Facebook User Wants The Supreme Court To Nix Beacon Settlement

It's been nearly six years since Facebook's first foray into social advertising: the disastrous 2007 Beacon program. The company has made significant revisions to all of its services since then, but the legal fallout from Beacon hasn't ended yet. In fact, the next stop could be the Supreme Court, if some critics of Facebook get their way.

The Beacon program infamously shared information about Facebook users' ecommerce activity at outside sites -- like Zappos and Overstock -- with their friends. The program, which was launched on an opt-out basis, blindsided many users. That's more than understandable, given that ecommerce sites had always kept purchase information confidential in the past.

A group of users brought a class-action lawsuit against Facebook, which eventually agreed to pay $9.5 million to resolve the case.

But the settlement itself is so problematic that litigation about it is still underway. In the latest development, today a user represented by the Center for Class Action Fairness (and the law firm BakerHostetler) asked the Supreme Court to consider whether the settlement should stand.

The settlement calls for Facebook to pay around $6.5 million to create a new privacy organization, the Digital Trust Foundation. The foundation will be directed by a three-person board -- and Facebook will play a key role in selecting those people. (One of the board members was supposed to be Facebook's former public policy director, Tim Sparapani, but he left the company before the foundation was created.) The lawyers who brought the case on behalf of the consumers -- including New York attorney Scott Kamber and Texas lawyer Joseph Malley -- stand to receive around $2.3 million.

The terms didn't sit well with everyone. Some critics went to court and asked that the deal be rejected, arguing that Facebook shouldn't be able to resolve a lawsuit by creating a new nonprofit, which it will largely control.

Despite the objections, U.S. District Court Judge Richard Seeborg in the Northern District of California approved the settlement. Critics appealed to the 9th Circuit, which also gave the go-ahead -- though over the dissent of Senior Circuit Judge Andrew Kleinfeld. He wrote that the deal "perverts the class action into a device for depriving victims of remedies for wrongs, while enriching both the wrongdoers and the lawyers purporting to represent the class."

The Center for Class Action Fairness makes those points in its petition to the Supreme Court. “A $9.5 million class action settlement that awards absentee class members no relief at all -- no money, no guarantee that defendants will not injure them in the exact same manner, not even coupons -- is not 'fair, reasonable, and adequate' by any measure,” the group argues.  “Yet the Ninth Circuit upheld such a settlement of class members’ claims because class counsel and the lead defendant agreed to use $6.5 million to establish a new foundation, controlled by the defendant and class counsel, that also does nothing to combat defendants’ alleged conduct or redress class members’ alleged injuries.”

The Supreme Court rejects the vast majority of petitions for review, but it's always possible that the court will agree to hear the case. Either way, Facebook, and its lawyers, must now once again spend time, energy and money coping with the fallout of the Beacon privacy snafu.

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