Amicus Curiae Brief — Theodore H. Frank, et al., Petitioners v. Paloma Gaos, Individually and on Behalf of All Others Similarly Situated, et al.

Supreme Court briefSep 5, 2018

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No. 17-961

IN THE

Supreme Court of the United States

————

THEODORE H. FRANK AND MELISSA ANN HOLYOAK,

Petitioners,

PALOMA GAOS, ON BEHALF OF HERSELF AND

ALL OTHERS SIMILARLY SITUATED, et al.,

Respondents.

————

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

————

BRIEF AMICUS CURIAE OF THE

CENTER FOR WORKPLACE COMPLIANCE

IN SUPPORT OF RESPONDENTS

————

RAE T. VANN

JOHN R. ANNAND

Counsel of Record

NT LAKIS, LLP

1501 M Street, N.W.

Suite 1000

Washington, DC 20005

jannand@ntlakis.com

(202) 629-5600

Attorneys for Amicus Curiae

Center for Workplace

Compliance

September 2018

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................

iii

INTEREST OF THE AMICUS CURIAE ............

STATEMENT OF THE CASE ............................

SUMMARY OF ARGUMENT .............................

ARGUMENT ........................................................

I. THE CY PRES DEVICE IS A VALID

MEANS OF RESOLVING CLASSBASED LITIGATION IN FEDERAL

COURT ......................................................

A. Cy Pres Settlements Are Permissible

Under The Federal Rules Of Civil

Procedure .............................................

B. Parties To A Class Action Are Broadly

Free To Structure A Settlement

Agreement As They Wish, Provided

That It Is “Fair, Reasonable, and

Adequate”.............................................

C. Cy Pres Settlements Offer The Best

Method Of Settlement Distribution In

Certain, Rare Circumstances ..............

1. When a settlement cannot be

directly distributed to class

members, use of the cy pres

mechanism is appropriate .............

2. In the absence of a feasible direct

distribution, the other options for

distributing the settlement are

worse than cy pres ..........................

(i)

TABLE OF CONTENTS—Continued

Page

D. Numerous Courts Of Appeals Endorse

The Use Of Cy Pres Settlements .........

II. WHETHER A CY PRES SETTLEMENT

ALSO INCLUDES DIRECT DAMAGES

IS OF NO IMPORT, AS LONG AS THE

SETTLEMENT MEETS RULE 23(e)’s

REQUIREMENTS ....................................

III. FOR EMPLOYERS THAT FACE LARGE

CLASS ACTIONS, THE AVAILABILITY

OF A RANGE OF SETTLEMENT

OPTIONS, INCLUDING THE CY PRES

SETTLEMENT DEVICE, IS CRITICALLY IMPORTANT ...............................

A. Cy Pres Settlements Promote Prompt

Dispute Resolution, And Decrease

The Likelihood That Costly Class

Procedures Will Be Necessary ............

B. Cy Pres Settlements Are Beneficial To

Both Class Members And Employers .

C. Cy Pres Settlements Are Particularly

Well-Suited For The Types Of

Disputes That Employers Face ...........

CONCLUSION ....................................................

iii

TABLE OF AUTHORITIES

FEDERAL CASES

Page(s)

Albemarle Paper Co. v. Moody, 422 U.S. 405

(1975), superseded by statute on other

grounds, Civil Rights Act of 1991, Pub. L.

No. 102-166, 105 Stat. 1071 .....................

AT&T Mobility LLC v. Concepcion, 563

U.S. 333 (2011) ..........................................

Bradley v. T-Mobile U.S., Inc., 5:17-cv07232 (N.D. Cal. Dec. 20, 2017) ............... 23, 24

Comcast Corp. v. Behrend, 569 U.S. 27

(2013) ....................................................... 3, 9, 22

Coopers & Lybrand v. Livesay, 437 U.S. 463

(1978), superseded by rule on other

grounds, Fed. R. Civ. P. 23(f), as

recognized in Microsoft Corp. v. Baker,

137 S. Ct. 1702 (2017) ...............................

Dennis v. Kellogg, 697 F.3d 858 (9th Cir.

2012) ..........................................................

East Texas Motor Freight System Inc. v.

Rodriguez, 431 U.S. 395 (1977) ................

EEOC v. Ruby Tuesday, Inc., No. 2:09-cv01330-MRH (W.D. Pa. Dec. 9, 2013) ........

Hanlon v. Chrysler Corp., 150 F.3d 1011

(9th Cir. 1998) ...........................................

In re Baby Products Antitrust Litigation,

708 F.3d 163 (3d Cir. 2013) .....................passim

In re Lupron Marketing & Sales Practices

Litigation, 677 F.3d 21 (1st Cir. 2012) .....

TABLE OF AUTHORITIES—Continued

Page(s)

In re Mexico Money Transfer Litigation, 267

F.3d 743 (7th Cir. 2001)............................

In re Pharmaceutical Industry Average

Wholesale Price Litigation, 588 F.3d 24

(1st Cir. 2009) ........................................... 12, 21

In re Volkswagen “Clean Diesel” Marketing

Litigation, 895 F.3d 597 (9th Cir. 2018) .. 9, 10

Evans v. Jeff D., 475 U.S. 717 (1986),

superseded by statute on other grounds,

Civil Rights Act of 1991, Pub. L. No. 102166, 105 Stat. 1071 ...................................

Keepseagle v. Perdue, 856 F.3d 1039, (D.C.

Cir. 2017), cert. denied, 138 S. Ct. 1326

(2018), and cert. denied, 138 S. Ct. 1345

(2018) .........................................................

Kempen v. Matheson Tri-Gas, Inc., No. 15cv-00660-HSG, 2017 WL 475095 (N.D.

Cal. Feb. 6, 2017) ......................................

Klier v. Elf Atochem North America, Inc.,

658 F.3d 468 (5th Cir. 2011) .....................

Lane v. Facebook, Inc., 696 F.3d 811 (9th

Cir. 2012) ..................................................passim

Mirfasihi v. Fleet Mortgage Corp., 356 F.3d

781 (7th Cir. 2004) ....................................

Mullins v. Direct Digital, LLC, 795 F.3d

654 (7th Cir. 2015) ....................................

