• by Wendy Davis  @wendyndavis, July 18, 2012

A federal appellate court agreed this week to decide whether two pay-per-click marketers who are suing Facebook should be allowed to proceed with a class-action lawsuit against the social networking service.

The marketers -- Fox Test Prep and Steven Price, who operates the car site DriveDownPrices.com -- are seeking to overturn U.S. District Court Judge Phyllis Hamilton's decision that the marketers aren't entitled to class-action status. Hamilton, a judge in the Northern District of California, ruled in April that the marketers hadn't shown that "common questions predominate" -- a necessary condition for class-actions. Her ruling allows the marketers to proceed individually, but doing so tends to be prohibitively expensive for small companies.

Federal appellate courts don't appear to have previously ruled on whether pay-per-click marketers can bring class-actions stemming from alleged overcharging.

Several trial judges have confronted that question, but have reached different conclusions.

Earlier this year, U.S. District Court Judge Edward Davila in the Northern District of California ruled that search marketers that sued Google about ads on parked domains and error pages -- which people tend to visit after mistyping a URL -- were not entitled to class-action status. Davila said in his ruling that class-action status wasn't appropriate because the marketers' cases required individualized evaluation.

But in 2009, U.S. District Court Judge Christina Snyder in the Central District of California allowed pay-per-click marketers to proceed in a click fraud lawsuit against IAC's Citysearch. That case was settled last year, according to court records.

The lawsuit against Facebook dates to 2009, when Price, Fox Test and other pay-per-click marketers sued the social networking service for allegedly charging them for invalid clicks. Two years ago, U.S. District Court Judge Jeremy Fogel in San Jose, Calif., decided that Facebook's contract with marketers disclaimed liability for clicks that were "fraudulent" in the sense that the clicker had dubious intentions.

But Fogel ruled that the disclaimer didn't apply to clicks that were "invalid" -- such as when technical problems prevented users from reaching a landing page.

In her ruling denying class-certification, Hamilton said that the marketers hadn't shown a "uniform method for distinguishing, on a classwide basis, between 'invalid' clicks and 'fraudulent' clicks."

In May, the marketers asked the 9th Circuit for permission to appeal Hamilton's order.