• by Wendy Davis  @wendyndavis, September 6, 2011

Facebook users who object to the $9.5 million settlement of litigation resulting from the Beacon ad initiative might have gotten a boost from a new appellate court decision about class-action cases.

The 9th Circuit Court of Appeals last month scuttled a settlement of class-action litigation against Motorola stemming from allegations that the company did not disclose the risk of hearing loss posed by Bluetooth headsets. That deal would have required Motorola to donate $100,000 to various health-related organizations, while the attorneys who sued would have received $800,000.

Now Ginger McCall, a Facebook user as well as an attorney with the Electronic Privacy Information Center, argues that the reasoning in the Bluetooth case supports her contention that the Beacon settlement should also be vacated.

Represented by the advocacy group Public Citizen, McCall filed papers with the 9th Circuit late last month calling attention to the recent decision in the Motorola litigation. Specifically, she pointed to a passage of the opinion stating that trial judges weighing class-action settlements should be "particularly vigilant for subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations."

The appellate court added that one sign is "when the class receives no monetary distribution but class counsel are amply rewarded."

That factor could prove important because the Facebook settlement calls for the company to pay more than $6 million to launch a new privacy foundation, and for the lawyers who sued to split around $2.3 million. But it does not provide for monetary damages to regular users (except for the 19 individuals who brought the case).

Critics like McCall are particularly unhappy with the new privacy foundation because it will be directed by a three-person board that includes Facebook's director of public policy Tim Sparapani. McCall and others argued against the deal last year, but U.S. District Court Judge Richard Seeborg approved the settlement despite the objections.

McCall and other critics appealed to the 9th Circuit, which is slated to hear arguments next month.

The ill-fated Beacon marketing program, launched in 2007, informed Facebook users about their friends' e-commerce activities on outside sites, like Blockbuster.com, Overstock and Zappos. Facebook launched the initiative on an opt-out basis, meaning that information about users' purchases at outside sites was shared with those users' friends by default.

Around one month after Beacon's launch, Facebook revamped the program so that it would not share information unless users explicitly opted in.