Google faces a lawsuit in California over whether bulk scanning of emails to deliver advertisements breaches state and federal wiretap laws.

In its filings for the lawsuit, the company has also admitted scanning the contents of emails sent and received by American students who attend schools which use the company’s Apps for Education suite. But America’s Education Week magazine says that that raises new questions about the compatibility between US child-protection laws and “big data”.

The nine plaintiffs accuse Google of breaching wiretap laws, and hope to start a collective “class action” suit to gain financial compensation for Gmail users, as well as to force the company to be more open about its policies.

Only two of the plaintiffs are students, one at the University of Hawaii and one at the University of the Pacific, in California. But their cases raise the thorniest questions for the company.

The company “scans and indexes” the email of any student using its tools for education, even if those schools have turned off the ability to display adverts. The scanning lets the company provide features such as spell check, virus and spam protection, as well as functionality including its “Priority Inbox” feature. It cannot be turned off.

Such a practice could be in violation of an American law called Ferpa, the Family Educational Rights and Privacy Act, which is the main law guarding student educational records.

Last updated in 2001, the legislation wasn’t written in an age of cloud computing, and it is possible it conflicts heavily with Google’s attempts to expand into education.

“More than 30 million students, teachers and administrators rely on Google Apps for Education every day to communicate and collaborate more efficiently,” says Bram Bout, the head of Google Apps for Education. “We are committed to protecting the privacy and security of our users — and that includes students — to make sure their information is safe, secure and always available to them. Ads in Gmail are turned off by default for Google Apps for Education and we have no plans to change this in the future.”

As part of the Californian lawsuit, Google argues that the two student plaintiffs consented to their emails being scanned when they first logged in. But, writes the social media lawyer Bradley S Shear, “since Google provides this same exact service for free to thousands of schools across the country it raises a serious question of whether Google is data mining the school emails of millions of students across the country for financial gain.”

Shear continues: “It does not appear that students, parents, and/or teachers have been informed and provided consent that would enable their digital interactions and the content sent and received on school contracted Gmail services to be utilised for advertising purposes.”

But others aren’t so concerned. Joel R Reidenberg, a law professor at Fordham University, told Education Week that the interpretation of Ferpa is “an open question, in part because the 40-year-old Ferpa does not adequately define what constitutes an educational record in an era in which a previously unthinkable amount of digital data about students proliferates.”

At stake is entry into the valuable education tech market, estimated to be worth $8bn by the SIIA (Software and Information Industry Association). Microsoft in particular stands to lose if Google services or its Chromebooks make significant inroads into the US educational market.

• Google: don’t expect privacy when sending to Gmail