Frank v. Gaos: Remand, but Little Guidance.

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Frank v. Gaos: Remand, but Little Guidance.Today, the Supreme Court sent Frank v. Gaos back to the Ninth Circuit to address the issue of standing under Spokeo.

Frank involved allegations of privacy violations. Plaintiffs brought class action claims against Google for alleged violations of the Stored Communications Act. The complaints alleged that when an Internet user conducted a Google search and clicked on a hyperlink to open one of the webpages listed on the search results page, Google transmitted information including the terms of the search to the server that hosted the selected webpage.

After three motions to dismiss (none of which disposed of the whole case), the parties negotiated a settlement requiring Google to include certain disclosures on some of its webpages and distribute more than $5 million to cy pres recipients, more than $2 million to class counsel, and no money to absent class members. Objectors appealed the settlement’s approval, arguing that cy pres relief to third-party charities was an improper basis for settlement. (The use of cy pres in this context, which involves remitting class settlement payments to non-parties – often charities – when it is difficult or expensive to make such payments directly to class members, has been the subject of criticism by courts and commentators.)

We were originally watching Frank in the hope that it would give a clear rule on whether and when it is permissible to have cy pres distributions in class-action settlements, but that hope shifted when the Court on its own called for additional briefing on whether the plaintiffs had a concrete injury necessary to confer standing. We then turned our focus to seeing if the Court would provide more guidance on exactly when a mere statutory violation confers standing under Spokeo, a question that has divided lower courts.

Today’s remand provides no real guidance at this point. The Court declined to rule on either the cy pres issue or the standing issue. Despite having raised the standing issue in the first place, the Court punted on its own question, stating that “we are a court of review, not of first view.” Because the Ninth Circuit and District Court had never analyzed the arguments regarding standing under Spokeo, the Court simply called a do-over. It vacated the Ninth Circuit’s judgment in a per curiam opinion and sent the case back to the lower courts for a review of standing. The Court cautioned “[n]othing in our opinion should be interpreted as expressing a view on any particular resolution of the standing question.”

Despite the lack of fireworks and despite the Supreme Court’s caution that we should not read anything in its standing ruling, there is an important takeaway here: the standing question presented was serious enough to require review. If the Court could comfortably say that standing did exist, it presumably would have addressed the cy pres question for which it granted certiorari in the first place. Its decision to vacate the judgment and send the case back to the lower courts signals how serious the standing question is, especially in these kinds of statutory violation cases.

What’s important to the Supreme Court should be important to practitioners. Arguing about standing has its risks (as we have noted), but federal courts are policing standing – especially in the class-action space – more than ever before. Class settlements designed to bring peace and resolve a line of litigation are attractive, but these settlements can be vulnerable to attack by objectors challenging subject matter jurisdiction. That is, after all, what happened in Franks: two objectors challenged a class settlement on jurisdictional grounds and pressed their objections all the way to the Supreme Court.

If we were placing bets, the odds are now against Franks returning to the Supreme Court anytime soon, if ever. But presumably, the Court will look to identify another case raising the cy pres questions that were present in Franks, and we continue to watch for the Court to grant certiorari on the Spokeo questions that ultimately caused Franks to be remanded. So, we wait. Ironically, however, the cases in which the parties resort to cy pres are often those where class members suffered little or no actual harm. So, don’t be surprised if both issues are presented next time the Supreme Court takes on this issue. Let’s hope that when that time comes, the trial court will have already addressed both issues itself.