Facebook Judge Steps Off Privacy Case Over Sponsored Ads

A federal judge in San Jose, California, recused herself from overseeing a proposed settlement of a privacy lawsuit against Facebook Inc. (FB) over the social networking site’s “Sponsored Stories.”

U.S. District Judge Lucy Koh today referred the case for reassignment to a different judge and canceled a hearing scheduled for tomorrow in which Facebook seeks Koh’s final approval of a settlement of the suit. Koh didn’t give an explanation for her recusal.

An increasing number of Facebook users have filed objections this week to the company’s proposed accord with a group of subscribers who challenged a program linking their likenesses to certain types of advertisements.

Under the proposed agreement, Facebook agreed to pay $10 million to be shared among advocacy groups for children, consumers and electronic privacy. The company also consented to revising its terms of usage so users can more easily see when they’re being shown as endorsers of products and games for which they clicked a “like” button and so they can limit the display of their content and interactions alongside “sponsored stories.”

Andrew Noyes, a spokesman for the Menlo Park, California- based company, declined to comment on the decision.

The case is Fraley v. Facebook Inc., 11-cv-01726, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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