Trial lawyers can’t dole out clients’ money as treats to their favorite charities.
This morning, the Supreme Court will hear oral arguments in a case involving one of trial lawyers’ favorite tricks: Doling out their clients’ money as treats to their favorite charities. The case, Frank v. Gaos, involves a class-action lawsuit filed in 2010 on behalf of all who’ve used Google’s search engine. The suit alleges that Google violated its users’ privacy because information about the users’ search terms could be visible to websites accessed through a search on the site using an outside web browser.
Here’s the trick: The lawyers for Google and the plaintiffs agreed to settle the case for more than $8 million without paying a penny to the actual class of plaintiffs, aside from three $5,000 “incentive” payments to the three individuals whose names were attached to the lawsuit. Instead, the lawyers agreed to pay more than $2 million to the attorneys who brought the suit and millions more to six mutually agreed upon charities, including the plaintiffs’ lawyers’ alma maters and the American Association of Retired Persons (AARP).
Attorney Ted Frank, who founded a nonprofit group in 2009 to fight unfair class-action practices, objected to the settlement. Frank rightly argues that the settlement shortchanges the individuals in the plaintiff class. How can it be fair for lawyers to agree to extinguish the purported legal rights of their clients while paying themselves millions and their clients nothing?
That seems straightforward enough. But the Supreme Court also needs to answer a broader question that the Manhattan Institute (where I am director of legal policy) highlights in an amicus brief: What is the legal basis for a federal court to distribute class-action proceeds to third-party charities in the first place? We argue that there is none.