In re: Google Cookie Placement Settlement

Whether the lower court erred in approving a proposed class action settlement in the Google "cookie placement" litigation that did not provide direct relief to class members and would distribute funds to groups with prior connections to Google and class counsel.

Background

This appeal concerns whether a class action settlement that provides no direct relief to the class members and awards cy pres funds to preferred charities of the defendant is fair. In the underlying lawsuit, Google allegedly circumvented the privacy settings of the plaintiffs’ web browsers to track their Internet activity. According to the complaint, Google used cookies that bypassed cookie-blocking features on the plaintiffs’ web browsers and served them with targeted advertisements from third-parties based on their browsing habits.

The class consists of individuals who used Apple’s Safari browser, which was designed to block third-party cookies by default. In 2012, however, a researcher discovered that Google had inserted code to bypass Safari’s cookie-blocking feature and track Internet users without their knowledge or consent. The discovery prompted the FTC to open an investigation into Google’s practices, and led to Google paying a record $22.5 million fine to settle charges that it lied to consumers about its cookie tracking practices in violation of a prior FTC consent order. Plaintiffs subsequently filed a series of class action lawsuits, which were consolidated before a federal district court in Delaware. The plaintiffs’ asserted both federal and California state law claims, including claims that Google violated the Wiretap Act, the Stored Communications Act, and the Computer Fraud and Abuse Act, as well as state privacy laws, by tracking Internet users.

The District Court initially dismissed the case and held that the plaintiffs could not state a claim for a violation of the state or federal privacy laws. In re Google Inc. Cookie Placement Consumer Privacy Litig., 988 F. Supp. 2d 434 (D. Del. 2013). On appeal, the Third Circuit vacated the district court judgment in part, holding that the lower court had improperly dismissed the California constitutional and privacy tort claims.

On remand, the case moved forward into discovery and then into mediation. Following the mediation, the parties submitted a proposed settlement to the lower court for approval. The settlement provided for the payment by Google of $5.5 million, to be used for cy pres contributions to six non-profit organizations: the Berkeley Center for Law & Technology, the Berkman Center for Internet & Society at Harvard University, the Center for Democracy & Technology, Public Counsel, Privacy Rights Clearinghouse, and the Center for Internet & Society at Stanford University. Under the settlement, Google also provided “assurances” that it “expire or delete, by modifying the cookie deletion date contained in each cookie, all third-party Google cookies that exist in the browser filed for Safari browsers.” The court issued an opinion granting final approval of the settlement on February 2, 2017.

Prior to the final approval, a class member objected to the proposed settlement, contending that the terms were unfair because it provided no monetary relief to the class members. The objector also called attention to the fact that one of the cy-pres charities was a non-profit for which the plaintiffs’ counsel had served as chairman of the board, and several other organizations were charities to which Google routinely donates. The lower court concluded that “direct monetary payments to absent class members would be logistically burdensome, impractical, and economically infeasible,” given the millions of potential class members. The objector subsequently appealed the settlement to the Third Circuit.

EPIC’s Amicus Brief

EPIC filed an amicus brief following oral argument, urging the Third Circuit to reject the settlement. EPIC presented several arguments. First, EPIC contended that the parties incorrectly represented that the proposed cy pres recipients were part of a “limited sphere” of organizations that did consumer privacy work. EPIC argued that its work—along with the work of the Center for Digital Democracy and US PIRG—proved that this statement was false. EPIC, CDD, and US PIRG had in fact warned the FTC as early as 2007 that Google’s merger with the Internet advertising firm DoubleClick would lead to the very practices complained of in this lawsuit. EPIC also advised the Court that its 2010 FTC complaint regarding Google Buzz led to the FTC's Consent Order with Google that enabled the Commission to pursue charges against Google for the conduct at issue in this case.

Second, EPIC argued that the District Court completely failed to scrutinize the settlement in light of the fact that several of the organizations had ties to the parties. In fact, one of the Third Circuit judges remarked during oral arguments that he had never seen a decision with such little analysis in his 17 years on the bench. Third, EPIC stressed that the settlement was unfair because it offered no monetary relief to the class members and did not require Google to discontinue its unlawful business practices.

EPIC’s Interest

EPIC has a strong interest in protecting the privacy of Internet users. In particular, EPIC has challenged the growing use of advanced tracking techniques that allow companies such as Google and Facebook to track users as they go from website to website, gaining a trove of personal information on individuals that they can use to develop profiles and sell them to advertisers. EPIC has done extensive work in the areas of online tracking and behavioral profiling, including urging the FTC to limit the use of cross-device tracking, whereby companies track consumers across their smartphones, laptops, tablets, and other Internet-connected devices. EPIC also supports proposals such as do not track, that would address the problem of companies like Google and Facebook tracking users when they visit third-party websites.

EPIC has done extensive work to address the privacy concerns posed by cookie tracking in particular. EPIC opposed DoubleClick’s use of cookies to collect information on Internet users to utilize for targeted advertisements. EPIC filed an amicus brief in In Re Nickelodeon, a case involving the Video Privacy Protection Act, in which the plaintiffs alleged that Viacom placed cookies on childrens’ computers without the their parents’ consent. EPIC has a particular interest in this settlement with Google because it warned the FTC back in 2007 that the Google-DoubleClick merger would lead to the exact business practices at issue in this case. DoubleClick was in fact one of the advertising defendants in this lawsuit.

EPIC has also opposed class action settlements that are unfair to the class members. EPIC opposed a settlement in Fraley v. Facebook, a class action involving Facebook’s use of “sponsored stories.” EPIC argued that the settlement allowed Facebook to continue the unlawful conduct that was the basis of the lawsuit, and misallocated cy pres funds to organizations that were not aligned with the interests of the class members.

EPIC has taken a particular interest in the use of cy pres as a remedy in class action settlements. “Cy pres” is the Latin term for “as near as.” In the legal context, it refers to settlement funds that are distributed to organizations in lieu of direct payments to the class members. Although EPIC has been the beneficiary of cy pres funds in consumer privacy class actions, EPIC has raised serious concerns regarding its use. In particular, EPIC opposed settlements in In re Google Referrer Header and Lane v. Facebook because the cy pres funds would not be awarded to organizations whose main focus was protecting consumer privacy. Chief Justice John Roberts echoed the concerns of EPIC in Marek v. Lane; although the Court declined to review the Lane v. Facebook settlement, Roberts opined that the Supreme Court would eventually need to address “fundamental concerns surrounding the use of such remedies in class action litigation.” EPIC has proposed an objective basis for courts to make determinations in consumer privacy cases that protect the interests of class members and avoid the risk of collusion between the parties in settlement.

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