Google Inc. must again defend its $5.5 million settlement to end privacy class claims after a federal appeals court raised concerns about money designated for third parties.

The trial court wrongly dismissed objections to the cy pres settlement, which distributes funds to specific interest groups, and must thoroughly address them on remand, the U.S. Court of Appeals for the Third Circuit said Aug. 6.

Federal courts are increasingly examining whether cy pres settlements are adequate relief for class plaintiffs, privacy attorneys say. The question often emerges in privacy actions because individual plaintiffs rarely can bring such litigation on their own,…