Re: Dkt. Nos. 65, 66
This consolidated internet privacy litigation against Defendant Google Inc. (“Google”) returns for final approval of a class action settlement. See Docket Item No. 65. Representative Plaintiffs Paloma Gaos, Anthony Italiano and Gabriel Priyev (“Plaintiffs”) also seek an order approving their request for attorneys fees, costs and incentive awards. See Docket Item No. 66.
Federal jurisdiction arises pursuant to 28 U.S.C. § 1331. Having carefully considered the written briefing along with the arguments of counsel at the hearing on this matter, the court has determined the motions should be granted for the reasons explained below.
I. FACTUAL AND PROCEDURAL BACKGROUND
The court previously described the factual allegations underlying this lawsuit and repeats them again here. According to the Consolidated Class Action Complaint (“CCAC”), “searching” is one of the “most basic activities performed in the Internet,” and Google’s website offers “the most-used search engine in the world.” See CCAC, Docket Item No. 50, at ¶¶ 15, 16. This case focuses on that proprietary search engine. Plaintiffs allege Google operated its search engine in a manner that violated their Internet privacy rights by disclosing personal information to third parties.
Specifically, Plaintiffs allege that Google’s search engine intentionally and by default included the user’s search terms in the resulting URL of the search results page. Id. at ¶ 56. Thus, when a user of Google’s search engine clicked on a link from the search results page, the owner of the website subject to the click receives the user’s search terms in the “referrer header” from Google. Id. at ¶ 57. This information is then disseminated further,
According to Plaintiffs, the problem with Google’s disclosure of users’ search information to the third parties is that the referrer header — which displays the user’s search terms — can sometimes contain certain personal information often subject to search queries, including “users’ real names, street addresses, phone numbers, credit card numbers, social security numbers, financial account numbers and more, all of which increases the risk of identity theft.” Id. at ¶ 3. “User search queries can also contain highly-personal and sensitive issues, such as confidential medical information, racial or ethnic origins, political or religious beliefs or sexuality, which are often tied to the user’s personal information. Id. at ¶ 3.
Based on these allegations, Plaintiffs assert the following causes of action against Google: (1) violation of the Stored Communications Act (“SCA”), 18 U.S.C. § 2701; (2) breach of contract; (3) breach of the covenant of good faith and fair dealing; (4) breach of implied contract; (5) unjust enrichment; and (6) declaratory and injunctive relief.
Gaos initiated an action in this court on October 25, 2010, and Priyev filed an action on February 29, 2012, in the Northern District of Illinois. On April 30, 2013, the cases were consolidated after the Priyev action was transferred to this court. On March 26, 2014, the court granted the parties motion for preliminary approval of the settlement, certified a settlement class and appointed counsel. These motions were filed upon completion of the notice plan.
The court received four written objections to the settlement from Kim Morrison, David Weiner, Melissa Holyoak, Theodore H. Frank, and Cameron Jan. A hearing addressing final approval was held on August 29, 2014.
II. LEGAL STANDARD
A class action may not be settled without court approval. Fed. R. Civ. P. 23(e). When the parties to a putative class action reach a settlement agreement prior to class certification, “courts must peruse the proposed compromise to ratify both the propriety of the certification and the fairness of the settlement.” Staton v. Boeing Co.,
“Approval under 23(e) involves a two-step process in which the Court first determines whether a proposed class action settlement deserves preliminary approval and then, after notice is given to class members, whether final approval is warranted.” Nat’l Rural Telecomms. Coop. v. DIRECTV, Inc.,
III. DISCUSSION
A. Continuing Certification of Settlement Class
This analysis begins with an examination of whether class treatment remains appropriate. The court found at the preliminary approval stage that Rule 23(a)’s requirements of numerosity, commonality, typicality, and adequate protection by the named representatives were satisfied. As to those issues, Plaintiffs anticipated a class comprised of approximately 129 million individuals who all share a common injury. The existence of this injury for each class member could be determined by resolving one question: whether Google’s system-wide practice and policy of storage and disclosure of their search query information was unlawful. Plaintiffs’ claims were also typical, if not identical, to that of other class members. For that reason, there was no indication that Plaintiffs’ interest would conflict with that of the class, and Plaintiffs and their counsel had proven a desire to vigorously pursue class claims as evidenced by prior motion practice.
