Appeals court allows $9.5 million Facebook deal over privacy claims

Thu Sep 20, 2012 6:40pm EDT
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By Dan Levine

(Reuters) - A U.S. appeals court refused to disturb Facebook Inc's $9.5 million class action settlement over allegations that the social networking company's defunct "Beacon" service violated its members' privacy rights.

The 2-1 ruling on Thursday came from the 9th U.S. Circuit Court of Appeals, with the one dissenting judge saying the settlement unfairly benefited Facebook and plaintiff attorneys.

In 2007 Facebook launched Beacon, which allowed users to broadcast their Internet activity to friends. If a user rented a movie from Blockbuster, for instance, Facebook would broadcast that transaction to the person's entire network, according to the ruling.

However, Facebook didn't require anyone's affirmative consent to participate in the program, and users soon complained about their private information being transmitted without permission. In the face of complaints and negative publicity, Facebook eventually discontinued the service.

A group of 19 plaintiffs filed a proposed class action in federal court against Facebook and other businesses who participated in Beacon. Facebook soon agreed to settle the case for $9.5 million.

Roughly $3 million of that was set aside for attorney's fees, with the rest going to establish a charitable group focused on online privacy rights.

A subset of plaintiffs objected to the settlement, but in its ruling on Thursday the 9th Circuit said the $9.5 million was not too low.

"A $9.5 million class recovery would be substantial under most circumstances," the court wrote, "and we see nothing about this particular settlement that undermines the district court's conclusion that it was substantial in this case."   Continued...

The loading screen of the Facebook application on a mobile phone is seen in this photo illustration taken in Lavigny May 16, 2012. REUTERS/Valentin Flauraud