Nachshin v. AOL, LLC, 663 F.3d 1034 (9th

Cir. 2011) ............................................. 15, 18, 25

TABLE OF AUTHORITIES—Continued

Page(s)

Officers for Justice v. Civil Service

Commission, 688 F.2d 615 (9th Cir.

1982) .......................................................... 9, 10

Parklane Hosiery Co. v. Shore, 439 U.S. 322

(1979) .........................................................

Powell v. Georgia-Pacific Corporation, 119

F.3d 703 (8th Cir. 1997)............................

Six (6) Mexican Workers v. Arizona Citrus

Growers, 904 F.2d 1301 (9th Cir.

1990) .................................................... 12, 15, 18

Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct.

1036 (2016) ................................................

Wal-Mart Stores, Inc. v. Dukes, 564 U.S.

338 (2011) ..................................................

FEDERAL STATUTES

Age Discrimination in Employment Act,

29 U.S.C. §§ 621 et seq. .............................

29 U.S.C. § 623(a) .....................................

2, 8

Fair Labor Standards Act,

29 U.S.C. §§ 201 et seq. ................................. 2, 8, 24

29 U.S.C. § 207 ..........................................

29 U.S.C. § 216(b) .....................................

Title VII of the Civil Rights Act of 1964,

42 U.S.C. §§ 2000e et seq..................... 2, 8, 25

FEDERAL REGULATIONS

29 C.F.R. § 785.47 ........................................

TABLE OF AUTHORITIES—Continued

FEDERAL RULES

Page(s)

Federal Rule Civil Procedure 23(a) .............

Federal Rule Civil Procedure 23(a)(3) .........

Federal Rule Civil Procedure 23(e).............passim

Federal Rule Civil Procedure 23(e)(2) ......... 9, 19

LEGISLATIVE HISTORY

Federal Rule Civil Procedure 23 advisory

committee’s note to 1998 Amendment,

28 U.S.C. app. Subdivision (f) .................. 20, 21

OTHER AUTHORITIES

Conciliation Agreement Between The

United States Department Of Labor,

Office Of Federal Contract Compliance

Programs and Humana Inc. (Mar. 2018)...

Conciliation Agreement Between The

United States Department Of Labor,

Office Of Federal Contract Compliance

Programs and Tyson Foods, Inc. (Sept.

2016) ..........................................................

IN THE

Supreme Court of the United States

————

No. 17-961

————

THEODORE H. FRANK AND MELISSA ANN HOLYOAK,

Petitioners,

PALOMA GAOS, ON BEHALF OF HERSELF AND

ALL OTHERS SIMILARLY SITUATED, et al.,

Respondents.

————

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

————

BRIEF AMICUS CURIAE OF THE

CENTER FOR WORKPLACE COMPLIANCE

IN SUPPORT OF RESPONDENTS

————

The Center for Workplace Compliance respectfully

submits this brief as amicus curiae.1 The brief

supports the position of Respondents before this Court

and thus urges that the decision below be affirmed.

The parties have consented to the filing of this brief. No

counsel for a party authored this brief in whole or in part, and no

counsel or party made a monetary contribution intended to fund

the preparation or submission of this brief. No person other than

amicus curiae, its members, or its counsel made a monetary

contribution to its preparation or submission.

INTEREST OF THE AMICUS CURIAE

Founded in 1976, the Center for Workplace

Compliance (CWC) (formerly the Equal Employment

Advisory Council (EEAC)) is the nation’s leading

nonprofit association of employers dedicated exclusively to helping its members develop practical and

effective programs for ensuring compliance with fair

employment and other workplace requirements. Its

membership includes more than 240 major U.S.

corporations, collectively providing employment to

millions of workers. CWC’s directors and officers

include many of industry’s leading experts in the

field of equal employment opportunity and workplace

compliance. Their combined experience gives CWC a

unique depth of understanding of the practical, as

well as legal, considerations relevant to the proper

interpretation and application of fair employment

policies and requirements.

All of CWC’s members are employers subject to Title

VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C.

§§ 2000e et seq., as amended; the Age Discrimination

in Employment Act (ADEA), 29 U.S.C. §§ 621 et seq.;

the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201

et seq.; and other federal employment-related laws and

regulations. Collectively, CWC’s member companies

routinely make and implement millions of employment decisions each year, including hires, promotions,

transfers, disciplinary actions, terminations, compensation, and other employment actions. They devote

extensive resources to training, awareness, and compliance programs designed to ensure that all of their

employment actions comport with these and other

applicable legal requirements.

Nevertheless, each employment transaction is a

potential subject of a discrimination charge and/or

lawsuit. As large employers, CWC’s members are

particularly likely targets for broad-based class action

litigation.

Consequently, CWC has an ongoing,

substantial interest in the issue presented in this case

regarding the availability of the cy pres device in class

action settlements, where there exists no better

alternative to distribute the settlement fund.

CWC has participated in numerous cases before this

Court raising important questions relating to class

and collective action litigation in the federal courts.

See, e.g., E. Tex. Motor Freight Sys. Inc. v. Rodriguez,

431 U.S. 395 (1977); Wal-Mart Stores, Inc. v. Dukes,

564 U.S. 338 (2011); Comcast Corp. v. Behrend, 569

U.S. 27 (2013); Tyson Foods, Inc. v. Bouaphakeo, 136

S. Ct. 1036 (2016). Because of its experience in these

matters, CWC is especially well-situated to brief this

Court on the importance of the issues beyond the

immediate concerns of the parties to the case.

STATEMENT OF THE CASE

When a Google user conducts an Internet search by

entering terms into the search engine, the results are

displayed on a separate search results page. Pet. App.

4. Each search results page has a unique Uniform

Resource Locator (URL) that includes the search

terms entered by the user. Id. This URL, including

the search terms that the user entered, is then

transmitted by the user’s web browser to the thirdparty website to which the user navigates from the

search results page. Id.

In In re Google Referrer Header Privacy Litig., three

Google users filed a putative class action in the U.S.