As to Rule 23(b), the court found that common questions predominate and that the class action mechanism was a superior process for this litigation. The alternatives to class certification — millions of separate, individual and time-consuming proceedings or a complete abandonment of claims by a majority of class members— were not preferable. Moreover, class treatment was appropriate because Defendant’s policy was directed at all of its users as whole rather than at particular users of its search engine. Since an adequate showing was made as to all of the Rule 23 factors, the court conditionally certified the class for settlement purposes.
The filings related to this motion do not compel an alteration to the prior findings under Rule 23. Although Objectors Frank and Holyoak argue the class should be decertified unless the class members receive direct payments from the settlement fund, such an argument is unpersuasive under these circumstances. Frank and Holyoak appear to generally contend that the only acceptable benefit is some form of monetary compensation. If it is too costly to distribute settlement funds to class members, then Frank and Holyoak believe the class action mechanism is an inferior method of resolution under Rule 23(b).
This argument directed at the superiority element of Rule 23(b) is misplaced. Within the context of a class action settlement, the superiority inquiry focuses on “whether the objectives of the particular class action procedure will be achieved in the particular case.” Hanlon,
Moreover, a class-wide resolution is not rendered inferior simply because the
Accordingly, the objection of Frank of Holyoak on this topic is overruled. The class shall remain certified for settlement purposes.
B. Appropriateness of the Notice Plan
Rule 23(c)(2)(B) requires “the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” However, individual notice is not always practical. When that is the case, publication or some similar mechanism can be sufficient to provide notice to the individuals that will be bound by the class action judgment. Mullane v. Cent. Hanover Bank & Trust Co.,
On the issue of appropriate notice, the court previously recognized the uniqueness of the class asserted in this case,'since it could potentially cover most internet users in the United States. On that ground, the court approved the proposed notice plan involving four media channels: (1) internet-based notice using paid banner ads targeted at potential class members (in English and in Spanish on Spanish-language websites); (2) notice via “earned media” or, in other words, through articles in the press; (3) a website decided solely to the settlement (in English and Spanish versions); and (4) a toll-free telephone number where class members can obtain additional information and request a class notice. In addition, the court approved the content and appearance of the class notice and related forms as consistent with Rule 23(c)(2)(B).
The court again finds that the notice plan and class notices are consistent with Rule 23, and that the plan has been fully and properly implemented by the parties and the class administrator.
C. Fairness of the Settlement
The court now reexamines the fairness of the proposed settlement, this time with the benefit of notice having been provided to the class. The settlement agreement contains the following major components:
• Google will pay a total amount of $8.5 million, which will constitute the entirety of the settlement fund. All payments will be made from this fund, including: (1) distributions to cy pres recipients, (2) attorneys fees and costs awards, (3) incentive awards to named plaintiffs, and (4) administration costs, including the costs due to the claims administrator. Funds that remain after all payments are made will not revert to Google.
• Google will maintain information on its website under the “FAQ,” “Key*1130 Terms,” and “Privacy FAQ for Google Web History” webpages which discloses how information concerning users’ search queries are shared with third parties. Specifically, the “FAQ” webpage will include an answer to the question “Are my search queries sent to websites when I click on Google Search results?” which notifies users that search terms may be disclosed to the destination webpage in the referrer header. In conjunction, the “Key Terms” webpage will include a definition of “HTTP Referrer,” and the “Privacy FAQ for Google Web History” webpage will direct users to the Privacy Policy FAQ for more information on how Google handles search queries generally. Importantly, however, Google is not required to make changes to its homepage, www.google.com, or to practices or functionality of Google Search, Google AdWords, Google Analytics or Google Web History.
