Appeals Court OKs Facebook’s Beacon Settlement

In yet another example of the blistering speed of the U.S. legal system, the $9.5 million settlement in a class-action lawsuit over Facebook’s now-defunct Beacon program, initially announced in March 2010, was finally approved by the Ninth U.S. Circuit Court of Appeals, and that decision wasn’t even unanimous.

Beacon was introduced by the social network in 2007, and it monitored and shared users’ non-Facebook online activity, such as purchases from Overstock.com or rentals from Blockbuster.

This settlement concerns a now defunct ad program called Beacon, which created controversy for gathering data on friends’ activity off of Facebook and sharing it with users on the social network. Users were automatically included unless they opted out.

According to Wired’s Threat Level blog, the lead plaintiff in the case, Sean Lane, had his bid to surprise his wife with jewelry foiled by this Beacon-generated Facebook post:

Sean Lane bought 14k White Gold 1/5 ct Diamond Eternity Flower Ring from overstock.com.

Threat Level reported that the three-judge panel could not reach a consensus, with Judge Andrew Kleinfeld, the one dissenting judge, writing:

I respectfully dissent. This settlement perverts the class action into a device for depriving victims of remedies for wrongs, while enriching both the wrongdoers and the lawyers purporting to represent the class.

Judge Proctor Hug wrote, joined by Judge William Fletcher, as reported by Threat Level:

That Facebook retained and will use its say in how cy pres funds will be distributed so as to ensure that the funds will not be used in a way that harms Facebook is the unremarkable result of the parties’ give-and-take negotiations, and the district court properly declined to undermine those negotiations by second-guessing the parties’ decision as part of its fairness review over the settlement agreement.

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.

According to Threat Level, attorneys involved in the case will receive some $3 million of the $9.5 million, and about $6 million goes toward the financing of a digital trust fund created to issue cy pres grants to organizations to study online privacy, meaning that only “a handful” of the 3.6 million members of the class-action suit will receive any financial damages at all.

According to the terms of the settlement, via Threat Level:

(The digital trust fund will) fund and sponsor programs designed to educate users, regulators, and enterprises regarding critical issues relating to protection of identity and personal information online through user control, and to protect users from online threats.

Readers: Do you think the Beacon settlement should have been approved?

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