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Court approves $9.5 million settlement over Facebook advertising feature

Introduced in November 2007, Beacon tracked a Facebook user’s activity across multiple third-party partner websites and posted the information online. 


Fidel Martinez

Internet Culture

The 9th U.S. Circuit Court of Appeals has approved a $9.5 million settlement in regards to Beacon, the much maligned Facebook advertising platform.

Introduced in November 2007, Beacon tracked a Facebook user’s activity across multiple third-party partner websites. That information would later be posted on a person’s Facebook profile in hopes of promoting brands to user’s friends. Beacon partners included Blockbuster and

The platform caused unrest amongst Facebook users, who were not comfortable with the fact that they were automatically enrolled in the program and had to opt out. Eventually, a class action lawsuit was filed and the social media giant discontinued Beacon for good in 2009.

In September 2012, the 9th U.S. Circuit Court of Appeals, led by Justice Richard Seeborg, approved a final settlement that would award $6 million to the Digital Trust Foundation— a proposed nonprofit that would “fund projects and initiatives that promote the cause of online privacy, safety, and security”— and $3 million in fees to the plaintiffs’ attorneys. The ruling was made despite opposition by nonprofit organization Public Citizen, who claimed that the settlement and its terms were insufficient.

Judge Procter Hug disagreed with the latter in his opinion.

“The question presented is 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. We hold that it did not.”

That decision was reaffirmed Tuesday when the Court denied a petition for an en banc rehearing, or a hearing in front every member of the 9th U.S. Circuit Court of Appeals instead of one presided by a small panel.

The Court’s Tuesday ruling was not unanimous. Judge Milan Smith, along with five other judges, argued that the Court’s decision to approve the settlement “created a significant loophole… that will confuse litigants and judges, while endorsing cy pres settlements that in no way benefit class members.”

Cy pres settlements are a form of restitution in which an award is given to charities that represent the interests of the class. Judge Smith argued that the Digital Trust Foundation did not accomplish this goal.

“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 controlled case law,” he wrote.

Smith’s opposition to the Digital Trust Foundation receiving the funds stems from the fact that they aim to educate users on how to better protect themselves online instead of addressing misconduct and abuse by companies like Facebook, which he claims is at the heart of the lawsuit.

“Instead, an appropriate cy pres recipient must be dedicated to protecting consumers from the precise wrongful conduct about which plaintiffs complain. … But an organization that focuses on protecting privacy solely through “user control” can never prevent unauthorized access or disclosure of private information where the alleged wrongdoer already has unfettered access to a user’s records,” Judge Smith opined.

“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 10 teaches Facebook users not to use Facebook. That seems unlikely.”

The decision to allow this settlement to stand contradicts a previous ruling by Judge Seeborg, the presiding Justice. In August 2012, Seeborg rejected a lawsuit settlement over Facebook’s Sponsored Stories because it took no measures to compensate members of the affected class.

Photo via Keith Burtis/Flickr

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