THEODORE H. FRANK, ET AL., PETITIONERS
v.
PALOMA GAOS, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, ET AL.
ON
WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT
PER
CURIAM.
Three
named plaintiffs brought class action claims against Google
for alleged violations of the Stored Communications Act. The
parties negotiated a settlement agreement that would require
Google to include certain disclosures on some of its webpages
and would distribute more than $5 million to cy pres
recipients, more than $2 million to class counsel, and no
money to absent class members. We granted certiorari to
review whether such cy pres settlements satisfy the
requirement that class settlements be "fair, reasonable,
and adequate." Fed. Rule Civ. Proc. 23(e)(2). Because
there remain substantial questions about whether any of the
named plaintiffs has standing to sue in light of our decision
in Spokeo, Inc. v. Robins, 578 U.S. ___ (2016), we
vacate the judgment of the Ninth Circuit and remand for
further proceedings.
Google
operates an Internet search engine. The search engine allows
users to search for a word or phrase by typing a query into
the Google website. Google returns a list of webpages that
are relevant to the indicated term or phrase. The complaints
alleged that when an Internet user conducted a Google search
and clicked on a hyperlink to open one of the webpages listed
on the search results page, Google transmitted information
including the terms of the search to the server that hosted
the selected webpage. This so-called referrer header told the
server that the user arrived at the webpage by searching for
particular terms on Google's website.
Paloma
Gaos challenged Google's use of referrer headers. She
filed a complaint in Federal District Court on behalf of
herself and a putative class of people who conducted a Google
search and clicked on any of the resulting links within a
certain time period. Gaos alleged that Google's
transmission of users' search terms in referrer headers
violated the Stored Communications Act, 18 U.S.C. §2701
et seq. The SCA prohibits "a person or entity
providing an electronic communication service to the
public" from "knowingly divulg[ing] to any person
or entity the contents of a communication while in electronic
storage by that service." §2702(a)(1). The Act also
creates a private right of action that entitles any
"person aggrieved by any violation" to
"recover from the person or entity, other than the
United States, which engaged in that violation such relief as
may be appropriate." §2707(a). Gaos also asserted
several state law claims.
Google
moved to dismiss for lack of standing three times. Its first
attempt was successful. The District Court reasoned that
although "a plaintiff may establish standing through
allegations of violation of a statutory right," Gaos had
"failed to plead facts sufficient to support a claim for
violation of her statutory rights." Gaos v. Google,
Inc., 2011 WL 7295480, *3 (ND Cal., Apr. 7, 2011). In
particular, the court faulted Gaos for failing to plead
"that she clicked on a link from the Google search
page." Ibid.
After
Gaos filed an amended complaint, Google again moved to
dismiss. That second attempt was partially successful. The
District Court dismissed Gaos' state law claims, but
denied the motion as to her SCA claims. The court reasoned
that because the SCA created a right to be free from the
unlawful disclosure of certain communications, and because
Gaos alleged a violation of the SCA that was specific to her
(i.e., based on a search she conducted), Gaos
alleged a concrete and particularized injury. Gaos v.
Google Inc., 2012 WL 1094646, *4 (ND Cal., Mar. 29,
2012). The court rested that conclusion on Edwards v.
First American Corp., 610 F.3d 514 (2010)-a Ninth
Circuit decision reasoning that an Article III injury exists
whenever a statute gives an individual a statutory cause of
action and the plaintiff claims that the defendant violated
the statute. 2012 WL 1094646, *3.
After
the District Court ruled on Google's second motion to
dismiss, we granted certiorari in Edwards to address
whether an alleged statutory violation alone can support
standing. First American Financial Corp. v. Edwards,
564 U.S. 1018 (2011). In the meantime, Gaos and an additional
named plaintiff filed a second amended complaint against
Google. Google once again moved to dismiss. Google argued
that the named plaintiffs did not have standing to bring
their SCA claims because they had failed to allege facts
establishing a cognizable injury. Google recognized that the
District Court had previously relied on Edwards to
find standing based on the alleged violation of a statutory
right. But because this Court had agreed to review
Edwards, Google explained that it would continue to
challenge the District Court's conclusion. We eventually
dismissed Edwards as improvidently granted, 567 U.S.
