• by Wendy Davis  @wendyndavis, February 16, 2010

Splitting with some other consumer watchdogs, the Center for Democracy & Technology is backing a proposed $9.5 million settlement of a class-action lawsuit stemming from Facebook's Beacon debacle. In addition, a group of consumers in Texas who initially attempted to intervene in the case have reversed course and no longer oppose the settlement.

The proposed resolution calls for Facebook to fund a new privacy think tank that will support programs aimed at educating users, regulators and enterprises about privacy. Facebook director of public policy Tim Sparapani, Berkeley Center for Law and Technology's Chris Hoofnagle and journalist and Web safety advocate Larry Magid will serve as the initial directors.

The Center for Democracy & Technology argues that the three board members are "outstanding choices" whose selection should quell any concerns about Facebook's potential influence over the foundation. "Hoofnagle and Magid are well-known privacy advocates and are absolutely unimpeachable in their independence and their dedication to and experience in protecting consumer privacy online," the group argues in a letter filed with U.S. District Court Judge Richard Seeborg in federal district court in San Jose.

The Beacon program, launched in 2007, told Facebook members about their friends' activity at outside retailers, like Zappos and Blockbuster. It initially operated by default, but Facebook later changed the platform to opt-in.

In November of 2008, a group of 19 consumers filed a privacy lawsuit in federal district court in San Jose against Facebook and its Beacon partners. The proposed settlement, arrived at last year, calls for Facebook to pay damages ranging from $1,000 to $15,000 to those 19 people, but no one else would receive any monetary awards. The deal also requires Facebook to permanently shutter Beacon.

Earlier this year, EPIC and other privacy groups argued that the settlement should be rejected on the ground that Facebook will have too much control over the new foundation. The organizations also questioned whether the settlement was fair, given that Facebook theoretically could have been liable for nearly $1 billion just for allegedly violating the federal Video Privacy Protection Act. That statute prohibits companies from sharing information about people's movie rentals without their consent and provides for damages of up to $2,500 per violation.

In addition to the lawsuit filed in San Jose, three consumers filed suit against Blockbuster in federal district court in Texas. Those Facebook users initially opposed the potential settlement in San Jose, but recently settled with Blockbuster for around $50,000 total. Court documents show that those consumers will receive $22,500, while their lawyers receive $27,500. On Monday, the Texas consumers' lawsuit against Blockbuster was dismissed.