The Supreme Court will hear a case on class action settlement distribution, and moreover how class action settlement money will be distributed. How is money from a class action settlement distributed? Well, a normal class action settlement will pay off legal expenses off the top, and the remaining funds will be awarded to the individual class members. In recent years, however, some judges have opted to award the money to different charities instead of the members of the class harmed by allegations in the lawsuit.
Consumer Affairs states that in the 2013 case Marek v. Lane, Chief Justice John Roberts called this practice into question after he noted that Facebook agreed to pay a $9.5 million settlement and the judge awarded the funds in what Roberts called “an unusual way.”
“Plaintiffs’ counsel were awarded nearly a quarter of the fund in fees and costs, while the named plaintiffs received modest incentive payments,” Roberts wrote. “The unnamed class members, by contrast, received no damages from the remaining $6.5 million.”
Awarding all class members deemed not practical
The court determined that distributing the remaining money to the large number of individuals in the class would result in awards so small that no class member would bother collecting it. So in this case, the court created a non-profit foundation with the money to educate the public about online privacy.
Since then, other judges have followed that example; but now, someone has challenged that practice in court and the high court has agreed to hear it.
The case in question stems from another online privacy issue. Google agreed to an $8.5 million settlement after it was accused in a class action of violating users’ privacy. The lawyers in the case pocketed $2 million, but members of the class received none of the remaining funds.
The money was instead divided between foundations focused on internet privacy issues, based at Stanford and Harvard universities. Two class members objected to the settlement, arguing the terms of the settlement did not address the real issue in the case — the harm to the members of the class.
The U.S. Ninth Circuit Court of Appeals upheld the original settlement, pointing out that trying to distribute the money in the settlement to every class member would result in awards of around four cents each.
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