• by Wendy Davis  @wendyndavis, October 15, 2010

A Facebook user and privacy advocate who objected to the $9.5 million Beacon settlement is asking an appellate court to vacate the deal on the grounds that it doesn't adequately compensate users.

In papers filed with the 9th Circuit Court of Appeals on Thursday, Ginger McCall argues that the deal's benefits are "deficient and illusory."

The settlement requires Facebook to pay $6 million to launch a new privacy foundation, to be directed by a three-person board that includes Facebook's Director of Public Policy, Tim Sparapani. McCall argues that this arrangement is inappropriate because it "presents an unacceptable risk that the organization will avoid taking actions that run counter to Facebook's interests."

In addition, McCall argues that the notification sent to Facebook members about the settlement did not give people sufficient information to enable them to decide whether to oppose it. "Most problematic is the notice's failure to mention that Facebook's chief lobbyist would be a director and co-president of the foundation," she argues in the appellate brief. "Although the foundation's Articles of Incorporation includes the identities of the foundation's directors and officers, it was first posted on the settlement website on January 25, 2010, one week prior to the February 1 opt-out deadline."

Facebook also agreed to permanently shutter Beacon as part of the settlement, but McCall argues that the social networking service had already effectively ceased to use Beacon -- a marketing program launched in 2007 that informed members about their friends' e-commerce activity on outside sites, including Blockbuster.com.

McCall further alleges that the resolution is inadequate because it doesn't provide users with monetary compensation, except for the 19 people who were named in the complaint and will receive amounts ranging from $1,000 to $15,000. McCall argues that some consumers -- herself included -- are potentially entitled to monetary damages on the theory that Facebook violated the federal Video Privacy Protection Act when it shared information about people's activity on Blockbuster.com. The federal video privacy law prohibits companies from disclosing information about people's movie rentals and provides for damages of $2,500 per violation.

U.S. District Court Judge Richard Seeborg rejected arguments by McCall and other objectors in March, when he approved the settlement.

McCall, herself a lawyer with the Electronic Privacy Information Center, filed an appeal. She is represented by outside attorneys including Public Citizen (which is representing MediaPost in an unrelated matter.)

Internet law expert Venkat Balasubramani says the 9th Circuit probably will focus on procedural issues, like whether Seeborg considered appropriate factors in approving the settlement, as opposed to whether the deal is a good one. "The brief raised a number of arguments that resonated, but ultimately, the appeals court is going to look at factors like whether the judge abused his discretion," he says.

Facebook did not respond to Online Media Daily's request for comment.