LinkedIn Settles Class-Action Stemming From Data Breach

Social networking service LinkedIn has agreed to pay $1.25 million in order to settle a class-action lawsuit stemming from a 2012 data breach.

The proposed settlement, which was outlined in court papers filed last week, calls for LinkedIn to pay up to $50 to some of the users who purchased premium memberships to the service. The social networking company also promises that for the next five years, it will protect users' passwords by “salting” and “hashing” them.

“This settlement provides an extraordinary result,” lawyers for the plaintiffs say in a motion asking U.S. District Court Judge Edward Davila in San Jose, Calif. to approve the deal. “By providing significant direct cash to the class and valuable prospective relief, the instant settlement exceeds the majority of privacy settlements that have won preliminary and/or final approval.”

If it gets the OK, the settlement will resolve a class-action lawsuit brought by Virginia resident  Khalilah Gilmore-Wright, a paid LinkedIn subscriber. She alleged that she wouldn't have purchased a premium LinkedIn membership if she had known the company used “obsolete” security measures.

The litigation stems from an incident in 2012, when hackers obtained access to the company's servers and then posted 6.4 million users' passwords online.

The settlement terms provide that LinkedIn's paid users can submit a claim, but only if they declare that they read the privacy policy and were influenced by the company's statements about security. Between 2007 and 2012, LinkedIn garnered around 800,000 premium subscribers, who paid at least $19.95 a month for membership, according to court papers. But lawyers for Wright estimate that only 20,000 to 50,000 subscribers will be able to qualify for payments from the settlement fund.

The deal provides that any money that isn't distributed to class members will go to three three nonprofits: the Center for Democracy and Technology, World Privacy Forum and the Carnegie Mellon CyLab Usable Privacy and Security Laboratory.

News of the deal comes several months after lawyers for both sides met with a mediator.

Davila will hold a hearing in January about whether to grant the settlement preliminary approval.

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