District Court for the Northern District of California,

on behalf of themselves and “all persons in the United

States who submitted a search query to Google” at any

time between October 25, 2006 and the date of notice

to the class of certification (April 25, 2014), a class

composed of approximately 129 million people,

including Petitioners Theodore H. Frank and Melissa

Ann Holyoak, as well as Respondent Paloma Gaos.

Pet. App. 45. In essence, the plaintiffs alleged that the

transmission of their search terms to third-party

websites violated their privacy rights under the Stored

Communications Act of 1986 and various state laws.

Pet. App. 3. They did not allege that they suffered any

harm as a result of the alleged violations. Pet. App. 8.

Following mediation, Google and the plaintiffs

agreed to a settlement of $8.5 million, $3.2 million of

which would go toward attorney’s fees, administrative

costs, and payments to the named plaintiffs. Pet.

App. 5. Rather than divide the remaining $5.3 million

among the approximately 129 million class members –

which would have resulted in each individual

receiving about $0.04 – the settlement divided the

remaining money among six cy pres recipients, which

would use the money to further projects related to

Internet privacy. Id. As a condition of receiving a

portion of the settlement fund, each of these

organizations committed “to devote the funds to

promote public awareness and education, and/or

to support research, development, and initiatives,

related to protecting privacy on the Internet.” Id. In

other words, instead of distributing negligible sums to

each of the class members, the parties agreed to

allocate the entire settlement fund, after fees and

costs, to recipients who would promote Internet

privacy and therefore benefit the class members. Id.

The district court preliminarily approved the settlement, and certified the class for settlement purposes.

Pet. App. 6. The parties gave notice to the class by,

among other things, setting up a website and issuing

advertisements and press releases, which resulted in

thirteen class members opting out of the settlement,

and five class members filing objections. Id. The

district court nonetheless granted final approval of

the settlement, finding that the funds were nondistributable given that “sending out very small

payments to millions of class members would exceed

the total monetary benefit obtained by the class.” Pet.

App. 9.

Two of the objectors, Theodore H. Frank and Melissa

Ann Holyoak, appealed the district court’s approval of

the settlement to the Ninth Circuit Court of Appeals.

Pet. App. 6. Although the objectors did not claim that

they had been personally injured, they did argue

among other things that a cy pres-only settlement was

not permissible. Pet. App. 8. Instead, the objectors

said, the monetary settlement should have been

divided among a small portion of the class members,

either by lottery or by offering token amounts under

the assumption that few class members would make

claims. Pet. App. 9.

The Ninth Circuit disagreed, finding that although

“direct distributions to class members are preferable,”

cy pres-only settlements “are appropriate where the

settlement fund is ‘non-distributable’ because ‘the

proof of individual claims would be burdensome or

distribution of damages costly.’” Pet. App. 9 (citations

omitted). It agreed with the lower court that here,

the settlement fund was effectively non-distributable

given each class member’s de minimis recovery

amount. Id.

The objectors filed a petition for a writ of certiorari,

which this Court granted on April 30, 2018. Frank v.

Gaos, 138 S. Ct. 1697 (U.S. Apr. 30, 2018).

SUMMARY OF ARGUMENT

Under the Federal Rules of Civil Procedure, parties

to class-based litigation are free to enter into an

agreement settling the dispute, provided that they

receive court approval that the settlement is “fair,

reasonable, and adequate.” Fed. R. Civ. P. 23(e). In

recognition of the private, negotiated nature of such

settlement agreements, courts typically will not disturb the agreement unless it is unfair, unreasonable,

or inadequate. Parties therefore have a great deal of

flexibility in structuring class action settlement agreements, including both the settlement amounts and the

manner in which settlement funds are distributed to

class members.

Distribution of the settlement fund can prove

especially problematic in certain, rare scenarios.

For example, occasionally a fund may be “nondistributable” because “the proof of individual claims

would be burdensome or distribution of damages

costly,” Lane v. Facebook, Inc., 696 F.3d 811, 819 (9th

Cir. 2012) (citation and internal quotations omitted),

or where, as here, each class member is entitled to only

a de minimis amount. Where a settlement fund is nondistributable, the parties are left either to proceed

to litigation or agree to an alternative means of

distribution. One alternative is the cy pres device, by

which settlement funds are distributed to a third

party, often a charity or foundation, which agrees to

use the funds to benefit the class as a whole. Use of

the cy pres settlement device, which has been endorsed

by several courts of appeals, is appropriate where

there is no better alternative for distributing the

settlement funds. Thus, the cy pres mechanism

addresses uncommon circumstances and accordingly

should be the exception rather than the rule. See In re

Baby Prods. Antitrust Litig., 708 F.3d 163, 173 (3d Cir.

2013).

However, neither the putative rarity of cy pres

settlements, nor the extraordinary circumstances

giving rise to them, changes the fact that they only

must pass muster under Rule 23(e). Although a Rule

23(e) fairness review of a cy pres settlement naturally

involves consideration of some factors that are different from the ordinary Rule 23(e) fairness review, those

factors simply offer further assurance of the settlement’s fairness, in light of the uncommon circumstances at play. Given that a cy pres settlement

need only satisfy a Rule 23(e) fairness review to

be approved, such a settlement conceivably could

distribute the entire settlement fund using the cy pres

device, thus entirely foregoing direct distributions. In

the end, if the proposed settlement as the parties have

structured it is “fair, reasonable, and adequate,” Fed.

R. Civ. P. 23(e), it will pass judicial muster; if it is

unfair, unreasonable, or inadequate, the court will

reject it.

The Ninth Circuit ruled correctly that under certain

circumstances, a class action settlement fund may be

distributed by way of a cy pres mechanism, in lieu of

making direct distributions to class members. Pet.

App. 21. Respondents correctly contend that a cy presonly settlement is permissible and appropriate given

that only a de minimis direct recovery would have

been available to each of the 129 million class

members. Although the cy pres device is to be used

sparingly, its mere availability is valuable to employers, as it offers the chance to resolve certain burdensome class actions before they enter costly litigation

phases. Cy pres settlements give defendants the

opportunity to credibly propose a settlement prior to

the certification stage, one that provides some form

of recovery to class members without requiring

unnecessary expenditures on class administration. In

avoiding litigation, use of the cy pres device offers

finality to both parties (and far sooner than if the

device were unavailable), allowing class members to

receive benefit from the settlement more quickly than

they otherwise may have, and encouraging the

employer to shift its focus to future compliance.

