Grudgingly, Supremes Pass on Facebook Cy Pres Challenge
We've written frequently about cy pres class action settlements—deals in which defendants pony up funds for charities or advocacy groups instead of paying class members directly. When Facebook inked such a settlement to resolve privacy claims over its now-defunct "Beacon" consumer endorsement program, the $9.5 million deal was challenged on the grounds that more than $6 million would go to study online privacy issues.
A divided U.S. Court of Appeals for the Ninth Circuit ultimately affirmed the Facebook settlement in September 2012. And that's as far as the challenge will go: As The Recorder's Scott Graham reports, on Monday the U.S. Supreme Court declined to intervene, rejecting a cert petition filed by Theodore Frank of the Center for Class Action Fairness and counsel of record David Rivkin Jr. of Baker & Hostetler.
Frank's organization habitually takes aim at deals that seem to benefit no one but lawyers. Back in February, for example, his group successfully dismantled a cy pres settlement in an antitrust class action against Toys "R" Us and others, persuading the U.S. Court of Appeals for the Third Circuit that the deal was unfair and "arguably overcompensates class counsel at the expense of the class."
Frank and Rivkin may have struck out in the Facebook case, but that doesn't mean the Supreme Court isn't interested in the cy pres issue. In a rare three-page statement on the cert denial (click here and scroll down), Chief Justice John Roberts made it clear that he found the spread of such settlements problematic. Because of the specifics of the Facebook deal, however, he wrote that "granting review of this case might not have afforded the court an opportunity to address more fundamental concerns surrounding the use of such remedies in class action litigation, including when, if ever, such relief should be considered." The chief justice added: "In a suitable case, this court may need to clarify the limits on the use of such remedies."
(Frank tweeted: "Anybody can get a cert grant; it takes a special petition to generate a chief justice statement respecting denial of cert.")
Kristin Linsley Myles of Munger, Tolles & Olson filed Facebook's brief opposing certiorari, along with Cooley's Michael Rhodes. Scott Kamber of KamberLaw LLC filed the class action plaintiffs' opposition brief.
CORRECTION: An earlier version of this story incorrectly characterized Frank and CCAF's roles in the underlying litigation. We regret the error.