Justices let Facebook settlement stand, voice concern about similar deals

The U.S. Supreme Court has declined to hear an appeal of a controversial $9.5 million settlement in a privacy lawsuit over Facebook’s long-defunct Beacon program.

That means the settlement is final.  But the news here may be that Chief Justice John Roberts has raised concern about this kind of negotiated agreement, known as a cy pres settlement, which are increasingly raising eyebrows in a host of privacy cases involving Internet companies.

Such settlements, in which the defendant usually agrees to pay the plaintiffs’ legal fees and make a cash donation to some nonprofit groups, have been criticized as potentially ripe for conflicts of interest and not serving the people who allegedly suffered the original harm in the case.

As we’ve reported before, watchdog groups have objected to another cy pres settlement arrangement in a case involving Google.  An earlier settlement in another Facebook case also drew controversy and was ultimately rejected by a judge.

Defenders say the settlements are a good outcome in cases where it’s difficult to distribute payments to potentially vast numbers of people who may have suffered relatively minor harm.

The Beacon case involved a program that surprised and annoyed many users when Facebook launched it in 2007: Without any advance warning, the program would notify a Facebook user’s friends whenever the user made a purchase on certain other websites.  Although Facebook ended the program, a group of users filed a class-action suit.

Attorneys on both sides in the Beacon case negotiated a settlement, which provided $3 million for legal fees and set aside the remaining $6.5 million to fund a charity focused on privacy rights.  But some of the plaintiffs weren’t satisfied and appealed the settlement to the Supreme Court.

The court apparently felt this case wasn’t ripe enough to intervene, but according to Reuters, Roberts wrote:

 ”In a suitable case, this court may need to clarify the limits on the use of such remedies.”

(Photo by Kirstina Sangsahachart/Bay Area News Group)

Brandon Bailey Brandon Bailey (341 Posts)

Brandon Bailey covers Google, Facebook and Yahoo for the San Jose Mercury News, reporting on the business and culture of the Internet.