No Lift-Off to Facebook Settlement Objections

WASHINGTON (CN) - A settlement over Facebook's advertising program Beacon does not present an ideal vehicle to consider the fundamental concerns associated with cy pres awards in class actions, Supreme Court Chief Justice John Roberts said Monday.

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 and $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 Megan Marek and three other plaintiffs objected to the terms and took the issue to the 9th Circuit.

A divided three-judge panel affirmed last year, rejecting claims that $9.5 million is not enough and that Sparapani's place on the charity's board represents a conflict.

When the court voted against holding an en banc rehearing of the case, six judges joined a stinging dissent that warned about the dangerous precedent Facebook's settlement could establish, subjecting little scrutiny to cy pres awards that have few connections to the underlying issues of the case.

The objectors petitioned the Supreme Court for a petition of certiorari but were shot down Monday.

Chief Justice John Roberts penned a brief explanation to accompany the order.

"Grant­ing review of this case might not have afforded the court an opportunity to address more fundamental concerns surrounding the use of such remedies in class action liti­gation, including when, if ever, such relief should be con­sidered; how to assess its fairness as a general matter; whether new entities may be established as part of such relief; if not, how existing entities should be selected; what the respective roles of the judge and parties are in shaping a cy pres remedy; how closely the goals of any enlisted organization must correspond to the interests of the class; and so on," Roberts wrote. "This court has not previously addressed any of these issues. Cy pres remedies, however, are a growing feature of class action settlements. In a suitable case, this court may need to clarify the limits on the use of such remedies."

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