Facebook's $20 Million Privacy Settlement Clears Appeals Court

The objectors, led by Massachusetts lawyer John Pentz, landed their argument with Judge Carlos Bea, who authored a seven-page dissent calling the cy pres award arbitrary. Bea said the district court could have increased the payout to claimants instead of providing “a huge windfall” to the designated nonprofits.

“I would not undo the entire agreement,” he wrote. “Instead I would vacate the district court's decision and remand with instructions to set a per-claimant distribution that would exhaust the net settlement fund.”

Bea also wrote that he would have granted legal fees to objector Sam Kazman, general counsel of the Competitive Enterprise Institute, who successfully petitioned to reduce the fees awarded to class counsel. Seeborg should have considered objector Kazman's billing records, Bea asserted, before dismissing his fee request as de minimis.

Facebook was represented by attorneys from Cooley and Munger, Tolles & Olson in the appellate litigation. Counsel referred requests for comment to Facebook, which issued a one-sentence response: “We are pleased with the court's ruling.”

In 2011, plaintiffs challenged Facebook's Sponsored Stories feature for publicizing users' “likes” of advertisers without any compensation or method to opt out.

Ruling on a set of objections raised by attorneys for underage Facebook users, the panel concluded that the settlement “does not clearly authorize continued violations of” privacy laws by allowing the site to continue using kids' names and images in advertising.

Under the 2013 agreement, Facebook made changes to its terms and conditions that, despite the elimination of Sponsored Stories in 2014, still allow the company to use kids' actions on the social network in advertising unless a parent objects.

“It is not clear whether Facebook's use of minors' names and likenesses in Sponsored Stories violated California law,” the panel wrote. “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.”

Scott Michaelman, an attorney with the Public Citizen Litigation Group in Washington, DC, who represents parents of teenage class members, said his group was dismayed.

“We're disappointed that the court approved the settlement that allows Facebook to continue violating the laws in seven states that require parental consent,” Michaelman said.

Cheryl Miller writes for The Recorder, the San Francisco-based ALM sibling of Internet Law & Strategy. She can be reached at [email protected].