Cy pres settlements are especially well-suited for

some types of class actions that employers may face,

including under employment laws such as Title VII

of the Civil Rights Act of 1964 (Title VII), 42 U.S.C.

§§ 2000e et seq., as amended; the Age Discrimination

in Employment Act (ADEA), 29 U.S.C. §§ 621 et seq.;

and the Fair Labor Standards Act (FLSA), 29 U.S.C.

§§ 201 et seq. To the extent that employment-based

class actions give rise to sprawling classes for which

“proof of individual claims would be burdensome or

distribution of damages costly,” Facebook, 696 F.3d at

819 (citation and internal quotations omitted), the

availability of the cy pres device gives employers a

chance to resolve disputes while avoiding protracted,

potential bet-the-company litigation. The inclusion by

federal enforcement agencies of cy pres-style devices

in settlement agreements further underscores their

utility in resolving allegations of noncompliance with

employment laws.

This Court’s resolution of whether parties to a class

action settlement may utilize cy pres-only settlements

will therefore impact employers’ ability to resolve

class-based employment disputes in a fair, efficient,

and cost-effective manner.

ARGUMENT

I. THE CY PRES DEVICE IS A VALID

MEANS OF RESOLVING CLASS-BASED

LITIGATION IN FEDERAL COURT

The Federal Rules of Civil Procedure permit “[o]ne

or more members of a class … [to] sue or be sued as

representative parties on behalf of all members,”

provided that the class meets certain criteria and has

been certified by the court. Fed. R. Civ. P. 23(a).

Nevertheless, the class action device remains “an

exception to the usual rule that litigation is conducted

by and on behalf of the individual named parties only.”

Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013)

(citation and internal quotations omitted).

A. Cy Pres Settlements Are Permissible

Under The Federal Rules Of Civil

Procedure

Once a class is certified, the parties may not enter

into a binding settlement agreement without court

approval that the settlement is “fair, reasonable, and

adequate.” Fed. R. Civ. P. 23(e)(2); see also Evans v.

Jeff D., 475 U.S. 717, 726 (1986) (noting that “Rule

23(e) wisely requires court approval of the terms of any

settlement of a class action”), superseded by statute on

other grounds, Civil Rights Act of 1991, Pub. L. No.

102-166, 105 Stat. 1071. Nevertheless, “there are few,

if any, hard-and-fast rules about what makes a

settlement ‘fair’ or ‘reasonable,’” In re Volkswagen

“Clean Diesel” Marketing Litigation, 895 F.3d 597, 610

(9th Cir. 2018), and a Rule 23(e) review of a proposed

settlement “[u]ltimately … is nothing more than an

amalgam of delicate balancing, gross approximations

and rough justice.” Officers for Justice v. Civil Serv.

Comm’n, 688 F.2d 615, 625 (9th Cir. 1982) (citation

and internal quotations omitted).

B. Parties To A Class Action Are Broadly

Free To Structure A Settlement Agreement As They Wish, Provided That It Is

“Fair, Reasonable, And Adequate”

As long as a proposed settlement agreement “is ‘fair,

adequate and free from collusion’ [it] will pass judicial

muster.” Volkswagen at 610 (quoting Hanlon v.

Chrysler Corp., 150 F.3d 1011, 1027 (9th Cir. 1998)).

Indeed, a guiding principle of a Rule 23(e) fairness

review is that the court will not

intru[de] upon what is otherwise a private

consensual agreement … [except] to the extent

necessary to reach a reasoned judgment that

the agreement is not the product of fraud or

overreaching by, or collusion between, the

negotiating parties, and that the settlement,

taken as a whole, is fair, reasonable, and adequate

to all concerned.

Officers for Justice v. Civil Serv. Comm’n, 688 F.2d at

625; see also Lane v. Facebook, Inc., 696 F.3d 811, 819

(9th Cir. 2012) (finding that a Rule 23(e) fairness

review determines “whether a settlement is fundamentally fair … [which] is different from the question

whether the settlement is perfect”) (emphasis added);

Hanlon v. Chrysler Corp., 150 F.3d at 1027 (“[T]he

question we address is not whether the final product

could be prettier, smarter or snazzier, but whether it

is fair, adequate and free from collusion”).

Because courts are loath to disturb a settlement of

class claims unless its terms are unfair, unreasonable,

or inadequate, the parties have considerable latitude

in fashioning the terms of a settlement agreement in

a manner that takes into account the particular

circumstances and context in which the dispute arose.

C. Cy Pres Settlements Offer The Best

Method Of Settlement Distribution In

Certain, Rare Circumstances

The flexibility class litigants possess to freely

structure the terms of a settlement extends not only to

the settlement amounts, but also to the manner in

which those funds are distributed. Provided that the

overall settlement agreement is fair, reasonable, and

adequate under Rule 23(e), the parties may choose any

number of formulas and methods to determine who, or

what entity, should receive which portion of the

settlement fund.

1. When a settlement cannot be directly distributed to class members,

use of the cy pres mechanism is

appropriate

Ideally, the proceeds from a class settlement should

be distributed directly to class members, see, e.g., Klier

v. Elf Atochem N. Am., Inc., 658 F.3d 468, 474 (5th Cir.

2011), in direct proportion to the actual damages

suffered by each individual. However, proportional

direct distribution is not always possible. In the

typical class action, for instance, such calculations

may be unduly complex and burdensome, given that

classes usually include members with similar – but

not identical – claims. See Fed. R. Civ. P. 23(a)(3)

(requiring class members only to have claims that are

“typical” as compared to the class, not identical).

In addition, as the size of a class increases, so too do

the costs of proving and awarding damages. This can

lead to a class action settlement fund becoming

“non-distributable, [which occurs] when the proof of

individual claims would be burdensome or distribution

of damages costly.” Facebook, 696 F.3d at 819 (citation

and internal quotations omitted). A settlement fund

may become non-distributable “if, for example, the

cost of distributing individually to all class members

exceeds the amount to be distributed,” In re Baby

Prods. Antitrust Litig., 708 F.3d 163, 169 (3d Cir.

