Facebook Users Appeal $20M Sponsored Stories Class Action Settlement

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One in a number of recent objections regarding so-called “cy pres” distributions could doom a prospective Facebook privacy class action settlement that would total some $20 million, depending on the decision of a panel from the Ninth Circuit Court of Appeals.

A cy pres distribution allocates a certain portion of a class action settlement toward various charities linked to the goals of the legal action. However, a group of plaintiffs who are part of the putative class of Facebook users who claimed their likenesses were used illegally for the social media giant’s “Sponsored Stories” program, argue that too little of the class action settlement goes to the Class Members.

A federal judge granted final approval to the $20 million Facebook Sponsored Stories class action settlement in August 2013.

Roughly one-quarter, or $5 million, of the total Facebook Sponsored Stories settlement would go to the class action lawyers who had originally negotiated the settlement deal. An additional portion would go to organizations like the Electronic Frontier Foundation and others committed to online privacy. However, the payouts for Class Members who applied for an award from the class action settlement are just $15 when statutory violations would provide for $750.

While it is expected that a settlement would not provide the same legal remedy, the cy pres distributions make little sense, the objectors say. According to the Class Members appealing the Facebook class action settlement, “Payments [like these] are permitted only where it is unfeasible to send payments to individual Class Members, or when each Class Member has been made whole.” That is not the case, according to their appeal to the Ninth Circuit.

There are more than 150 million members of the putative Class of Facebook users whose rights were allegedly violated by the use of their images and information in the Sponsored Stories program, and as such the settlement only represents a victory of pennies on the dollar, according to the appeal. Still, those who filed claims should receive payments “until and unless those Class Members are made whole[,]” and before any money is sent to charity.

The appeal cites a decision made by the Fifth Circuit Court of Appeals where “no settlement may be paid to cy pres until every Class Member who has filed a claim has received 100 percent of the alleged damages.” Those distributions to charity and nonprofits like the Electronic Frontier Foundation “puts settlement funds to their next best use … [and] arises only if it is not possible to put those funds to their very best use: benefitting the class members directly.”

Instead, by approving the Facebook settlement, a lower court judge approved “an arbitrary figure that Facebook is willing to donate to charity and pay class counsel as fees to rid itself of this litigation,” the appeal argues. Therefore, it continues, the Class Members who applied for class action settlement funds should receive the entire $20 million, less any attorneys’ fees, which would total $19 per class member.

The objecting Class Members are represented by John J. Pentz.

The class action lawyers who negotiated the settlement for the plaintiffs as a whole are 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 Lally et al. v. Facebook Inc., Case No. 13-cv-16919, U.S. Court of Appeals, Ninth Circuit.

UPDATE: On Jan. 6, 2016, the 9th U.S. Circuit Court of Appeals upheld the lower court’s approval of the Facebook Sponsored Stories class action settlement.

UPDATE 2: 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.