(Adds Google did not offer comment)
By Andrew Chung
WASHINGTON, March 20 - The U.S. Supreme Court on Wednesday put in jeopardy an $8.5 million settlement Google made with users to resolve a class action lawsuit accusing it of violating their privacy by sharing users' search queries with other websites.
The justices, in an unsigned opinion, threw out a ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals that had upheld the settlement, directing it to take a fresh look at whether the plaintiffs had the legal standing necessary to sue and whether they were even harmed by the search engine operator.
Google, part of Alphabet Inc., was accused in the lawsuit of violating a 1986 law governing the privacy of stored electronic communications.
Justice Clarence Thomas dissented, saying the increasingly common type of settlement at the heart of the case was "unfair and unreasonable" and should not have been approved by the 9th Circuit.
These so-called "cy pres" (pronounced "see pray") settlements are used in class action cases when it might be impractical to carve up low-value individual damages among a large number of plaintiffs. In endorsing the Google settlement in 2017, the 9th Circuit said each of the 129 million U.S. Google users who theoretically could have claimed part of it would have received "a paltry 4 cents in recovery."
Proponents have said these settlements can put otherwise negligible awards per person to good use by benefiting groups that work for the public good or support underfunded entities. Critics have said they encourage frivolous lawsuits and excessive fees going to plaintiffs' lawyers.
Google agreed in the settlement to disclose on its website how users' search terms are shared but was not required to change its behavior. The three main plaintiffs received $5,000 each for representing the class. Their attorneys received about $2.1 million.
Under the settlement, much of the rest of the money would go to organizations or projects that promote internet privacy, including at Stanford University and AARP, a lobbying group for older Americans, but nothing to the millions of Google users who the plaintiffs were to have represented in the class action.
A Google representative did not immediately respond to a request for comment on Wednesday.
The settlement was challenged by attorneys including Ted Frank of the Hamilton Lincoln Law Institute, which advocates against what it considers abusive class action procedures.
Following the ruling, Frank said he expects the lower courts to again find that the plaintiffs may sue and that the issue will soon be back before the high court. "The decision simply delays the day of reckoning for this unfair practice," Frank said.
The case began when a California resident named Paloma Gaos filed a proposed class action lawsuit in 2010 in San Jose federal court.
The plaintiffs said that their privacy was violated when their search terms were disseminated by Google to other sites. One searched for her own name, another for financial and health data, and a third for information related to his divorce proceedings.
The Supreme Court may soon get another opportunity to clarify what is needed for plaintiffs to achieve the legal standing necessary to sue. The justices are considering whether to hear a pending appeal by online shoe retailer Zappos, a subsidiary of Amazon.com Inc, over whether customers are entitled to sue over a 2012 data breach.
Reporting by Andrew Chung; Editing by Will Dunham