Friday, January 8, 2016
Ninth Circuit Rejects Objections to $20 Million Settlement
Facebook to Pay Claimants Whose Photos, Names Were Used in Advertising
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals has affirmed the settlement of a class action under which Facebook will pay out $20 million, to be disbursed among users whose names and faces were used in its “sponsored story” ads without their consent.
Under its practice, ended in 2014, if a Facebook user designated someone as a “friend,” and that friend interacted with a commercial website, the sponsor of that website could cause the favorable posting to be relayed to the user, with a small likeness and identification of the “friend” included.
The accord provides that attorneys for the class will receive $7.5 million, plus costs, the named plaintiffs will divide $37,500, and the class members—numbering nearly 615,000—will be paid $15 each.
On Wednesday, the panel—comprised of Judges William A. Fletcher, Marsha S. Berzon, and Carlos Tiburcio Bea—treated the case, which has attracted national attention, as a ho-hum matter, rebuffing protests to the settlement in a short “memorandum disposition” (unpublished opinion). Bea filed a dissenting opinion in which he said that he agreed with “most of the majority’s disposition of this case.”
California Statute Invoked
Objectors insisted that each class member should receive the full statutory penalty set forth in California Civil Code §3344 for unauthorized use of person’s name or likeness.
That section provides that “the person who violated the section shall be liable to the injured party or parties in an amount equal to the greater of seven hundred fifty dollars ($750) or the actual damages suffered by him or her as a result of the unauthorized use….”
The panel responded:
“The monetary award of $15 was reasonable in light of the minimal (if any) harm suffered by the plaintiffs. Furthermore, an award of $750 per claiming class member could implicate due process concerns.”
Under the settlement, Facebook agreed to make clear in its “Statement of Rights and Responsibilities”—to which users must assent—the extent of their agreement to Facebook’s display of their names and likenesses in its ads. It must also enable users to block certain content from being displayed, and restrict use of names and likenesses of minors.
The objectors asserted that these provisions did too little, and that the settlement actually authorizes continued breaches of California law.
The federal appeals court responded:
“When approving a settlement, a district court should avoid reaching the merits of the underlying dispute….As a result, a district court abuses its discretion in approving a settlement only if the agreement sanctions ‘clearly illegal’ conduct….It is not clear whether Facebook’s use of minors’ names and likenesses in Sponsored Stories violated California law….It is also not clear whether the settlement at issue—which provides more protection for minors from Facebook’s advertising practices than existed before—violates state law. The district court did not abuse its discretion in approving the settlement in the face of this uncertainty.”
The court found the $7.5 million attorney fee award reasonable, saying:
“The district court properly exercised its discretion to use a percentage of-recovery approach…and awarded an amount (25% of the net settlement funds) which matches exactly this Court’s established benchmark rate.”
The opinion did not elaborate on the calculations.
Where Bea parted company with his colleagues was over their approval of unclaimed funds going to specified consumer protection groups and their affirmance of the District Court’s denial of attorney fees and an into one of the objectors, Sam Kaman.
Cy Pres Doctrine
With respect to disposal of unclaimed funds under the cy press doctrine, the opinion said:
“We have previously approved of class actions settlements incorporating cy pres distribution of unclaimed funds, as long as an appropriate nexus existed between the issues underlying the case and the cy pres recipients….The district court did not err in finding that an appropriate nexus existed here. As the district court found, ‘[t]he recipient organizations focus on consumer protection, research, education regarding online privacy, the safe use of social media, and the protection of minors—the very issues raised in plaintiffs’ complaint.’ ”
“It is… eminently feasible to distribute the bulk of the net settlement fund to the claiming class members; indeed, when it gave final approval to the settlement, the district court increased the per-claimant distribution from $10 to $15, as it was allowed to do under the settlement agreement.”
There were fewer claimants than anticipated.
“I see no reason why the district court could not have further increased the per-claimant distribution to avoid giving a huge windfall to the charities identified as cy pres recipients,” he remarked.
Fees, Incentive Award
As Fletcher and Berzon saw it:
“The record does not support Kazman’s contention that he contributed to the district court’s decision to award class counsel attorney’s fees in an amount lower than requested. The district court was concerned with the excessiveness of the requested attorney’s fees long before Kazman became involved. Kazman was also not entitled to attorney’s fees for arguing that class counsel’s attorney’s fees should be calculated as a percentage of net (rather than gross) recovery because, as the district court found, the associated reasonable fee for preparing this argument was de minimis.”
“Kazman cites little authority for the proposition that objectors are entitled to incentive awards. Even if objectors are occasionally entitled to incentive awards, there is no evidence that Kazman personally provided any ‘service to the class.’ ”
Bea insisted that Kazman’s objection “undeniably produced a material benefit for the class.”
The case is Batman v. Facebook, Inc., 13-16819.
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