• As to particular payments to be made from the settlement fund, Plaintiffs request that each of the three representative plaintiffs receive incentive awards $5,000, and anticipate up to $1 million in claims administration costs. They also request the court approve their counsel’s request for $2,125 million in fees and $21,643.16 in costs.
• After all contemplated payments are made from the fund, the balance will be distributed to the cy pres recipients previously approved by the court. To that end, Plaintiffs propose that Carnegie Mellon University receive 21% of the remainder, that the World Privacy Forum receive 17%, that Chicago-Kent College of Law Center for Information, Society and Policy receive 16%, that the Stanford Center for Internet and Society receive 16%, that the Berkman Center for Internet and Society at Harvard University receive 15%, and that the AARP Foundation receive 15%.
To determine whether a class action settlement is fair, adequate and reasonable, the court must balance a series of factors, including “the strength of the plaintiffs’ case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement.” Hanlon,
When, as here, settlement occurs before formal class certification, .approval requires a higher standard of fairness in order to ensure that class representatives and their counsel do not secure a disproportionate benefit at the expense of the class. Lane,
i. Strength of Plaintiffs’ Case
To assess strength of the case, “the district court’s determination is nothing more than an amalgam of delicate balancing, gross approximations and rough justice.” Officers for Justice,
Here, Plaintiffs readily state that the alleged privacy violation underlying all of their claims is novel and was potentially one of first impression in this circuit. Thus, from the outset, there was no guarantee that any claims would survive pretrial challenges if adversarial litigation had continued. Indeed, by the time the parties reached a settlement, some of the claims were facing a third motion to dismiss and the one claim that had survived the second dismissal motion, the SCA claim, was subsequently invalidated by the Ninth Circuit in, a case presenting a similar theory. See In re Zynga Privacy Litig.,
Plaintiff also faced challenges had the case proceeded to trial. In light of the technology involved, the jury would have been required to review complex technical evidence about the inner-workings of Google’s search engine, leaving significant opportunity for misunderstanding. Furthermore, success at trial would not have equated to an ultimate success for the eláss. This is because the calculation of damages based on a potentially unquantifiable privacy injury would have posed a serious challenge to Plaintiffs in obtaining some type of valuable relief, and any meaningful monetary amount awarded to each class member would have resulted in an astronomical judgment far exceeding the value of Google, given the size of the class. For that reason, the judgment would undoubtedly have been met with a remittitur motion and an appeal.'
This factor weighs strongly in favor of the settlement. Without a compromise, there was little guarantee of any benefit to the class without a substantial amount of further litigation.
ii. The Risk, Expense, Complexity, and Likely Duration of Further Litigation
This case was a particularly risky one for counsel because the type of privacy injury asserted by Plaintiffs renders it legally unproven, technically complex and potentially of little value. It also would have been expensive to litigate and try since expert testimony would be necessary to explain the referrer header technology and establish a basis for damages in an untested area.
Moreover, Google’s denial of liability means Plaintiffs would continue to face “serious hurdles,” including a motion for summary judgment, Daubert challenges, and inevitable appeals that would “likely prolong the litigation, and any recovery by class members, for years.” Rodriguez,
iii. The Risk of Maintaining Class Action Status
Although a class can be certified for settlement purposes, the notion that a district court could decertify a class at any time is an inescapable and weighty risk
iv. The Amount Offered in Settlement
This settlement has a monetary component requiring Google to pay $8.5 million into a common fund and an injunctive component obligating certain disclosures on the Google website. After court-approved payments, the remainder of the fund will be distributed to identified cy pres recipients in proportions designated by Plaintiffs’ counsel.
