9th Circuit Won’t Upend Facebook Beacon Deal

     (CN) – Facebook users unhappy with the website’s advertising program, Beacon, will have to settle for $9.5 million, though most will not see one cent, the 9th Circuit ruled Thursday.
     Launched in 2007, Beacon aimed to let Facebook users tell their friends what else they were doing on the Internet, such as shopping on Overstock.com or booking trips through Hotwire.
     The program, which could be blocked only with affirmative consent from a user, eventually collapsed under the weight of privacy concerns and a class action.
     Some 3.6 million users belong to the class that settled with Facebook for $9.5 million in 2010. Of that amount, $3 million would to class counsel, $10,000 would go to lead plaintiff Sean Lean, and the other named representatives would collect between $1,000 to $5,000 each.
     In the larger cy pres portion of the agreement, Facebook agreed to support online privacy initiatives with the remaining $6.5 million by donating it to the Digital Trust Foundation (DTF).
     The settlement named Timothy Sparapani, Facebook’s public policy director and former counsel for the American Civil Liberties Union, to the charity’s board of directors. It also required Facebook to permanently shelve the offending program.
     U.S. District Judge Richard Seeborg approved the settlement in San Francisco, but four plaintiffs objected to the terms and took the issue to the 9th Circuit.
     A divided three-judge panel affirmed on Thursday, rejecting claims that $9.5 million is not enough and that Sparapani’s place on the charity’s board represents a conflict.
     “We find no substance in objectors’ claim that the presence of a Facebook employee on DTF’s board of directors categorically precludes DTF from serving as the entity that will distribute cy pres funds,” Judge Procter Hug wrote for the panel. “Here, in exchange for its promise to pay the plaintiff class approximately $9.5 million, Facebook insisted on preserving its role in the process of selecting the organizations that would receive a share of that substantial settlement fund by providing that one of its representatives would sit on DTF’s initial board of directors, and the plaintiffs readily agreed to this condition. That Facebook retained and will use its say in how cy pres funds will be distributed so as to ensure that the funds will not be used in a way that harms Facebook is the unremarkable result of the parties’ give-and-take negotiations, and the district court properly declined to undermine those negotiations by second-guessing the parties’ decision as part of its fairness review over the settlement agreement.”
     “A $9.5 million class recovery would be substantial under most circumstances,” Hug added, “and we see nothing about this particular settlement that undermines the district court’s conclusion that it was substantial in this case.”
     In a scathing dissent, Judge Andrew Kleinfeld argued that the settlement does nothing to help the victims in the case, but rather “enrich[es] both the wrongdoers and the lawyers purporting to represent the class.”
     “The majority approves ratification of a class action settlement in which class members get no compensation at all,” he wrote. “They do not get one cent. They do not get even an injunction against Facebook doing exactly the same thing to them again. Their purported lawyers get millions of dollars. Facebook gets a bar against any claims any of them might make for breach of their privacy rights. 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.”

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