Facebook To Donate $10M To Groups, $10M To Attorneys, But Nothing To Users, In Sponsored Stories Settlement

by Wendy Davis, Jun 21, 2012, 6:34 PM

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Earlier this week, it emerged that Facebook agreed to give users more control over sponsored stories, and to pay $10 million to various organizations, in order to settle a class-action lawsuit.

Now, new court papers filed on Thursday provide more details. For one thing, Facebook will develop "a mechanism that will allow users to see and control which actions they have taken that have led to their being featured in sponsored stories ads."

While there's room for interpretation, this statement indicates that users will be able to avoid appearing in at least some sponsored stories. If so, that marks a big change for Facebook, which doesn't now allow people to opt out of sponsored stories ads.

But the vague wording could mean that Facebook only plans to make it easier for people to cancel a decision to "like" particular brands -- which would then remove those users from future ads for the brand. While that might give users more control, it isn't the same as letting them "like" a company and still opt out of ads for it.

The lawsuit itself alleges that sponsored stories violate a California law that gives consumers the right to control the commercial use of their names and images.

The newest court papers also reveal that the social networking service agreed to pay a total of $20 million to settle the case. Half of the money will go to various organizations and law schools, while $10 million will go to the lawyers who brought the case.

Facebook users themselves won't get a dime, except for three people who served as class representatives; they'll each get $12,500.

Lawyers who win a class-action typically are awarded attorneys' fees, but the amount here is higher than in other recent privacy lawsuits. In the Beacon litigation, Facebook agreed to pay around $9.5 million total, of which around $3 million will go to the lawyers. (The 9th Circuit Court of Appeals is still considering whether that settlement is appropriate.) Google also settled a class-action lawsuit about the launch of Buzz by agreeing to pay $8.5 million, with around $2.5 million going to the plaintiffs' lawyers. And Netflix recently agreed to a $9 million settlement of a privacy lawsuit, with $2.5 million set aside for attorneys' fees.

The proposed sponsored-stories settlement comes at a time when courts are increasingly scrutinizing deals that provide for large attorneys' fees. In one recent case, the 9th Circuit rejected a tentative settlement involving Motorola. Consumers in that lawsuit alleged that Motorola didn't disclose the risk of hearing loss posed by Bluetooth headsets. The proposed settlement called for Motorola to donate $100,000 to various health-related organizations, and pay $800,000 to the attorneys who filed suit.

U.S. District Court Judge Lucy Koh in San Jose, Calif. will hold a hearing in July about whether to grant the settlement preliminary approval

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