Facebook Privacy Settlement Moves Forward

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A federal judge in California has given preliminary approval to Facebook's settlement of a class-action lawsuit stemming from the ill-fated Beacon ad program, which told members about their friends' e-commerce activity.

U.S. Magistrate Judge Richard Seeborg in San Jose also rejected an attempt to intervene in the case by consumers who are pursuing two other Beacon-related lawsuits in Texas. Seeborg ruled on Friday that the motion to intervene -- filed more than one year after the lawsuit was brought -- was untimely.

But the litigation remains messy procedurally because some consumers in Texas are attempting to pursue their own class-action lawsuits against Facebook and Blockbuster, which participated in the Beacon program. If the settlement in California is approved, the Texas lawsuits could be dismissed -- even though the Texas lawsuit against Blockbuster was filed in April of 2008 and the California case wasn't brought until that August.

The California agreement, entered into last month, calls for Facebook to shutter Beacon permanently and to pay $9.5 million, approximately two-thirds of which will fund a new privacy foundation. The individual consumers named in the complaint would receive damages ranging from $1,000 to $15,000, and their lawyers would be eligible to receive up to one-third of the settlement fund.

But the Texas consumers might be entitled to at least $2,500 each if their lawsuit proceeds. That's because a federal law, the Video Privacy Protection Act, specifically protects the confidentiality of movie rental records and provides for up to $2,500 in damages. The consumers in that case appeared to have won a significant victory earlier this year, when a federal judge in Dallas ruled that the case could proceed in court, even though Blockbuster's contract with users calls for disputes to be heard by an arbitrator.

The judge ruled that that Blockbuster's contract with users was "illusory" because the agreement said that the movie rental store could change the terms and conditions at any time. Blockbuster appealed that ruling and the case is currently pending in the Fifth Circuit Court of Appeals.

Earlier this month, the same consumers who sued Blockbuster also filed a lawsuit against Facebook in Texas.

At this point, it's not clear whether the judge presiding over the California case will grant final approval to the settlement as it currently stands. But the judge specifically told the lawyers to address whether the final agreement should cover Facebook members who might have claims under the Video Privacy Protection Act. The judge also set a Feb. 1 deadline for Facebook members affected by Beacon to object to the proposed settlement.

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