The Ninth Circuit Court of Appeals recently affirmed the Northern District of California’s approval of the $9.5 million settlement in the Lane, et al. v. Facebook, Inc., et al. litigation. For those who are unfamiliar with the case, the plaintiffs filed a putative class action claiming that Facebook’s Beacon program was causing the publication of private, “outside” web activities on the class members’ personal Facebook pages. As described by Wikipedia:
Beacon was a part of Facebook‘s advertisement system that sent data from external websites to Facebook, for the purpose of allowing targeted advertisements and allowing users to share their activities with their friends. Certain activities on partner sites were published to a user’s News Feed. Beacon was launched on November 6, 2007 with 44 partner websites. The controversial service, which became the target of a class action lawsuit, was shut down in September 2009. Mark Zuckerberg, CEO of Facebook, said on the Facebook Blog in November 2011 that Beacon was a “mistake”.
On appeal, the issue was “whether the district court abused its discretion in approving the parties’ $9.5 million settlement agreement as “fair, reasonable, and adequate,” either because a Facebook employee sits on the board of the organization distributing cy pres funds or because the settlement amount was too low. In a 2-1 decision, the Court of Appeals concluded:
Ultimately, we find little in Objectors’ opposition to the settlement agreement beyond general dissatisfaction with the outcome. That dissatisfaction may very well be legitimate insofar as Objectors would have acted differently had they assumed the role of class representatives. But while Objectors may vigorously disagree with the class representatives’ decision not to hold out for more than $9.5 million or insist on a particular recipient of cy pres funds, that disagreement does not require a reviewing court to undo the settling parties’ private agreement. The district court properly limited its substantive review of that agreement as necessary to determine that it was “fair, adequate, and free from collusion.”
The trial court’s approval of the settlement was quite controversial. The lawyers took home more than $2 million in fees and the named class plaintiffs received between $1,000 and $10,000 (the total amount paid to the named class plaintiffs was $39,000). The remaining funds from the $9.5 million was earmarked for a new privacy foundation that would be chaired by three individuals chosen by Facebook and class counsel. Although more than 50,000 complained about Beacon, the “class” received nothing from the settlement.
In what could be characterized as a scathing dissent, Judge Kleinfeld concluded:
The majority approves ratification of a class action settlement in which class members get no compensation at all. 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.
Facebook deprived its users of their privacy. And now they are deprived of a remedy.
So, does this end the Beacon litigation? I haven’t heard any comments from appellate counsel but, given the comments–bordering on outrage–in the dissent, I would not be surprised if appellate counsel seeks en banc review. Time will tell (the case was originally filed in August 2008 and it is possible that we will see it continue well into 2013 and possibly beyond).