• by Wendy Davis  @wendyndavis, February 11, 2014

A group of Facebook users are asking an appellate court to set aside a $20 million class-action settlement stemming from the social networking service's sponsored stories program.

The deal, which was approved last year by U.S. District Court Judge Richard Seeborg, “does not begin to redress the claims alleged in the plaintiffs' complaint,” the users argue in papers filed on Tuesday with the 9th Circuit Court of Appeals.

The deal requires Facebook to pay $15 each to around 600,000 users who were featured in sponsored stories ads. Those users, representing only a fraction of eligible Facebook members, are the only ones who made claims after receiving notifications about the proposed settlement. The deal also requires Facebook to pay several million dollars to 14 nonprofits and schools; the attorneys who sued the company will receive around $5 million in attorneys' fees.

The settlement resolved a class-action lawsuit alleging that the sponsored stories program violates a California law governing endorsements. That law, which provides for $750 per violation, says companies must obtain adults' permission before using their names or images in ads. When minors' names or images are used in ads, companies must obtain parental consent.

The users who are appealing now argue that the payout to individuals is so small that Seeborg should have rejected the the deal. “About all that can be said about the settlement approved by the district court is that it is greater than nothing,” the users argue. “In the context of a class action that demanded payment of $750 to each class member, a $20 million settlement that provides payments of $15 to each claimant must be judged a failure. The appropriate remedy for a failed action is dismissal, not the approval of a nuisance value settlement that enriches the lawyers and charities, but provides little for the class members.”

The users also say that none of the settlement fund should have gone to nonprofits. “It is axiomatic that any money recovered on behalf of the class in this action belongs to the class members,” they argue. “While the extremely small amount of recovery makes direct payment to all class members infeasible, the entire fund must be paid to those class members who come forward and make claims until and unless those class members are made whole.”

The consumers are represented by John Pentz of the Class Action Fairness Group, a Massachusetts-based organization that has objected to other class-action settlements.

The users who filed an appeal this week weren't the only ones who opposed the deal. Organizations like Public Citizen and The Children's Advocacy Institute at the University of San Diego's Center for Public Interest Law, also asked Seeborg to scuttle the deal. The Children's Advocacy Institute specifically argued that children aren't likely to ever see the provision in the terms of use that requires parental permission, much less seek their parents' consent to appear in ads.