Lawsuit seeks to block Google settlement

Suit argues that affected advertisers would not be compensated enough by $90 million click fraud settlement.

Lawyers representing Internet search advertisers filed a lawsuit this week in an attempt to block a proposed $90 million settlement to a class-action click fraud suit against Google, a lawyer and the lead plaintiff said Thursday.

"The settlement is just a joke," said plaintiff Joseph Kinney, a Pinehurst, N.C., security consultant who said he has lost about $1,500 to click fraud on ads related to his Web site. "A jury needs to hear these issues and Google needs to be held accountable."

Lane's Gifts and Collectibles and Caulfield Investigations sued Google and other search engines in February 2005 in state court in Texarkana, Ark., accusing them of charging advertisers for clicks on online advertisements that were fraudulent or done in bad faith and not with the intention of legitimate commerce.

Google reached a settlement with the plaintiffs in March that provides for $30 million to be used for lawyer fees and $60 million to pay credits to affected advertisers. The settlement would not apply to other defendants, namely Yahoo, Lycos, Miva, and LookSmart.

The Arkansas judge has scheduled a two-day hearing to begin on July 24 to consider whether to give the proposed settlement final approval, said Shawn Khorrami, one of the lawyers listed on the latest lawsuit, which was filed before the same Arkansas judge as the initial lawsuit. Khorrami also represents a plaintiff in a similar lawsuit filed in California against Google.

The latest lawsuit argues that the settlement should be rejected because it would not adequately compensate advertisers who lost money from fraud.

"The settlement leaves advertisers in worse shape than they are now. There is no benefit that the class (of advertisers) is getting at all," said Khorrami, who is based in Los Angeles.

"Under the settlement, Google can pay a half a percent of your losses," or $5 on every $1,000 of losses claimed, he said. For instance, a loss of $10,000 would garner a coupon worth $50 from Google that could used only to buy more advertising through Google, he added.

Google defended the settlement. "Lawyers for the California plaintiffs are trying to circumvent the normal class action process, which we believe is inappropriate," Google said in statement. "We question if this lawsuit may be motivated more by the quest for attorneys' fees than pursuit of what's best for class members."

If the court agrees to block the proposed settlement, the case would be free to either proceed to trial or continue settlement negotiations with Google, said Khorrami, who also represents Web hosting company AIT filed against Google last year in San Jose, Calif. That lawsuit is on hold pending the outcome in the Arkansas case, Khorrami said.

Khorrami and others have created a

Once Google sends out notices to its advertisers notifying them of the proposed settlement, advertisers will have 30 days to opt out of the settlement, Khorrami said. Google so far has not sent out the notices, which must go out before the judge approves it, he said.

The settlement would not solve the underlying problem of click fraud, experts have said. It is unclear how much of a problem it is. Google and other search engines say they catch most click fraud and that it is not a serious issue.

A recent study found that click fraud at the major search engines is . Other estimates--from companies that stand to profit off click-fraud detection-related software and services--have pegged it as high as 30 percent.

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