Verdicts & Settlements

Judge Wants to Know if Facebook Settlement Terms Were 'Plucked from Thin Air'

A federal judge in San Francisco has refused to approve a settlement that doesn’t award any money to class members in a suit over a Facebook advertising feature that published users’ “likes.”

U.S. District Judge Richard Seeborg asked litigants to prove some settlement terms weren’t “merely plucked from thin air,” the New York Times Bits blog reports. The proposed settlement called for attorney fees of up to $10 million and payment of $10 million to groups advocating for digital privacy, according to the Times and Reuters. The deal also provided injunctive relief, allowing users more control over use of their information.

The suit had contended that Facebook users weren’t adequately informed that their “likes” were being used in advertisements to their friends, generating money for the social networking company.

Seeborg noted the potential class could include “upwards of 70 million individuals” and said the case presents a novel issue: “Can a cy pres-only settlement be justified on the basis that the class size is simply too large for direct monetary relief? Or, notwithstanding the strong policy favoring settlements, are some class actions simply too big to settle?”

The parties should respond to those questions, Seeborg wrote in an order issued on Friday. The litigants should also address how the value of the settlement and attorney fees should be calculated, as well as the adequacy of the $10 million cy pres award, he said.

“Although it is not a precise science, plaintiffs must show that the cy pres payment represents a reasonable settlement of past damages claims, and that it was not merely plucked from thin air, or wholly inconsequential to them, given their focus on prospective injunctive relief,” Seeborg wrote.

Related coverage: “Netflix Notifies Customers of Class Action Settlement; Privacy Groups Will Benefit”

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