• by Wendy Davis  @wendyndavis, November 21, 2011

A federal appellate court has rejected a deal calling for AOL to donate $110,000 to six groups, including the Boys and Girls Club of America, in order to settle class-action litigation about ads in emails.

In an opinion issued on Monday, the 9th Circuit Court of Appeals ruled that the organizations designated as recipients were inappropriate because they don't deal with Internet issues. The court sent the case back to the trial court for further proceedings.

“The parties should not have trouble selecting beneficiaries from any number of non-profit organizations that work to protect internet users from fraud, predation, and other forms of online malfeasance,” the 9th Circuit wrote. “If a suitable ... beneficiary cannot be located, the district court should consider escheating the funds to the United States Treasury,” the 9th Circuit ruled.

The settlement would have resolved two class-action lawsuits by members who complained that the ads were "annoying, confusing, intrusive and misleading” and that they violated a federal privacy law.

AOL began inserting ads in the email footers in 2006. Two years later, the company decided to allow paying subscribers to opt out of the ads; the following year, AOL changed its policy to allow everyone to opt out of the ads.

The agreement called on AOL to donate $110,000 to six charities: The Legal Aid Foundation for Los Angeles, the Federal Judicial Center Foundation, the Boys and Girls Club of America, New Roads School of Santa Monica, Oklahoma Indian Legal Services, and the Friars Foundation. (The latter three were chosen by the individual consumers who brought suit on behalf of the class.)

A trial judge approved the settlement over the objection of two AOL users. They appealed that decision and the 9th Circuit Court of Appeals sided with them, ruling that the charities named as recipients don't “have anything to do with the objectives of the underlying statutes on which Plaintiffs base their claims.”