In support of final approval, Plaintiffs point out that the amount of the agreed-upon settlement fund compares favorably to that of other similar class actions. See, e.g., In re Google Buzz Privacy Litig.,
Plaintiffs also believe that a distribution of the settlement funds to cy pres recipients is appropriate in this case. Cy pres payments like those proposed for this case can be approved when actual funds are “non-distributable,” or “ ‘where the proof of individual claims would be burdensome or distribution of damages costly.’ ” Nachshin,
On this issue, the court echoes the comments it made at preliminary approval describing why a cy pres remedy is the “next best” result here. First, the settlement fund, while sizeable, is “non-distributable.” Since the amount of potential class members exceeds one hundred million individuals, requiring proofs of claim from this
Second, the cy pres distribution accounts for the nature of this suit, meets the objectives of the SCA, and furthers the interests of class members. The recipients are established organizations chosen by Plaintiffs’ counsel after considering whether they are independent and free from conflict, have a record of promoting privacy protection on the Internet, reach and target interests of all demographics across the country, were willing to provide detailed proposals, and are capable of using the funds to educate the class about online privacy risks.
Aside from the cy pres portion of the settlement, the court must also comment on the fact that Google’s allegedly unlawful practice will not change as a result of this case. Instead, Google will be obligated to make certain “agreed-upon disclosures,” or changes to certain portions of its website, the purpose of which is to better inform users how their search terms could be disclosed to third parties through a referrer header. It was noted previously that this relief is not the best result when compared to that sought in the CCAC, since the order contemplated by that pleading would have required Google to stop disclosing search queries altogether.
At the same time, a class action settlement does not need to embody the best possible result to be approved. The court’s role is not to advocate for any particular relief, but instead to determine whether the settlement terms fall within a reasonable range of possible settlements, giving “proper deference to the private consensual decision of the parties” to reach an agreement rather than to continue litigating. Hanlon,
In sum, this factor favors settlement.
v.The Extent of Discovery Completed and the Stage of the Proceedings
Prior to reaching a settlement, the parties had engaged in extensive document exchange and had fully briefed three motions to dismiss. They also met in person numerous times and engaged an experienced neutral to assist them in reaching a negotiated resolution. The extent of Plaintiffs’ counsel factual investigation and the amount of pre-compromise litigation shows they “had a good grasp on the merits of their case before settlement talks began.” Rodriguez,
vi.The Experience and Views of Counsel
“Parties represented by competent counsel are better positioned than courts to produce a settlement that fairly reflects each party’s expected outcome in litigation.” Id. Consequently, “ ‘[t]he recommendations of plaintiffs’ counsel should be given a presumption of reasonableness.’ ” In re Omnivision Techns., Inc.,
vii. The Presence of a Governmental Participant
The Class Action Fairness Act, or “CAFA,” requires that notice of a settlement be given to state and federal officials and provides those officials a window of time to comment. 28 U.S.C. § 1715(b). “Although CAFA does not create an affirmative duty for either state or federal officials to take any action in response to a class action settlement, CAFA presumes that, once put on notice, state or federal officials will raise any concerns that they may have during the normal course of the class action settlement procedures.” Garner,
viii. The Reaction of Class Members
A low number of opt-outs and objections in comparison to class size is typically a factor that supports settlement approval. See Hanlon,
In sum, all of the applicable factors weigh in favor of finally approving the settlement.
IV. ATTORNEYS FEES, COSTS AND INCENTIVE AWARDS
When attorneys fees and costs are requested by counsel for the class, “courts have an independent obligation to ensure that the award, like the settlement itself, is reasonable, even if the parties have already agreed to an amount.” In re Bluetooth Headset Prods. Liab. Litig.,
“Where a settlement produces a common fund for the benefit of the entire class, courts have discretion to employ either the lodestar method or the percentage-of-recovery method.” Id. at 942. The former method is routinely used when “the relief sought—and obtained—is often primarily injunctive in nature and thus not easily monetized.” Id. The figure is calculated “by multiplying the number of hours the prevailing party reasonably expended on the litigation (as supported by adequate documentation) by a reasonable hourly rate for the region and for the experience of the lawyer.” Id. The court can “adjust [the figure] upward or downward by an appropriate positive or negative multiplier reflecting a host of ‘reasonableness’ factors, including the quality of representation, the benefit obtained for the class, the complexity and novelty of the issues presented, and the risk of nonpayment.” Id. at 941-42 (internal quotations omitted). “Foremost among these considerations, however, is the benefit obtained for the class.” Id. at 942.
