Friday, September 21, 2012
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Ninth Circuit Approves Settlement of Class Action Charging Facebook With Invasion of Privacy
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday upheld a $9.5-million settlement of a class action charging Facebook, Inc. with invading users’ privacy by publicizing purchases they made on various websites. The panel ruled, 2-1, that U.S. District Judge Richard Seeborg of the Northern District of California did not abuse his discretion in approving the settlement over objections that it gave nothing to those whose privacy was invaded and too much to lawyers.
Under Facebook’s “Beacon” program, discontinued in November 2009 while the suit was in mediation, the social networking giant contracted with online retailers to disclose to Facebook the transactions of Facebook users, which were then appeared on the Facebook Wall of the purchaser and on to their friends’ feeds.
Facebook initially required users who did not want to be part of Beacon to opt out, then agreed to limit it to those who opted in, before finally agreeing to get rid of it altogether.
The plaintiffs claimed that the disclosure of their transactions caused them embarrassment and ridicule. One plaintiff explained that he had purchased a ring from Overstock.com as a Christmas gift from his wife, but Facebook spoiled the surprise by disclosing it to 700 of his friends before the holiday.
Settlement Terms
The settlement requires Facebook to pay more than $3 million in attorney fees, court costs, and administrative expenses, with the remainder of the money to be used to fund education about online privacy issues. This cy pres portion of the settlement is being administered by a new entity called the Digital Trust Fund, whose board consists of Chris Jay Hoofnagle, who heads the Berkeley Center for Law & Technology; Tim Sparapani, Facebook’s public policy director; and writer Larry Magid.
Seeborg agreed that the cy pres provision was appropriate given that the class consists of more than 3.663 million members, few of whom opted out or objected. He also rejected objections that Sparapani’s presence on the board of the DTF rendered the settlement unfair, and that the notice of the proposed settlement should have disclosed his Facebook affiliation, rather than identifying him merely by name.
The objectors, represented by Washington, D.C.-based Public Citizen, called the settlement a sweetheart deal for Facebook, but Ninth Circuit Senior Judge Procter Hug Jr., joined by Judge William A. Fletcher, said the approval fell within the district judge’s broad authority to find the deal “fair, reasonable, and adequate.”
Hug wrote:
“A $9.5 million class recovery would be substantial under most circumstances, and we see nothing about this particular settlement that undermines the district court’s conclusion that it was substantial in this case.”
Video Privacy Act
The judge tossed aside the objector’s complaint that the lack of a financial recovery for any of the class members was unfair, particularly since a number of them—those whose video rentals had been disclosed—would have been entitled to $2,500 each in statutory damages for violation of the Video Privacy Protection Act.
“Objectors are no doubt correct that the VPPA claims of some class members might prove valuable if successful at trial, but that does not cast doubt on the district court’s conclusion as to the fairness and adequacy of the overall settlement amount to the class as a whole,” Hug wrote. “It is an inherent feature of the class-action device that individual class members will often claim differing amounts of damages....But a class action settlement necessarily reflects the parties’ pre-trial assessment as to the potential recovery of the entire class, with all of its class members’ varying claims. So even if some of the class members in this case would have successful claims for $2,500 in statutory damages under the VPPA, those individuals represent, to use the candid phrasing of Objectors, ‘only a fraction of the 3.6 million-person class.’ Their presence does not in itself render the settlement unfair or the $9.5 million recovery among all class members too low.”
Senior Judge Andrew Kleinfeld dissented.
“The most we could say for the cy pres award is that in exchange for giving up any claims they may have, the exposed Facebook users get the satisfaction of contributing to a charity to be funded by Facebook, partially controlled by Facebook, and advised by a legal team consisting of Facebook’s counsel and their own purported counsel whom they did not hire and have never met.
Facebook deprived its users of their privacy. And now they are deprived of a remedy.”
The case is McCall v. Facebook, Inc., 10-16380.
Copyright 2012, Metropolitan News Company