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In re Google Referrer Header Privacy Litigation

United States Court of Appeals, Ninth Circuit

August 22, 2017

In re Google Referrer Header Privacy Litigation,
v.
Melissa Ann Holyoak; Theodore H. Frank, Objectors-Appellants, Paloma Gaos; Anthony Italiano; Gabriel Priyev, individually and on behalf of all others similarly situated, Plaintiffs-Appellees,
v.
Google, Inc., a Delaware corporation, Defendant-Appellee.

          Argued and Submitted March 13, 2017 San Francisco, California

         Appeal from the United States District Court for the Northern District of California D.C. No. 5:10-cv-04809-EJD Edward J. Davila, District Judge, Presiding

          Theodore H. Frank (argued), Melissa A. Holyoak, and Adam Ezra Schulman, Competitive Enterprise Institute, Center for Class Action Fairness, Washington, D.C., for Objectors-Appellants.

          Kassra P. Nassiri (argued) and John J. Manier, Nassiri & Jung LLP, San Francisco, California, for Plaintiffs-Appellees.

          Donald M. Falk (argued) and Edward D. Johnson, Mayer Brown LLP, Palo Alto, California; Daniel E. Jones, Mayer Brown LLP, Washington, D.C.; Randall W. Edwards, O'Melveny & Myers LLP, San Francisco, California; for Defendant-Appellee.

          Before: J. Clifford Wallace, M. Margaret McKeown, and Jay S. Bybee, Circuit Judges.

         SUMMARY[*]

         Stored Communications Act / Settlement

         The panel affirmed the district court's order approving the cy pres-only settlement of a class action brought under the Stored Communications Act and state law by Google Search users, alleging that Google violated their privacy by disclosing their Internet search terms to owners of third-party websites.

         The panel held that the district court did not abuse its discretion in approving the settlement, which provided that Google would pay a total of $8.5 million and provide information on its website disclosing how users' search terms are shared with third parties, in exchange for a release of the claims of the approximately 129 million people who used Google Search in the United States between October 25, 2006 and April 25, 2014. Of the $8.5 million settlement fund, approximately $3.2 million was set aside for attorneys' fees, administration costs, and incentive payments to the named plaintiffs, and the remaining $5.3 million or so was allocated to six cy pres recipients.

         The panel held that the cy pres-only settlement, reached prior to class certification, was appropriate because the settlement fund was non-distributable. In addition, the fact that the settlement fund was non-distributable did not mean that a class action could not be the superior means of adjudicating the controversy under Fed.R.Civ.P. 23(b)(3). The panel held that approval of the settlement was not an abuse of discretion due to claimed relationships between counsel or the parties and some of the cy pres recipients. The panel held that a prior relationship or connection, without more, is not an absolute disqualifier. Rather, a number of factors, such as the nature of the relationship, the timing and recency of the relationship, the significance of dealings between the recipient and the party or counsel, the circumstances of the selection process, and the merits of the recipient play into the analysis. The panel also held that the district court did not abuse its discretion by approving the attorneys' fees and costs.

         Concurring in part and dissenting in part, Judge Wallace agreed that a cy pre-only settlement was appropriate and that the district court did not abuse its discretion in calculating class counsel's fees. Dissenting from Section II of the majority opinion, Judge Wallace wrote that the fact alone that 47% of the settlement was being donated to the alma maters of class counsel raised an issue which, in fairness, the district court should have pursued further. Judge Wallace would vacate the district court's approval of the class settlement and remand with instructions to hold an evidentiary hearing, examine class counsel under oath, and determine whether class counsel's prior affiliation with the cy pres recipients played any role in their selection as beneficiaries.

          OPINION

          McKEOWN, Circuit Judge

         Google's free Internet search engine ("Google Search") processes more than one billion user-generated search requests every day. This case arises from class action claims that Google violated users' privacy by disclosing their Internet search terms to owners of third-party websites. We consider whether the district court abused its discretion in approving the $8.5 million cy pres-only settlement and conclude that it did not.

         Background

         In these consolidated class actions, three Google Search users-Paloma Gaos, Anthony Italiano, and Gabriel Priyev (collectively "plaintiffs")-asserted claims for violation of the Stored Communications Act, 18 U.S.C. § 2701 et seq.; breach of contract; breach of the covenant of good faith and fair dealing; breach of implied contract; and unjust enrichment. The plaintiffs sought statutory and punitive damages and declaratory and injunctive relief for the alleged privacy violations.

         The claimed privacy violations are the consequence of the browser architecture. Once users submit search terms to Google Search, it returns a list of relevant websites in a new webpage, the "search results page." Users can then visit any website listed in the search results page by clicking on the provided link.

         When a user visits a website via Google Search, that website is allegedly privy to the search terms the user originally submitted to Google Search. This occurs because, for each search results page, Google Search generates a unique "Uniform Resource Locator" ("URL") that includes the user's search terms. In turn, every major desktop and mobile web browser (including Internet Explorer, Firefox, Chrome, and Safari) by default reports the URL of the last webpage that the user viewed before clicking on the link to the current page as part of "referrer header" information. See In re Zynga Privacy Litig., 750 F.3d 1098, 1102 (9th Cir. 2014) (explaining how "referrer headers" operate).[1]

          The genesis of the plaintiffs' complaints is the application of the search protocol, coupled with Google's "Web History" service, which tracks and stores account holders' browsing activity on Google's servers. Following mediation, the parties reached a settlement, which they submitted to the district court for preliminary approval in July 2013. The settlement provided that Google would pay a total of $8.5 million and provide information on its website disclosing how users' search terms are shared with third parties, in exchange for a release of the claims of the approximately 129 million people who used Google Search in the United States between October 25, 2006 and April 25, 2014 (the date the class was given notice of the settlement).

         Of the $8.5 million settlement fund, approximately $3.2 million was set aside for attorneys' fees, administration costs, and incentive payments to the named plaintiffs. The remaining $5.3 million or so was allocated to six cy pres recipients, each of which would receive anywhere from 15 to 21% of the money, provided that they agreed "to devote the funds to promote public awareness and education, and/or to support research, development, and initiatives, related to protecting privacy on the Internet." The six recipients were AARP, Inc.; the Berkman Center for Internet and Society at Harvard University; Carnegie Mellon University; the Illinois Institute of Technology Chicago-Kent College of Law Center for Information, Society and Policy; the Stanford Center for Internet and Society; and the World Privacy Forum. Each of the recipients submitted a detailed proposal for how the funds would be used to promote Internet privacy.

         After a hearing, the district court certified the class for settlement purposes and preliminarily approved the settlement. Notice was given to the class on April 25, 2014, via a website, toll-free telephone number, paid banner ads, and press articles. Thirteen class members opted out of the settlement, and five class members, including Melissa Ann Holyoak and Theodore H. Frank (collectively "Objectors"), filed objections.

         Following a final settlement approval hearing at which the district court heard from both the parties and Objectors, the district court granted final approval of the settlement on March 31, 2015. With respect to the objections, the district court found that: (1) a cy pres-only settlement was appropriate because the settlement fund was non-distributable; (2) whether or not the settlement was cy pres- only had no bearing on whether Rule 23(b)(3)'s superiority requirement was met; (3) the cy pres recipients had a substantial nexus to the interests of the class members, and there was no evidence that the parties' preexisting relationships with the recipients factored into the selection process; and (4) the attorneys' fees ...


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