2013), or if a large class size would result in each

member receiving only de minimis amounts. See, e.g.,

Facebook, 696 F.3d at 825.

Where a settlement fund is not directly distributable, an alternative approach to distribution is

appropriate. One such alternative that the parties

may elect to use is the cy pres distribution, which

“is a settlement structure wherein class members

receive an indirect benefit (usually through defendant

donations to a third party) rather than a direct

monetary payment.” Facebook, 696 F.3d at 819. The

cy pres mechanism is properly used “[w]here the only

question is how to distribute the damages ….” Six (6)

Mexican Workers v. Arizona Citrus Growers, 904 F.2d

1301, 1307 (9th Cir. 1990).

Under circumstances such as these, where there is

no better, alternative method of distributing a class

action settlement fund, the inclusion of the cy pres

mechanism is entirely uncontroversial: “‘[C]ourts are

not in disagreement that cy pres distributions are

proper in connection with a class settlement, subject

to court approval of the particular application of the

funds.’” In re Pharm. Indus. Average Wholesale Price

Litig., 588 F.3d 24, 34 (1st Cir. 2009) (quoting A. Conte

& H.B. Newberg, 4 Newberg on Class Action § 11:20,

at 28 (4th ed. 2002)).

2. In the absence of a feasible direct

distribution, the other options for

distributing the settlement are

worse than cy pres

The lack of controversy surrounding use of cy pres

settlements under the narrow circumstance of a nondistributable settlement fund can be explained by the

fact that the mechanism is intended to be used only

where there is no better alternative for disposing of the

settlement fund. See Dennis v. Kellogg, 697 F.3d 858,

865 (9th Cir. 2012) (“[A] cy pres award must qualify as

‘the next best distribution’ to giving the funds directly

to class members”) (citation omitted). If a class action

settlement fund cannot be directly distributed – as

would be the case, for example, if class members

cannot be readily identified, or if class members would

each receive only de minimis recoveries – there in fact

remains no better alternative method than cy pres for

disposing of a settlement fund.

Two other options for distribution that are frequently identified by courts are reversion of the

settlement fund to the defendant, or escheat to a

governmental entity. See, e.g., In re Baby Prods.

Antitrust Litig., 708 F.3d at 172. These options are

less preferable than cy pres distribution because both

deprive the class of any benefit, with one scenario

(reversion) providing the settlement fund to the very

entity accused of causing the harm in the first place,

thus muting any potential deterrent effect on the

defendant’s behavior. Compared to reversion or

escheat, a cy pres distribution at least ensures that

settlement funds will be used to provide a benefit to

the class as a whole. As the Third Circuit observed:

Reversion to the defendant risks undermining the

deterrent effect of class actions …. Escheat to the

state preserves the deterrent effect of class

actions, but it benefits the community at large

rather than those harmed by the defendant’s

conduct. Cy pres distributions also preserve the

deterrent effect, but (at least theoretically) more

closely tailor the distribution to the interests of

class members, including those absent members

who have not received individual distributions.

In re Baby Prods. Antitrust Litig., 708 F.3d at 172.

Petitioners insist that the settlement fund must

be distributed directly to individual class members

in some fashion, even though the high costs of

distribution relative to the size of the settlement fund

render direct distribution completely infeasible and

thus make this as an ideal circumstance to apply

the cy pres mechanism. Perhaps acknowledging

the absurdity (and impracticalities) of distributing

approximately $0.04 to each of 129 million class

members, Petitioners instead propose two options for

directly distributing the settlement fund: (1) holding a

lottery to determine which class members would be

eligible to share in the settlement fund; or (2)

promising a token recovery of $5 or $10 to all class

members who make a claim, under the assumption

that few class members will do so. Pet. App. 9.

Both proposals make far less sense than the cy pres

settlement to which the parties agreed, and which the

district court and Ninth Circuit below ultimately

approved. This is because the alternatives proposed

by Petitioners would distribute recoveries to only a

portion of the affected class while simultaneously

introducing unnecessary administrative expenses

associated with management of large classes. The

agreed-upon and approved cy pres distribution, on

the other hand, benefits the entire class by providing

money to organizations whose activities would promote the protection of Internet privacy. The cy pres

distribution also reduces administrative costs as

compared to Petitioners’ proposals: rather than spend

money unnecessarily on administering recoveries

to millions of individuals – as would be the likely

outcome under either proposal – the only costs

associated with administering the cy pres distribution

are those related to evaluating foundations’ proposals

to ensure that the money would be used to benefit the

class. The cy pres method of distribution provides a

greater benefit to the class and represents a lower

administrative burden, and therefore is by far the

superior option of those available under the circumstances presented here.

D. Numerous Courts Of Appeals Endorse

The Use Of Cy Pres Settlements

The Ninth Circuit properly approved the parties’

use of the cy pres device to resolve their otherwise nondistributable class claims given the de minimis

amounts due to each class member, deeming the

settlement to be “fair, adequate, and free from

collusion.” Pet. App. 10. In doing so, it accorded

with a line of Ninth Circuit precedent generally

approving of the use of the cy pres mechanism in class

action settlements. See, e.g., Six (6) Mexican Workers,

904 F.2d at 1311-12; Nachshin v. AOL, LLC, 663 F.3d

1034, 1038 (9th Cir. 2011); Facebook, 696 F.3d at 81920.

In Lane v. Facebook, a case that bears a close

resemblance to the one at issue, the Ninth Circuit

considered a class of 3.6 million individuals claiming

that Facebook “had violated [its] members’ privacy

rights by gathering and publicly disseminating information about their online activities without permis-

sion.” 696 F.3d at 817. The parties proposed settling

the claims by making a cy pres payment of $6.5 million

to a charity that would sponsor programs related to

protection of personal information online. The appeals

court affirmed the district court’s approval of the

settlement, finding “that it would be ‘burdensome’ and

inefficient to pay the $6.5 million in cy pres funds that

remain after costs directly to the class because each

class member’s recovery under a direct distribution

would be de minimis.” Facebook, 696 F.3d at 825.

