Federal judge halts $100 million Google Ads settlement at finish line

SAN JOSE, Calif. (CN) — Class members looking for a payout from their 14-year lawsuit over Google Ads may have to wait a little bit longer, after a federal judge on Thursday delayed the final approval of a $100 million settlement between Google and advertisers who claim they didn't get a click-based discount on the ads they bought.

Although U.S. District Judge Edward J. Davila said he was originally inclined to approve the settlement, calling it “fair and reasonable,” he expressed concern with the “aggressive approach” taken by settlement administrators to push class members toward using virtual prepaid cards to receive their funds.

“I’d like to resolve this issue before we go to final approval,” the Barack Obama appointee said.

Davila said his doubts were sparked by descriptions on the settlement website that seemed to advertise the prepaid cards over other payment methods available to class members — like physical checks, Venmo and Zelle — promoting them as more secure or more widely accepted for digital payments.

The prepaid cards are also the default payment option for class members if no other option is selected.

After confirming with both sides that Angeion Group, the company hired by the parties to administer the settlement, had a relationship with MasterCard, which distributed the prepaid cards, Davila questioned whether Angeion was receiving anything in exchange for class members who used the prepaid card option.

“Were there commissions involved? It sounds like there might be,” Davila told attorneys.

Davila also expressed skepticism over the various hidden fees tied to the prepaid cards.

In court, the plaintiffs assured the judge that if the money on the cards was not claimed within a year, it would be transferred back to the home state of the class member.

However, Davila noted the card’s terms stated that if there was no action after 12 months, MasterCard would impose a $0.95 per month fee on the cardholder. He also questioned the company’s $6.00 card replacement fee.

“It seems like there’s some subtle push toward using the card,” Davila said.

Before he approves the settlement, Davila said he wanted a declaration from Angeion Group as to its financial interests in the case, seeking more transparency on any “fee arrangements” it might have and their possible effect on class members.

The judge warned that if any “secondary stream of income” is discovered, the next question he’d have for the parties is whether he should deduct that from Angeion’s administration fees in the case.

The court took the motion for final approval under submission and said he hoped to wrap the settlement proceedings in September.

Although both sides appeared dismayed that the 14-year lawsuit would not conclude Thursday, the plaintiffs expressed their commitment to getting the settlement done right.

“We’ve been at this for a long time, and we want to make sure it’s perfect,” said Matthew Leo Mustokoff of Kessler Topaz, who represented the advertisers. “If your honor feels the need to bring this back, we will make ourselves available.”

Google's attorneys declined a request for comment.

The class action, filed in 2011, accuses the tech giant of excluding clicks on mobile devices from its discount program marketed to advertisers between 2004 and 2011. Under Google’s Smart Pricing package, customers could purchase ads at a discount based on a “conversion score” of the website where the advertisement appeared.

A conversion score divides the number of clicks that an advertisement gets by the number of purchases made as a result of the click-throughs to give advertisers an idea of how many clicks are actually leading to business.

The plaintiffs claim Google owed them a discount because of the conversion scores on their websites, but Google refused, saying it specifically exempted any clicks that originated from tablets or smartphones from the program.

Over the last 14 years, the plaintiffs, led by plaintiff Rene Cabrera, have filed five amended complaints, opposed five motions to dismiss, taken or defended 41 expert depositions, briefed two motions for summary judgment and successfully appealed the case’s dismissal to the Ninth Circuit.

“After 14 years of contentious, hard-fought litigation, the parties have reached an agreement to resolve the classes’ claims against defendant Google LLC in exchange for a $100 million cash payment,” the plaintiffs said in their settlement agreement.

The advertisers said their decision to settle was prompted by worries over the “significant challenges” they would face if they went to trial. As they explained, Google planned to individually target the two subclasses the court had certified, looking to reduce the damages owed to each one or decertify them completely.

“Had Google prevailed on these challenges, the classes’ recovery would have been significantly reduced or eliminated,” the plaintiffs said in court documents.

The advertisers said the $100 million settlement amount represents an estimated 13.9% to 18.8% of their total claimed damages, but maintained that it was a “particularly favorable” outcome.

Meanwhile, the plaintiffs’ attorneys seek 33% of the settlement fund, citing the estimated 34,000 hours they’ve dedicated over the life of the lawsuit, with an approximate labor cost of $22.5 million.

The plaintiffs’ attorneys also want an additional $4.2 million to cover expenses, which include the retention of experts and consultants used in the case, four private mediation sessions between parties, online legal and factual research costs as well as travel expenses.

In April, Davila said he would likely approve the agreement at its final fairness hearing, calling it “fair, reasonable and adequate to the classes.”

Google seemed happy to be rid of the lawsuit.

“This case was about ad product features we changed over a decade ago and we’re pleased it’s resolved,” a Google spokesperson said at the time.

This case was filed in the Northern District of California and heard at the Robert F. Peckham Federal Building and U.S. Courthouse in San Jose, California.