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(Reuters) — The U.S. Supreme Court on Wednesday cast doubt on a $8.5 million settlement Google had agreed to pay to end an internet privacy dispute, directing a lower court to review whether plaintiffs who accused the search engine operator of wrongdoing in a class action lawsuit were legally eligible to sue.
The plaintiffs had argued that Google, part of Alphabet Inc., violated federal privacy law by allowing other websites to see users' search queries.
The justices threw out a ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals that had upheld the settlement and directed it to take a fresh look at whether the plaintiffs had actually been harmed by Google and had the necessary legal standing.
The dispute centered on an increasingly common type of settlement in class action cases used when it might be impractical to carve up low-value individual damages among a large number of plaintiffs. In endorsing the Google settlement in 2017, the 9th Circuit said each of the 129 million U.S. Google users who theoretically could have claimed part of it would have received "a paltry 4 cents in recovery."
Proponents have said these "cy pres" (pronounced "see pray") settlements can put otherwise negligible awards per person to good use by benefiting groups that work for the public good or support underfunded entities. Critics have said the settlements encourage frivolous lawsuits and excessive fees going to plaintiffs' lawyers.
The Google settlement was challenged by attorneys including Ted Frank of the Hamilton Lincoln Law Institute, which advocates against what it considers abusive class action procedures.
The plaintiffs in the case alleged that their privacy was violated when their search terms were disseminated by Google to other sites. One searched for her own name, another for financial and health data, and a third for information related to his divorce proceedings.
Regulators in Europe sent a clear signal about how strictly they will enforce the bloc’s General Data Protection Regulation with a €50 million ($57.2 million) fine against Alphabet Inc.’s Google, and risk managers and other stakeholders should heed the warning and closely examine their privacy and data protection policies and processes, particularly in the area of informed consent for the use of personal information, experts say.