Notably, had the Facebook settlement been directly

distributed to class members, each would have

received approximately $1.77. Even though these

recoveries would have been approximately 44 times

larger than the $0.04 direct recoveries that would have

been available to each class member in the case at

issue, they were still deemed to be de minimis.

The decision below also accords with decisions by

other courts of appeals. For example, in In re Mexico

Money Transfer Litigation, the Seventh Circuit reviewed a class action settlement agreement that, in

addition to providing coupons to class members,

included a cy pres component “in recognition of the fact

that many class members will prove to be unidentifiable, will not claim their coupons, or will not use all

coupons they receive.” 267 F.3d 743, 746 (7th Cir.

2001). The appeals court affirmed the district court’s

approval of the settlement, finding that it fairly

compensated the class. Id. at 748-49. Likewise, in In

re Baby Products Antitrust Litigation, the Third

Circuit approved of the use of cy pres distributions

generally, saying that “a district court does not abuse

its discretion by approving a class action settlement

agreement that includes a cy pres component[, provided that the third party uses the funds] for a purpose

related to the class injury.” 708 F.3d at 172 (footnote

omitted). The D.C. Circuit has even gone so far as to

suggest that parties to a class action could negotiate

a cy pres settlement even where “claimants are

identifiable and dispersal of funds is feasible,” noting

that “[t]here is no precedent in this circuit” that would

prevent that outcome. Keepseagle v. Perdue, 856 F.3d

1039, 1050 (D.C. Cir. 2017), cert. denied, 138 S. Ct.

1326 (2018), and cert. denied, 138 S. Ct. 1345 (2018).

In short, the inclusion of the cy pres mechanism as

a negotiated term in class action settlement agreements is neither controversial nor unusual. Because

use of this mechanism – which is permissible under

the Federal Rules of Civil Procedure and has been

endorsed by numerous courts of appeal – gives parties

a settlement option that is superior to other available

alternatives, the Ninth Circuit’s decision, approving of

the parties’ use of the cy pres mechanism, should be

affirmed.

II. WHETHER A CY PRES SETTLEMENT

ALSO INCLUDES DIRECT DAMAGES IS

OF NO IMPORT, AS LONG AS THE

SETTLEMENT MEETS RULE 23(e)’s

REQUIREMENTS

It bears repeating that the cy pres mechanism

addresses uncommon circumstances and should therefore be the exception rather than the rule. See

In re Baby Prods. Antitrust Litig., 708 F.3d at 173.

However, these uncommon circumstances do nothing

to change the fact that the settlement need only meet

Rule 23(e)’s requirement that it be fair, reasonable,

and adequate.

Of course, the uncommon circumstances that necessitate a cy pres settlement bring with them special

considerations that typically are not present in run-of-

the-mill class action settlements. For example, cy pres

settlements are often appropriate when class members

cannot be readily identified, resulting in a class consisting largely of silent, potentially geographically

diverse members who lack the ability to influence the

settlement. See Six (6) Mexican Workers, 904 F.2d at

1307 (“[T]he interests affected are not the defendant’s

but rather those of the silent class members”). The

large number of silent class members can, in turn,

increase the potential for self-dealing. See, e.g.,

In re Baby Prods. Antitrust Litig., 708 F.3d at 173

(“Cy pres distributions also present a potential conflict

of interest between class counsel and their clients

because the inclusion of a cy pres distribution may

increase a settlement fund, and with it attorneys’ fees,

without increasing the direct benefit to the class”);

Nachshin, 663 F.3d at 1039 (cautioning that selection

of cy pres beneficiaries must not fall prey to “the whims

and self interests of the parties, their counsel, or the

court”).

To account for these uncommon circumstances,

courts pay special attention to settlements that

include a cy pres mechanism, in order to ensure that

they provide appropriate protection and benefit for

silent class members whose rights will be impacted

by the settlement. See Nachshin, 663 F.3d at 1036.

However, even though a court may end up considering

multiple factors when deciding whether to approve a

cy pres settlement, in reality it is doing nothing more

than conducting a Rule 23(e) fairness review that

is tailored to the circumstances of the settlement at

hand. As the Ninth Circuit recognized in Facebook,

where it ultimately approved a cy pres-only

settlement:

The district court’s review of a class-action

settlement that calls for a cy pres remedy is not

substantively different from that of any other

class-action settlement except that the court

should not find the settlement fair, adequate, and

reasonable unless the cy pres remedy ‘account[s]

for the nature of the plaintiffs’ lawsuit, the

objectives of the underlying statutes, and the

interests of the silent class members ….’

696 F.3d at 819-20 (quoting Nachshin, 663 F.3d at

1036). See also In re Baby Prods. Antitrust Litig., 708

F.3d at 174 (“To assess whether a settlement containing a cy pres provision satisfies this requirement,

courts should employ the same framework developed

for assessing other aspects of class action settlements”); In re Lupron Mktg. & Sales Practices Litig.,

677 F.3d 21, 33 (1st Cir. 2012) (holding that, in order

to be fair, cy pres distributions must “reasonably

approximate the interests of the class members”).

Thus, in terms of judicial review, cy pres settlements

need do nothing more than satisfy Rule 23(e)’s

requirement that they must be “fair, reasonable, and

adequate.” Fed. R. Civ. P. 23(e)(2). This is true

whether they are cy pres-only or merely include a cy

pres component in addition to direct distribution.

III. FOR EMPLOYERS THAT FACE LARGE

CLASS ACTIONS, THE AVAILABILITY

RANGE

SETTLEMENT

OPTIONS, INCLUDING THE CY PRES

SETTLEMENT DEVICE, IS CRITICALLY

IMPORTANT

Employers derive considerable benefits from the

availability of cy pres settlements. Although cy pres

settlements are rare, their mere availability promotes

efficient resolution of class actions as well as future

compliance with legal requirements.

A. Cy Pres Settlements Promote Prompt

Dispute Resolution, And Decrease The

Likelihood That Costly Class Procedures Will Be Necessary

Cy pres settlements are a valuable tool for dispute

resolution. They offer the opportunity to resolve

disputes in lieu of costly litigation on the merits and

complex damages proceedings. In short, the availability of cy pres settlements promotes prompt

resolution of burdensome class actions.

