• by Wendy Davis , Staff Writer @wendyndavis, July 12, 2012

The "sponsored stories" lawsuit against Facebook has been transferred to U.S. District Court Judge Richard Seeborg, who now must decide whether to allow a controversial proposed settlement to move forward.

If approved, the deal would resolve a class-action lawsuit alleging that sponsored stories -- an ad program that publicizes users' likes to their friends -- violates  a California law giving consumers the right to control the use of their names and images in endorsements. That law also says that minors' images can't be used in endorsements without their parents' permission.

The proposed settlement calls for Facebook to shell out $10 million to various advocacy organizations and law schools and $10 million to lawyers who sued the company on behalf of users. The agreement also requires Facebook to give users more control over sponsored stories -- though how much isn't clear.

Facebook said in court papers that it 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."

That vague wording indicates that Facebook plans to connect the dots for users by explaining why they appeared in certain ads, and instructing them about how to opt out of future ads by "unliking" particular companies. That might effectively give users more control, but it's hardly the same as letting them "like" a company yet also opt out of appearing in ads.

At this point, it's not certain that the settlement will garner court approval -- especially because several organizations have filed papers opposing the deal. Yesterday, the Center for Digital Democracy sent a letter to the court arguing that the settlement won't go far enough to protect users.

The University of San Diego School of Law's Center for Public Interest Law also filed objections to the settlement yesterday. That group says that whatever notifications or controls Facebook intends to give users won't be adequate -- especially for teens. "The proposed settlement’s warnings and notices are textbook adhesive fig leaves. They do nothing for the thirteen-year-old who is striving to assert her independence yet is still simply too young to grasp the reach of her digital citizenship – a reach that could tarnish her reputation for years to come through a few thoughtless clicks of a mouse," the group say in court papers.

The Center for Public Interest Law also questions the portion of the deal awarding $10 million to attorneys. "It seems doubtful that plaintiffs’ counsel, in one year, worked this case to point of earning $10 million to procure a settlement," the group writes.

U.S. District Court Judge Lucy Koh removed herself from the case yesterday. She didn't give a reason, but one factor could be that her husband is a professor at Stanford -- which is slated to receive $600,000 from Facebook, should the deal go through.

It's way too early to know what Seeborg will make of the objections to the settlement. But it's worth noting that he previously approved a separate, equally controversial class-action settlement stemming from Facebook's Beacon program, which told users about their friends' e-commerce activity.

In that case, Seeborg okayed a deal that involved Facebook paying more than $6 million to create a new privacy organization -- which it would largely control -- and more than $2 million to the class-action lawyers who brought the lawsuit.

Seeborg approved that deal despite objections raised by Ginger McCall -- a privacy advocate with the Electronic Privacy Information Center as well as a Facebook user.  McCall said the settlement wasn't appropriate because it gave Facebook too much power over the new organization, and because users such as herself wouldn't receive any monetary compensation.

She appealed to the 9th Circuit, which is still considering the case.