Facebook’s $9.5 mln Class-action Settlement has No Money for Class Members

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In spite of loud objections from at least six judges, the 9^th U.S. Circuit Court of Appeals has upheld the approval of a $9.5 million settlement by Facebook where class members would receive no money. The 9th Circuit has 28 judges, and without a majority agreeing, an en banc review is not possible.

A group of Facebook users brought the lawsuit over data access violations by Facebook’s now defunct “Beacon” advertising system. In the lawsuit, which was filed in 2008, Facebook settled and agreed to pay $9.5 million, but asserting that $2.3 million would go to attorneys’ fees and the rest would go to fund a new charity that would focus on digital privacy, following the cy pres doctrine.

The deal, which was approved by a Northern California federal judge, was upheld by a three-judge panel of the 9^th Circuit, last year. However, senior 9^th Circuit Judge Andrew Kleinfeld dissenting.

  

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In a reenactment of the former process, on Tuesday, the 9^th Circuit issued an order holding that it would not reconsider the former ruling before an 11-judge panel. The order was issued in spite of six judges signing a dissent to the denial of review.

Writing in dissent, 9^th Circuit Judge Milan Smith observed about the Digital Trust Foundation created by the settlement (which has no record of service) that it was unfit to remedy the specific issues raised by the lawsuit. Smith observed, “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 … unless of course the DTF teaches Facebook users not to use Facebook. That seems unlikely.”

Facebook is rather happy with the decision and Andrew Noyes, the Facebook spokesman said that DTF “will fund worthy projects that will help protect and improve Internet users’ privacy, safety and security.”

The case is Lane v. Facebook Inc, 9th U.S. Circuit Court of Appeals, No. 10-16380