In addition to serving as a useful tool for more

efficient dispute resolution, the availability of cy pres

settlements can serve as a check against abusive

tactics aimed at coercing settlement of questionable

class claims. If cy pres settlements were completely

unavailable, plaintiffs would have greater ability to

force employers into costlier litigation phases that

inch ever closer to ruinously high damages.

Indeed, it is at the certification stage that the

playing field begins to tilt in the plaintiffs’ favor. As

this Court has observed, class actions can entail “the

risk of ‘in terrorem’ settlements.” AT&T Mobility LLC

v. Concepcion, 563 U.S. 333, 350 (2011). See also

Coopers & Lybrand v. Livesay, 437 U.S. 463, 476

(1978) (“Certification of a large class may so increase

the defendant’s potential damages liability and

litigation costs that he may find it economically

prudent to settle and to abandon a meritorious

defense”), superseded by rule on other grounds, Fed. R.

Civ. P. 23(f), as recognized in Microsoft Corp. v. Baker,

137 S. Ct. 1702 (2017); Federal Rule Civil Procedure

23 advisory committee’s note to 1998 Amendment, 28

U.S.C. app. Subdivision (f) (“An order granting

certification, on the other hand, may force a defendant

to settle rather than incur the costs of defending a

class action and run the risk of potentially ruinous

liability”).

B. Cy Pres Settlements Are Beneficial To

Both Class Members And Employers

Cy pres settlements provide numerous benefits to

both parties to a class action. First, cy pres settlements confer finality, to the benefit of all involved.

Class members receive some form of redress – albeit

indirectly – for the harm alleged, and both parties

are given the chance to move past the dispute with

certainty. Obtaining final resolution is a critically

important objective of litigation, both for the parties

and for the courts. See, e.g., Parklane Hosiery Co. v.

Shore, 439 U.S. 322, 326 (1979) (explaining that the

doctrine of collateral estoppel “promot[es] judicial

economy by preventing needless litigation”) (citation

omitted).

Second, cy pres settlements can be useful in promoting deterrence. See In re Pharm. Indus. Average

Wholesale Price Litig., 588 F.3d at 33-34 (“[T]he

cy pres ... distributions serve the objective[] of …

deterrence of illegal behavior”) (quoting A. Conte &

H.B. Newberg, 3 Newberg on Class Action § 10:15, at

513 (4th ed. 2002)). This benefits class members by

creating an incentive for future compliance. The

employer also benefits from this deterrent effect,

which affords it the opportunity to redress harms,

address discontent within its workforce, and continue

striving toward compliance with legal requirements.

Third, cy pres settlements provide class members

some form of recovery in instances where otherwise

they may receive nothing. The cy pres mechanism is

appropriately used where, for example, distribution of

a settlement fund is infeasible. See supra pp. 11-12.

Without the availability of the cy pres mechanism, the

settlement fund would be disposed of in a manner that

would provide no direct or indirect benefit to the class,

such as reversion to the defendant or escheat to a

governmental entity. See supra pp. 13-15. Thus, as

the Seventh Circuit pointed out in Mirfasihi v. Fleet

Mortg. Corp., “In the class action context the reason

for appealing to cy pres is to prevent the defendant

from walking away from the litigation scot-free

because of the infeasibility of distributing the proceeds

of the settlement ….” 356 F.3d 781, 784 (7th Cir.

2004).

Further, a cy pres distribution may also permit the

class to receive an indirect benefit from a settlement

even though “the shakiness of the plaintiffs’ claims,”

Pet. App. 9, could well prove fatal if the dispute were

to proceed to litigation.

Moreover, it is highly unlikely here that the class of

129 million individuals could possibly have obtained

class certification and maintained it through litigation. As this Court held in Comcast v. Behrend,

“certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that the prerequisites

of Rule 23(a) have been satisfied.’” 569 U.S. at 33

(quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338,

350-51 (2011)). Included among these requirements is

“ascertainability,” which is “an implicit requirement

… that a class must be defined clearly and that

membership be defined by objective criteria ….”

Mullins v. Direct Digital, LLC, 795 F.3d 654, 657

(7th Cir. 2015). Classes have failed to meet this

requirement “when they were too vague.” Id. The

class here is the very definition of vague, as it includes

anyone who used Google during a seven-and-a-half

year period. In sum, had this case proceeded to

litigation rather than ended with a cy pres settlement,

it is likely that, due to weaknesses in the underlying

claims and questionable ability to maintain class

status, class members would have received absolutely

nothing, compared to the myriad benefits they would

gain as a result of the parties’ cy pres settlement.

C. Cy Pres Settlements Are Particularly

Well-Suited For The Types Of Disputes

That Employers Face

Employers, especially those with large workforces,

can expect to face class action lawsuits, and the cy pres

mechanism is particularly well-suited to helping them

reach satisfactory resolution of at least some such

disputes. This is because certain claims may give

rise to sprawling classes for which proof of specific

harm is extremely difficult to establish, or for which

direct distribution to individual class members would

cost more than the settlement fund itself. Direct

distribution, in other words, may be infeasible for

some specific types of class claims that employers can

expect to face.

For example, the ADEA prohibits an employer from

“refus[ing] to hire … any individual … because of such

individual’s age.” 29 U.S.C. § 623(a). One potential

claim that may arise under the ADEA is that an

employer intentionally discouraged older workers

from applying for jobs by targeting younger job

applicants, either through the language contained in a

job advertisement itself (for instance, by expressing a

preference for “recent college graduates”), or through

its targeted distribution of job advertisements exclusively to younger workers. See, e.g., Bradley v. T-

Mobile U.S., Inc., 5:17-cv-07232 (N.D. Cal, Dec. 20,

2017) (complaint filed). In such a case, the plaintiffs

likely would face considerable difficulty proving

collectively that they would have applied for the job

had they seen the advertisement, or had it been

worded differently. Faced with such a claim, the cy

pres mechanism could enable the employer to settle

the threatened collective action in a manner beneficial

to the plaintiffs without resort to protracted and

uncertain collective litigation.

