$20M Facebook Sponsored Stories Class Action Settlement Upheld

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Last week, the 9th U.S. Circuit Court of Appeals affirmed a lower court’s decision to approve a $20 million class action settlement that requires Facebook to make policy changes about when it uses members’ photos in advertisements.

The divided panel of appellate judges ruled 2-1 that the lower court did not abuse its discretion when it approved the Facebook Sponsored Stories class action settlement in August 2013, overruling concerns from objectors who believed claimants would not receive adequate compensation and who feared that the settlement allowed Facebook to violate the laws of seven states.

“The district court did not abuse its discretion in approving a class action settlement which awarded $15 to each claiming class member, notwithstanding the possibility of a $750 statutory penalty,” the appellate court wrote in the majority opinion. “The monetary award of $15 was reasonable in light of the minimal (if any) harm suffered by the plaintiffs. Furthermore, an award of $750 per claiming class member could implicate due process concerns.”

Further, the appellate court found that the lower court did not abuse its discretion in approving the distribution of unclaimed funds to charitable organizations, as the selected organizations had missions that were related to the issues brought forth in the original Facebook class action lawsuit.

The appellate court decision may finally put an end to a class action lawsuit that was filed in April 2011. The Facebook class action lawsuit alleged that Facebook did not provide a way to opt out of the Sponsored Stories advertising program that began in January 2011. The Sponsored Stories program allegedly used a person’s name and profile picture to falsely represent that a Facebook user “liked” an advertiser.

In July 2014, parents of minors whose likenesses were used to promote company pages in Facebook’s controversial “Sponsored Stories” advertising campaign filed an objection to the proposed class action settlement, arguing that the proposed deal did not adequately compensate Class Members.

The objectors argued that the laws of seven states do not allow the use of minors’ likenesses without parental consent: California, Florida, New York, Oklahoma, Tennessee, Virginia and Wisconsin. They were concerned that the Facebook class action settlement would authorize “clearly illegal conduct” that is expressly prohibited by state law.

The appellate panel disagreed with the objectors, finding that the Facebook class action settlement did not clearly authorize violations of the law.

One judge dissented from the majority opinion, finding that it would be appropriate to increase the payment the 600,000 claimants will receive “to avoid giving a huge windfall to the charities identified as cy pres recipients.”

Class Members are represented by Jonathan Davis, Robert Arns and Steven Weinmann of the Arns Law Firm and Jonathan Jaffe of Jonathan Jaffe Law.

The Facebook Sponsored Stories Class Action Lawsuit is Fraley, et al. v. Facebook Inc., Case No. 13-16918, in the 9th U.S. Court of Appeals.

UPDATE: On Jan. 20, 2016, the father of an unnamed class action plaintiff asked the Ninth Circuit to revisit their devision to uphold the $20 million Facebook class action lawsuit settlement.

UPDATE 2: On Nov. 17, 2016, Top Class Actions readers who submitted timely and valid claims for theFacebook settlement started receiving checksworth as much as $15. Congratulations to everyone who got PAID!