Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Monday, May 20, 2024 | Back issues
Courthouse News Service Courthouse News Service

Embers of Facebook Case Spark Harsh Dissent

(CN) - Six judges balked Tuesday at the 9th Circuit's refusal to revisit a $9.5 million settlement of privacy claims over the failed Facebook advertising program, Beacon.

Judge Milan Smith's dissent, joined by five members of the court, questioned the 2010 settlement's cy pres award of $6.5 million to the Digital Trust Foundation (DTF), a charity partly controlled by Facebook.

The DTF's stated purpose of teaching users how to protect their online privacy has nothing to do with the settled claims, according to the dissent.

"Instead, they relate to misconduct by Internet companies that wrongfully expose private information in ways that even educated users cannot anticipate, prevent, or direct," Smith wrote (emphasis in original).

"The DTF can teach Facebook users how to create strong passwords, tinker with their privacy settings, and generally be more cautious online, but it can't teach users how to protect themselves from Facebook's deliberate misconduct," he added. "Unless of course it teaches Facebook users not to use Facebook."

Launched in 2007, Beacon was supposed 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. Floundering in a wave of privacy concerns that the move generated, Facebook eventually scratched the idea.

It settled with a class of about 3.6 million users in 2010, and U.S. District Judge Richard Seeborg approved its $9.5 million offer, but four plaintiffs objected to the terms and took the issue to the 9th Circuit.

They complained that the bulk of the settlement, $6.5 million, would fund the DTF, with the rest going mostly to attorneys.

The settlement named Timothy Sparapani, Facebook's public policy director and a former American Civil Liberties Union lawyer, to the charity's board of directors. It also required Facebook to permanently shelve the offending program.

A three-judge panel of the 9th Circuit affirmed the settlement in 2012.

In a dissent to the three-judge panel ruling, Judge Andrew Kleinfeld wrote: "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."

Smith warned that the settlement could establish a dangerous precedent in which cy pres awards are subjected to little scrutiny, are settled on vague grounds and have few connections to the underlying issues of the case.

"That the DTF is committed to funding 'programs' regarding 'critical issues' nothing about whether class members will truly benefit from this settlement; it simply promises that DTF will do some 'stuff' regarding some more 'critical stuff,'" Smith wrote. "If fashioning an open-ended, one-sentence mission statement is all it takes to earn cy pres settlement approval in our court, we have completely eviscerated the meaning of our previously controlling case law."

Judge Kleinfeld voted to rehear the case before a full, 11-judge panel, but was in the minority. He did not join Smith's dissent. Joining Smith were Chief Judge Alex Kozinski and Judges Diarmuid O'Scannlain, Jay Bybee, Carlos Bea and Sandra Ikuta. The two-member majority of the three-judge panel, Judges Proctor Hug and William Fletcher, voted to deny rehearing.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.