Employers also regularly face class-based (“collective”) actions under the FLSA, which requires

payment of overtime to any employee who works more

than forty hours during a given workweek, unless he

or she is exempt from the FLSA’s requirements. 29

U.S.C. § 207. See also Kempen v. Matheson Tri-Gas,

Inc., No. 15-cv-00660-HSG, 2017 WL 475095, at *4

(N.D. Cal. Feb. 6, 2017) (approving settlement of

FLSA claims using cy pres mechanism and noting

that “[c]ourts generally apply the [Rule 23(e) fairness]

standard to FLSA collective action settlements”). A

common FLSA claim involves allegations that an

employer failed to pay wages for work done “off-theclock” – that is, before clocking in or after clocking out.

For example, a non-exempt employee may occasionally

spend a few minutes answering emails in the evening,

which work generally must be compensated unless it

is de minimis. 29 C.F.R. § 785.47. Because “off-theclock” work typically must be compensated, employees

could file a collective action, 29 U.S.C. § 216(b),

alleging that their employer violated the FLSA by

failing to pay them for such work; however, class

members likely would have difficulty proving when

they performed the work and how much of it they did.

In other words, in such a circumstance, “proof of

individual claims would be burdensome,” which would

make it ideal for application of the cy pres mechanism.

Nachshin, 663 F.3d at 1038 (citation and internal

quotations omitted).

Furthermore, cy pres settlements, which provide a

beneficial deterrent effect, are especially appropriate

for settling certain types of employment disputes

where deterrence is a primary statutory goal. For

instance, prevention of harm is a chief aim of many

equal employment opportunity laws, such as Title VII

of the Civil Rights Act of 1964. See Albemarle Paper

Co. v. Moody, 422 U.S. 405, 417 (1975) (“[T]he primary

objective [in enacting Title VII] was a prophylactic

one”), superseded by statute on other grounds, Civil

Rights Act of 1991, Pub. L. No. 102-166, 105 Stat.

1071. The cy pres mechanism therefore may be

particularly suitable for settling some workplace

discrimination claims brought under such laws,

because the deterrent effect of cy pres settlements

aligns neatly with such laws’ aim of keeping workplace

discrimination from occurring in the first place.

Given that the cy pres mechanism deters future

violations, using it to settle certain employment class

actions in turn promotes the underlying purpose of

such laws. For example, in Powell v. Georgia-Pacific

Corporation, the Eighth Circuit considered a settlement between Georgia-Pacific and a class of African

American employees alleging that the company had

discriminated against them in violation of Title VII.

119 F.3d 703, 706 (8th Cir. 1997). Following direct

distribution of the settlement fund to class members,

there remained more than $1 million that had gone

undistributed, and the Eighth Circuit approved a cy

pres distribution of the funds to a scholarship program

that would help African American students improve

their employment prospects. This approval served as

tacit recognition that cy pres settlements can indeed

dovetail with the underlying aims of federal workplace

nondiscrimination laws.

Even federal enforcement agencies, such as the U.S.

Equal Employment Opportunity Commission (EEOC),

often utilize cy pres or similar mechanisms in

resolving public enforcement actions. See, e.g., EEOC

v. Ruby Tuesday, Inc., No. 2:09-cv-01330-MRH (W.D.

Pa. Dec. 9, 2013) (Consent Decree at 6) (stipulating

that if any portion of the settlement fund were to

go unclaimed by class members, the EEOC would

distribute such funds to “a non-profit entity that

advocates for older workers or assists in the job

placement of older workers”). The U.S. Department of

Labor’s (DOL) Office of Federal Contract Compliance

Programs (OFCCP) also has utilized cy pres-style

components in its settlement agreements. One such

agreement required the employer, after making payments to class members, to “use any uncashed funds

to conduct [equal employment opportunity] training

at the Corporate office.” Conciliation Agreement

Between The U.S. DOL-OFCCP and Humana Inc.,

at 8 (Mar. 2018).2 In another settlement, OFCCP

included a cy pres-style device that was to be used only

in the event that redistributing unclaimed funds

among the class would have resulted in de minimis

payments to class members. In the settlement,

OFCCP required uncashed funds to be redistributed to

class members who had cashed checks, unless “the

total amount of uncashed funds would result in a

payment of less than $40.00 to each Eligible Class

Member,” in which case the remaining funds were to

be used “to provide training in equal employment

Available at https://www.dol.gov/ofccp/foia/files/Humana_

CA_Redacted.pdf.

opportunity to its personnel ….”

Conciliation

Agreement Between The U.S. DOL-OFCCP and Tyson

Foods, Inc., at 9 (Sept. 2016).3

The cy pres-style devices that the EEOC and OFCCP

routinely include in resolving agency-initiated enforcement actions serve the same function as the cy

pres-only settlement at issue here: in the absence of

some discernable way to distribute settlement funds to

those who were otherwise entitled to receive them,

the settlements provide some means of public relief

rather than reverting the funds to another party.

Such settlements help enforcement agencies maximize

the deterrent effect of the laws they enforce, by

ensuring all settlement funds – even the remnants

that remain after distribution – are used for the

benefit of the class. The settlements also help the

parties manage their limited resources by resolving

allegations at the administrative stage, avoiding

costly litigation. This finality has the added benefit

of freeing up the employer’s resources to focus on

achieving future compliance. In short, federal enforcement agencies’ use of a cy pres-style mechanism

in settling alleged violations of equal employment

opportunity laws underscores the mechanism’s utility

in supporting the underlying prophylactic aims of

federal workplace nondiscrimination laws. Because

the cy pres mechanism is permissible and has clear

utility in settling certain employment disputes, it

must remain a viable settlement option.

Available at https://www.dol.gov/ofccp/foia/files/TysonCA_

Redacted.pdf.

CONCLUSION

For the reasons set forth above, the amicus curiae

Center for Workplace Compliance respectfully submits that the decision below should be affirmed.

Respectfully submitted,

RAE T. VANN

JOHN R. ANNAND

Counsel of Record

NT LAKIS, LLP

1501 M Street, N.W.

Suite 1000

Washington, DC 20005

jannand@ntlakis.com

(202) 629-5600

Attorneys for Amicus Curiae

Center for Workplace

Compliance

September 2018

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.