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$9.5M deal in Facebook class action deemed ‘adequate,’ says 9th Circuit

A $9.5 million settlement of a consumer class action against Facebook was sufficiently adequate to be approved, even if it represented only a fraction of what some class members claimed they could recover in individual lawsuits, the 9th Circuit has ruled in affirming judgment.

The plaintiffs’ class action alleged that Facebook’s “Beacon” marketing program – launched in 2007 – violated Facebook members’ privacy rights by gathering and publicly disseminating information about their online activities without permission.

The parties settled the case in 2009. Under the terms of the settlement, Facebook agreed to permanently terminate the Beacon program and pay $9.5 million. Of the $9.5 million pay-out, approximately $3 million would be used to pay attorney fees, administrative costs and incentive payments to the class representatives. The remaining $6.5 million was used to set up a new charity organization dedicated to promoting online privacy.

Objectors argued that the $9.5 million settlement was too low in light of the more than 3.5 million class members. In particular, the objectors alleged that many class members had viable claims under the Video Privacy Protection Act, which authorizes liquidated damages in the amount of $2,500.

But the 9th Circuit concluded these concerns did not pose an obstacle to finding the settlement as a whole “fair, reasonable, and adequate.”

The court explained that “even if some of the class members in this case would have successful claims for $2,500 in statutory damages under the VPPA, those individuals represent, to use the candid phrasing of [the objectors], ‘only a fraction of the 3.6 million-person class.’ Their presence does not in itself render the settlement unfair or the $9.5 million recovery among all class members too low.”

In addition, the court rejected the objectors’ argument that the settlement should not have been approved because a Facebook employee sits on the board of the charitable organization distributing cy pres funds.

U.S. Court of Appeals, 9th Circuit. McCall v. Facebook, No. 10-16398. Sept. 20, 2012. Lawyers USA No. 993-3512.

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