Under the latter method, the court awards as fees a percentage of the common fund in lieu of the lodestar amount. Id. “[C]ourts typically calculate 25% of the fund as the ‘benchmark’ for a reasonable fee award, providing adequate explanation in the record of any ‘special circumstances’ justifying a departure.” Id. Relevant factors to a determination of the percentage ultimately awarded include: “(1) the results achieved; (2) the risk of litigation; (3) the skill required and quality of work; (4) the contingent nature of the fee and the financial burden carried by the plaintiffs; and (5) awards made in similar cases.” Tarlecki v. bebe Stores, Inc., No. C 05-1777 MHP,
“Though courts have discretion to choose which calculation method they use, their discretion must be exercised so as to achieve a reasonable result.” Id.
A. Percentage of the Fund
Plaintiffs’ counsel seek a fee award of $2.125 million, which is equal to 25% of the settlement fund. According to counsel, the combination of monetary distributions and injunctive relief obtained in the settlement is an excellent result for the class because they “work in concert ... reshape the landscape of Internet privacy protections” and “enact a regime of informed consent for Google Search users, who can now access complete and truthful information about the ways Google handles user search queries before deciding whether to use Google Search, Google Encrypted Search, or a competing search engine.”
Plaintiffs’ counsel also believe they undertook substantial risk by agreeing to litigate this case on a purely contingent basis given the unsettled legal issues, and, for that reason, spent considerable time and money with no guarantee of payment. In addition, they assert the novel nature of this case coupled with an opponent armed
Having considered the relevant factors, the court agrees with Plaintiffs’ counsel that this action posed a substantial risk and required significant time and skill to obtain a result for the class. This case was not one where settlement was easily secured; to the contrary, Plaintiffs’ counsel was required to defend their claims against three motions to dismiss. An agreement only materialized after extensive in-person negotiations, first without and then including a professional neutral. Moreover, counsel’s request is not disproportionate to the class benefit and is comparable to awards approved in other similar internet privacy class actions, including one previously approved by this court. See In re Netflix Privacy Litig.,
B. Lodestar Comparison
' The Ninth Circuit encourages district courts “to guard against an unreasonable result” by cross-checking attorneys fees calculations against a second method. In re Bluetooth,
Here, Plaintiffs’ counsel calculates a lodestar figure of $966,598.75 for 2085.6 billing hours from four law firms, to which they apply a 2.2 multiplier for a total amount of $2,126,517.25. They also seek compensation for total costs of $21,643.16. These amounts are attributable to each firm as follows:
Firm Fees Expenses Total Cost
Aschenbrener Law, P.C. $321,184.00 $5,844.54 $327,028.54
Nassiri & Jung LLP $253,776.50 [,464.95 $258,241.45
Progressive Law Group $331,967.25 $7,551.27 (+ $22.40) $339,540.92
Edelson PC $59,671.00 $3,760.00 $63,431.00
Totals $966,598.75 $21,643.16 $988,241.91
Among the participating law firms, the hourly rates charged by attorneys range from $300 to $685. The hourly rate for law clerks is $75, and for paralegals is $125. Altogether, the average hourly rate for all work performed is $463.
