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The case of Frank v. Gaos presents the question of whether and in what circumstances courts can approve class action settlements that send all or part of the settlement to charity rather than to class members. The payments to charity are known as “cy pres” payments—French for “next best.” The idea is that, if, for some reason, it is not practical to send the money to class members—usually because the money is not sufficient to send more than a few cents or dollars to each class member—the next best thing is to send it to a charity that can serve class members indirectly.
Ted Frank runs an organization that objects to class action settlements he deems problematic. He objected to a settlement in a privacy lawsuit against Google on the ground that all the money that did not go to attorneys’ fees and other transaction costs (some several million dollars) was going to charity. Class members got nothing besides changes to Google’s privacy disclosures. Frank says that cy pres should never be counted when the court assesses whether a settlement is fair. But, if it is counted, courts should always try to distribute money to class members before ever resorting to cy pres. Mr. Frank also takes issues with the charities that received the money in the Google case.
The class action lawyers and Google say cy pres has been used for decades and there is nothing wrong with it when it is impractical to distribute the money (the class here comprises 140 million people); the charity will indirectly serve the class’s interests, and there is no conflict of interest on the part of the judge or lawyers in selecting the charities. The issues of Frank v. Gaos as related in oral arguments are further discussed in this teleforum.
Prof. Brian T. Fitzpatrick, Professor of Law, Vanderbilt University Law School
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