Supreme Court Declines To Consider Facebook's Beacon Settlement

Facebook's $9.5 million privacy settlement stemming from a controversial ad program cleared its final hurdle on Monday, when the U.S. Supreme Court declined to hear a challenge to the deal.

The decision brings an end to litigation stemming from Facebook's first foray into social ads -- the 2007 Beacon program, which told users about their friends' ecommerce activity.

The settlement, which was first approved in 2010 by U.S. District Court Judge Richard Seeborg in the Northern District of California, requires Facebook to pay around $6.5 million to create a new privacy organization, the Digital Trust Foundation. That organization will be directed by a three-person board -- and Facebook will have a major say 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.

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Several Facebook users objected to the settlement, arguing that the deal doesn't benefit Facebook's users, and that Facebook will have too much control over the new foundation. One disgruntled user, Megan Marek -- represented by the Center for Class Action Fairness (and the law firm BakerHostetler) -- asked the Supreme Court to hear a challenge to the deal.

“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,” Marek argued in a petition seeking review.

The Supreme Court didn't say why it rejected the appeal, but Chief Justice John Roberts indicated on Monday that the court might agree to take up so-called “cy pres” settlements in the future. Cy pres agreements require companies to donate money to nonprofits instead of to individual class members.

“Marek’s challenge is focused on the particular features of the specific cy pres settlement at issue. Granting review of this case might not have afforded the Court an opportunity to address more fundamental concerns surrounding the use of such remedies in class-action litigation, including when, if ever, such relief should be considered,” Roberts wrote in a statement issued on Monday. “In a suitable case, this Court may need to clarify the limits on the use of such remedies.”

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