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Last Update: May 8, 2006
RAMIFICATIONS OF ARKANSAS SETTLEMENT
Google’s recent settlement of the Arkansas click-fraud lawsuit was a much bigger win for Google than we and others initially thought:
- The settlement, if approved, will preclude all additional class actions against the company based on past click-fraud claims.
- The California class action (see below), which was potentially far more serious than the Arkansas case, will disappear, as will all documents gathered from Google in discovery.
- Attorneys for the plaintiffs in the California case called the Arkansas settlement “the worst class action settlement in history” [for the plaintiffs]. From Google's perspective, this suggests the settlement is the best settlement in history.
- Because Yahoo! has not settled the Arkansas case, the California case against Yahoo! will continue, as will the one in Arkansas. Yahoo!, it seems, would be well-advised to settle the Arkansas case immediately.
- The Google settlement will not preclude additional click-fraud claims against Google after the final settlement approval date.
Sources/Details:
After the preliminary approval of the Arkansas settlement, we spoke with attorneys for the plaintiffs in the California class action. We also reviewed the Arkansas “Stipulation and Settlement Agreement” and a letter the California attorneys wrote to the judge in Arkansas after he denied their motion to intervene in the settlement.
The letter lays out the settlement math, which will result in each plaintiff receiving not ‘pennies on the dollar’ but fractions of pennies on the dollar. Additionally, the plaintiffs will receive these fractions not in cash but in rebates against future advertising spending. Based on this, Google CEO Eric Schmidt appears to have understated the case when he called click fraud “not material” –at least as far as exposure from existing class actions is concerned. "Non-existent" might have been more accurate.
The attorneys in the California class action may continue to try to head off final approval of the Arkansas settlement, but are not optimistic about their chances of success. They will continue to press their case against Yahoo unless Yahoo also settles in Arkansas.
SUMMARY OF LEGAL PROCEEDINGS
In the Arkansas lawsuit, a Texarkana retailer is leading a group action against Google, Yahoo!, and the rest of the search industry. Google announced a preliminary agreement to settle this case for up to $90 million. Preliminary approval of the settlement was granted by the judge on April 20.
In the California lawsuit, which has now been tabled, a North Carolina web hosting company called AIT is leading a class action against Google. This case is potentially more significant and expensive than the Arkansas case. AIT is a sophisticated company ($30 million in revenue) that has maintained detailed logs of Google clicks. The company spent approximately $450,000 on Google keywords and estimates that more than $250,000 of this paid for fraudulent clicks. Perhaps most importantly, AIT’s counsel has already conducted significant discovery, gathering more than 270,000 pages of documents and conducting numerous interviews with Google employees. Details of this discovery have not yet been released. The case was stayed pending the outcome of the Arkansas settlement discussions.
IMPORTANT DATES/EVENTS
April 6, 2006: The judge in the California case granted Google’s request to stay the California litigation pending resolution of the Arkansas settlement talks.
April 20, 2006: The judge in the Arkansas case gave preliminary approval for the Google settlement.
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