756 (2012) (per curiam), and Google then withdrew
its argument that Gaos lacked standing for the SCA claims.
Gaos'
putative class action was consolidated with a similar
complaint, and the parties negotiated a classwide settlement.
The terms of their agreement required Google to include
certain disclosures about referrer headers on three of its
webpages. Google could, however, continue its practice of
transmitting users' search terms in referrer headers.
Google also agreed to pay $8.5 million. None of those funds
would be distributed to absent class members. Instead, most
of the money would be distributed to six cy pres
recipients. In the class action context, cy pres
refers to the practice of distributing settlement funds not
amenable to individual claims or meaningful pro rata
distribution to nonprofit organizations whose work is
determined to indirectly benefit class members. Black's
Law Dictionary 470 (10th ed. 2014). In this case, the cy
pres recipients were selected by class counsel and
Google to "promote public awareness and education,
and/or to support research, development, and initiatives,
related to protecting privacy on the Internet." App. to
Pet. for Cert. 84. The rest of the funds would be used for
administrative costs and fees, given to the named plaintiffs
in the form of incentive payments, and awarded to class
counsel as attorney's fees.
The
District Court granted preliminary certification of the class
and preliminary approval of the settlement. Five class
members, including petitioners Theodore Frank and Melissa
Holyoak, objected to the settlement on several grounds. They
complained that settlements providing only cy pres
relief do not comply with the requirements of Rule 23(e),
that cy pres relief was not justified in this case,
and that conflicts of interest infected the selection of the
cy pres recipients. After a hearing, the District
Court granted final approval of the settlement.
Frank
and Holyoak appealed. After briefing before the Ninth Circuit
was complete, but prior to decision by that court, we issued
our opinion in Spokeo, Inc. v. Robins, 578 U.S. ___
(2016). In Spokeo, we held that "Article III
standing requires a concrete injury even in the context of a
statutory violation." Id., at ___ (slip op., at
9). We rejected the premise, relied on in the decision then
under review and in Edwards, that "a plaintiff
automatically satisfies the injury-in-fact requirement
whenever a statute grants a person a statutory right and
purports to authorize that person to sue to vindicate that
right." 578 U.S., at ___ (slip op., at 9); see also
id., at ___ (slip op., at 5). Google notified the
Ninth Circuit of our opinion.
A
divided panel of the Ninth Circuit affirmed, without
addressing Spokeo. In re Google Referrer Header Privacy
Litigation, 869 F.3d 737 (2017). We granted certiorari,
584 U.S.___ (2018), to decide whether a class action
settlement that provides a cy pres award but no
direct relief to class members satisfies the requirement that
a settlement binding class members be "fair, reasonable,
and adequate." Fed. Rule Civ. Proc. 23(e)(2).
In
briefing on the merits before this Court, the Solicitor
General filed a brief as amicus curiae supporting
neither party. He urged us to vacate and remand the case for
the lower courts to address standing. The Government argued
that there is a substantial open question about whether any
named plaintiff in the class action actually had standing in
the District Court. Because Google withdrew its standing
challenge after we dismissed Edwards as
im-providently granted, neither the District Court nor the
Ninth Circuit ever opined on whether any named plaintiff
sufficiently alleged standing in the operative complaint.
"We
have an obligation to assure ourselves of litigants'
standing under Article III." Daimler Chrysler Corp.
v. Cuno,547 U.S. 332, 340 (2006) (quoting Friends
of the Earth, Inc. v. Laidlaw Environmental Services (TOC),
Inc.,528 U.S. 167, 180 (2000); internal quotation marks
omitted). That obligation extends to court approval of
proposed class action settlements. In ordinary non-class
litigation, parties are free to settle their disputes on
their own terms, and plaintiffs may voluntarily dismiss their
claims without a court order. Fed. Rule Civ. Proc.
41(a)(1)(A). By contrast, in a class action, the
"claims, issues, or defenses of a certified class-or a
class proposed to be certified for purposes of settlement-may
be settled, voluntarily dismissed, or compromised only with
the court's approval." Fed. Rule Civ. Proc. 23(e). A
court is powerless to approve a proposed ...