Appeals Court OKs Facebook’s $20 Mln Privacy Deal

Over objections by privacy advocates, Facebook has won appellate court approval of a $20 million class action settlement that allows the social networking company to use pictures of even young children in advertising unless parents opt out.

The 9th U.S. Circuit Court of Appeals issued a non-precedential ruling Wednesday finding the $15 award to each class member that files a claim to be reasonable, even though the law allows up to a $750 penalty for each violation.  Paying every class member the maximum would have required over $112 billion, according to the district court in its 2013 settlement approval.

“The district court did not abuse its discretion in approving the class action settlement,” including approval of a distribution of unclaimed funds to groups working on privacy-related issues, the appeals court said.

The case has been closely watched by privacy groups and the settlement challenged by objectors who believed too few consumers might make claims for relatively low cash payments and that Facebook did not adequately deal with use of minors’ images.

The Electronic Privacy Information Center (EPIC) was among those that opposed the deal, pointing out that it would allow use of images of teens in online advertising and the Federal Trade Commission filed an amicus brief saying state privacy laws prevent the display of children’s images without consent.

The suit, originally filed in 2011, covers a class of 150 million Facebook users whose names and images were allegedly misappropriated to promote products and services through Facebook’s so-called “sponsored stories” program.

The settlement requires Facebook to give users more information about, and control over, how their names and images are used in sponsored stories.

The original settlement proposal was rejected by the court.  The current settlement plan gives minors and their parents greater opt-out options.  Facebook users will also have greater ability to see when their activities result in generation of sponsored stories, according to the trial court.

The appeals court panel approved the current version of the plan.  Signing the order were Judges William Fletcher, Marsha Berzon and Carlos Bea.

Case: Fraley v. Facebook Inc, No 13-16819



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