In Marek v. Lane, 571 U.S. ___ (2013), the U.S. Supreme Court refused to grant review of the 9th U.S. Circuit Court of Appeals' denial of a challenge to a cy pres settlement, but Chief Justice John Roberts issued a statement regarding cy pres settlements that sets the stage for the Court to take up the propriety of such settlements in the future.
A divided 9th Circuit affirmed the district court's approval of a $9.5 million class action settlement involving allegations that Facebook's short-lived Beacon program violated federal and state privacy laws. Under the terms of the settlement, plaintiffs' counsel was awarded $2.36 million. Because the parties agreed that any payments to individual plaintiffs would be nominal, the remaining $6.5 million was paid in the form of cy pres relief to a charitable foundation established to promote online privacy. The Supreme Court denied review of the challenge to the settlement.
Chief Justice Roberts, however, issued his own statement explaining that there are "fundamental concerns" about cy pres settlements, but Marek was not the right case to consider them because the petitioner's challenge was focused on the particular features of the settlement at issue. The Chief Justice advised that the "Court may need to clarify the limits on the use of [cy pres]" given that such settlements "are a growing feature" of class action settlements. In particular, Chief Justice Roberts identified a number of concerns such as "when, if ever, such relief should be considered," how fairness should be assessed, how entities should be selected in receiving the cy pres fund, the role of the judge and parties in shaping the remedy, and how closely the goals of an enlisted organization must align to the interests of the class. The Chief Justice's comments should be viewed as a warning shot that cy pres settlements have caught the High Court's eye, and that the Court may accept an opportunity to establish ground rules for them. Chief Justice Roberts's statement can be found here.
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