Plaintiffs counsel has provided sufficient support for its proposed lodestar calculation. The amount of hours and other costs attributed to this case are reasonable in light of the efforts required to litigate and ultimately engage in a lengthy settlement process. In addition, the hourly rates charged fall within the range of those approved in other similar cases, and the suggested lodestar multiplier of 2.2 is comparable to that previously permitted by other courts in similar internet privacy cases. Accordingly, the lodestar cross-check con
C. Incentive Awards
“[Njamed plaintiffs, as opposed to designated class members who are not named plaintiffs, are eligible for reasonable incentive payments.” Staton,
The Settlement Agreement provides that the named Plaintiffs may receive incentive awards of up to $5,000 each. In this district, that amount is presumptively reasonable. Jacobs v. Cal. State Auto. Ass’n Inter-Ins. Bureau, No. C 07-00362 MHP,
V. OBJECTIONS
The court now addresses the points raised in the four written objections, keeping in'mind that objectors to a class action settlement bear the burden of proving any assertions they raise challenging the reasonableness of a class action settlement. United States v. Oregon,
The objectors have not satisfied this burden. To begin, all four objectors take issue with the cy pres character of this settlement, or with cy pres settlements in general. These arguments overlook both the law of this circuit which permits cy pres settlements such as this one, and the indirect benefit provided by a cy pres settlements. See Lane,
The objectors similarly argue that the size of the settlement fund is insufficient in comparison to the value of the case, and believe that a fair settlement would have resulted in an end to Google’s “unlawful” practices. This contention is misguided, however, because the objectors do not account for the significant and potentially case-ending weakness in the SCA claim brought about by the Ninth Circuit’s decision in Zynga Privacy Litigation. In light of this development, whether or not Google’s practice of disclosing search queries can actually be characterized as unlawful is questionable. In the end, the parties fashioned a settlement in consideration of the favorable and unfavorable aspects of each side’s case. And it is the parties themselves, as opposed to the court or the objectors, who are in the best position to assess whether a settlement “fairly reflects” their “expected outcome in litigation.” In re Pac. Ents. Sec. Litig.,
Objectors also argue that the cy pres recipients are unrelated to the subject
Some objections challenge the notice plan or the contents of the notice and describe alternative ways that notice could have been provided to the class. It may be true that other methods of notice exist. But here, the court approved one specific plan that satisfied the standard Rule 23(c)(2)(B) standard: Although the plan did not call for individual notice, that type of notice is not required in all cases. See Mullane,
Finally, the objectors challenge the provisions of the Settlement Agreement which provide for attorneys fees and incentive awards. The court does not agree that the fees and incentive awards are inconsistent with the value of the class benefit, and notes that the approved amounts are consistent with the relevant Ninth Circuit authority on this topic.
For these reasons, the court is unper-siiaded by the objections. They are each overruled.
VI. CONCLUSION AND ORDER
Based on the preceding discussion, the court finds that the terms of the settlement, including the awards of attorneys fees, costs, and incentive awards, is fair, adequate, and reasonable; that it satisfies Federal Rule of Civil Procedure 23(e) and the fairness and adequacy factors; and that it should be approved and implemented.
The Motion for Final Approval (Docket Item No. 65) and the Motion for Attorneys Fees and Costs (Docket Item No. 66) are therefore GRANTED. The Clerk shall close this file upon entry of Judgment.
IT IS SO ORDERED.
Notes
. Some of the proposed cy pres recipients are “usual suspects,” or organizations that routinely receive distributions from class action settlements. At the two approval hearings held in this case, the court expressed a concern with using the same list of cy pres recipients in every internet privacy class action and observed that this practice discourages the development of other worthy organizations. This practice also raises questions about the effectiveness of those organizations that have received prior distributions. The court was somewhat surprised at the final list of distrib-utees, since Plaintiffs’ counsel suggested the selection process would potentially cast a wider net. See Tr. of Proceedings on Aug. 23, 2013, Docket Item No. 57, at p. 14:25-15:4 ("We are raising the bar, and I think raising the bar for all cy pres settlements like this to follow. We’re treating the cy pres allocation more like a grant making organization would treat grant — prospective grant recipients.”).
Despite this concern, the court recognizes that failure to diversify the list of distributees is not a basis to reject the settlement, particularly when the proposed recipients otherwise qualify under the applicable standard. See Lane,