Lundy v. Meta Platforms, Inc.

Docket number: 18-cv-6793-JD (N.D. Cal.)

The Hamilton Lincoln Law Institute represented an objector challenging a proposed settlement to the extent the court exercises the option to divert all or part of the $37 million fund to third parties rather than to the class.

The underlying lawsuit alleges that Meta improperly inferred the location of Facebook users through their IP addresses even if the Facebook user had turned off the Location Services on their phone. The parties reached a settlement pursuant to which Meta would pay $37.5 million for a release of the class’s claims.

The settlement provides for pro rata distribution of the net settlement fund to class members who participated in a claims process. However, the settlement also contains a provision that allows the court to order payment to cy pres recipients instead if distribution to the class is not economically or administratively feasible or if the court determines that a pro rata distribution to the class members who submitted valid claims would result in a windfall to those class members.

Following the close of the claims period, the parties informed the court that class members who filed claims were expected to receive $25-$30. The settlement administrator would send the funds primarily through inexpensive digital means such as Venmo, PayPal, Zelle, or virtual prepaid card. The parties did not argue that this distribution process was infeasible and instead voiced support for the direct class payment. Nor did the parties argue that the payment would be a windfall. Rather, the settlement fund represented about half of the class’s nominal damages, and the plaintiffs maintained that they were entitled to additional damages under a disgorgement theory.

Objecting on behalf of class member and HLLI attorney Anna St. John, HLLI argued that ordering cy pres under either provision was improper under the terms of the settlement as well as legal precedent and Rule 23. HLLI explained that cy pres is an especially poor fit for class actions when courts permit settlements to divert material amounts of money away from the class. HLLI gave numerous examples of much smaller amounts being distributed to class members rather than cy pres to demonstrate feasibility. And HLLI raised concern with the polarizing nature of certain recipients’ advocacy work and the related First Amendment problems, with the procedural approach by which the Court urged the parties to allow cy pres in the settlement, and with the appearance of favoritism that underlies the selection of the proposed recipients. HLLI pointed out that all of the fundamental concerns surrounding cy pres could be avoided by approving direct distribution of the settlement fund to the class.

On October 19, 2023, Judge James Donato agreed with Hamilton Lincoln Law Institute that there should be a pro rata distribution of the $37 million fund to class members who had submitted valid claims and that there was no reason to default to a cy pres distribution of the fund to third parties. HLLI had filed a contingent objection to the proposed settlement which included a provision that if there were too few or too many claimants, the settlement fund could be distributed to third party organizations approved by the district court, rather than to class members.

Judge Donato agreed that the approximate $29 pro rata distribution to class members who submitted valid claims was sufficient to avoid a cy pres distribution, and therefore deemed HLLI’s objection moot. While we respectfully disagree with Judge Donato that the cy pres provision of the proposed settlement was appropriate under Rule 23 of the Federal Rules of Civil Procedure, we are pleased that he agreed that a pro rata distribution to claiming class members was a proper resolution to the case and that there was no need to resort to a cy pres distribution.

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