Objectors Attack Facebook Privacy Settlement

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U.S. District Judge Richard Seeborg, Northern District of California
U.S. District Judge Richard Seeborg, Northern District of California

SAN FRANCISCO — A Facebook privacy class action that a judge once said might be too big to settle is being attacked on appeal for providing "only" $20 million in relief.

Massachusetts attorney John Pentz is asking the U.S. Court of Appeals for the Ninth Circuit to throw out the deal, which provides $15 to each user who filed a claim over Facebook Inc.'s "sponsored stories" feature. That pales against the $750 in statutory damages for each violation, Pentz says, and U.S. District Judge Richard Seeborg compounded the problem by steering several million dollars more in a cy pres award to 14 nonprofit organizations.

"The appropriate remedy for a failed action is dismissal, not the approval of a nuisance value settlement that enriches the lawyers and charities, but provides little for the class members," Pentz wrote in a brief filed Monday in Fraley v. Facebook.

Seeborg acknowledged the issue when he approved the settlement in August. "The challenge, given the size of the class, is that even a modest per-class member payment could easily require a total settlement fund in the billions of dollars," Seeborg wrote. "This raises the specter of whether some class actions are simply too big to settle."

But Seeborg said it was "far from clear" that Facebook users were harmed by sponsored stories, which publicized users' "likes" of advertisers without compensation. So he approved a deal under which some 800,000 users will received $15 each, a group of consumer protection nonprofits will receive $4 million, and class counsel led by The Arns Law Firm and Jonathan Jaffe Law get about $5 million.

On Monday, Pentz argued that the settlement represents only about 13 cents per eligible Facebook user. "Class counsel pled a case that could never be proved, with no theory of damages other than statutory damages of $112 billion," Pentz wrote. Instead of signing off, Seeborg should have "forced the plaintiffs to litigate this case to the point where either liability is established ... or the defendant obtains a judgment in its favor."

Cy pres awards should only be used when it's infeasible to direct money to class members, Pentz added. In this case, the several million dollars directed to nonprofits could have been used to increase payouts to $19 per claimant.

The cy pres issue could get close scrutiny at the Ninth Circuit, where six judges dissented from a similar Facebook privacy settlement last year. The Supreme Court denied review, but Chief Justice John Roberts wrote that the court is on the lookout for a case to determine "when, if ever, such relief should be considered."

Munger, Tolles & Olson, which joined Facebook's team before the Supreme Court in that case, is representing Facebook before the Ninth Circuit along with Cooley.

Contact the reporter at sgraham@alm.com.

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