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Judge Preliminarily Approves Settlement In Facebook Sponsored Stories Class Action

Tuesday, December 11, 2012

A $20 million settlement agreement to resolve class claims that Facebook Inc. unlawfully displayed users' names and likenesses through its Sponsored Stories advertising program won preliminary approval Dec. 3 from the U.S. District Court for the Northern District of California (Fraley v. Facebook Inc., N.D. Cal., No. 3:11-cv-01726-RS, preliminary approval of settlement 12/3/12).

Judge Richard Seeborg, who denied Aug. 17 an earlier proposed settlement agreement in the right of publicity case (11 PVLR 1343, 9/3/12), wrote that he was “satisfied that the revisions to the terms of the settlement are sufficient to warrant preliminary approval.” At a Nov. 15 hearing regarding the motion for preliminary approval, Seeborg told counsel that the revisions “certainly endeavored to address the concerns, serious concerns, on my part” (11 PVLR 1687, 11/19/12).

The Sponsored Stories program combined a Facebook member's name and profile picture with an advertiser's logo and a note stating that the user had “liked” the company. Plaintiffs in the case argued that merely clicking the “Like” button on Facebook did not provide consent for their profile photos to be used for marketing purposes.

Revised Terms.

In ruling against the earlier settlement, Seeborg faulted the parties for not adequately justifying the lack of a direct payment to class members. The earlier agreement would have established a $10 million cy pres fund to assist organizations such as the Electronic Frontier Foundation and the Consumer Federation of America. Seeborg also was troubled by a “clear sailing” provision that meant Facebook would not contest an award of $10 million in attorneys' fees.

Under the revised agreement, Facebook still will provide a $20 million settlement. However, the settlement now offers a direct payment of $10 per claimant. If the total sum of claims would exhaust the settlement fund, then a pro rata share will be used unless the share is less than $5 per claimant, in which case the court could elect to substitute the cy pres fund.

The new agreement also stripped the “clear sailing” provision.


Full text of the court's opinion is available at http://op.bna.com/pl.nsf/r?Open=kjon-92nudy.

Full text of the amended settlement agreement is available at http://op.bna.com/tpif.nsf/r?Open=mlon-8ywm8s.

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