook, to educate the public about online privacy. The parties agreed to bar not only the current class from future lawsuits against Facebook but also those injured by the Facebook Beacon program in the future.
Normally, a denial of certiorari is not particularly noteworthy. Today, however, Chief Justice John Roberts penned a four-page statement in which he cast doubt on the future of cy pres awards. While Marek was not an appropriate vehicle for the Supreme Court to address cy pres, “fundamental concerns surrounding the use of such remedies” are on the radar of the Chief Justice.