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Ninth Circuit Affirms Facebook Cy Pres Settlement

By Robyn Hagan Cain on September 21, 2012 4:30 PM

A split Ninth Circuit panel upheld a $9.5 million privacy class action settlement with Facebook on Thursday. The settlement gives no money to Facebook users, $2.36 million to the plaintiffs' lawyers, and $6 million to a newly established charity promoting online privacy, reports Thomson Reuters News & Insight.

The question in this appeal was whether the district court abused its discretion in approving the $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.

The Ninth Circuit Court of Appeals concluded that there was not an abuse of discretion.

The settlement agreement resolved a putative class action lawsuit involving a Facebook program called "Beacon." Facebook described the purpose of the Beacon program as allowing its members to share with friends information about what they were doing elsewhere on the Internet. Members complained that Beacon was causing publication of otherwise private information about their outside web activities to their personal profiles without their knowledge or approval.

Facebook responded to these by releasing a privacy control to allow members to opt out of the Beacon program fully. Unsatisfied with these responses, a group of 19 plaintiffs filed a putative class action in federal court.

This isn't Facebook's only cy pres settlement of the year. In May, Facebook settled a claim with California residents over the company's "Sponsored Stories." The plaintiffs challenged the posts, arguing that using a person's image to promote a product without the person's consent violates the state's right of publicity laws. The Sponsored Stories settlement required Facebook to pay the plaintiffs' attorneys fees and $10 million cy pres to charity.

U.S. District Judge Richard Seeborg of San Francisco rejected that settlement in August, Wired reports. Thursday's Ninth Circuit ruling could mean that the sponsored stories cy pres deal will be revived.

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