Facebook’s ‘Beacon’ Settlement Upheld in Privacy Lawsuit

Facebook Inc. (FB) won a court ruling upholding its $9.5 million settlement of a class-action lawsuit over claims that its since-discontinued “Beacon” feature violated privacy laws.

The U.S. Court of Appeals in San Francisco today ruled 2-1 that the 2009 accord on behalf of 3.6 million Facebook users is fair. The two appellate judges agreed with a lower-court judge that the settlement amount isn’t too low. It included about $3 million for the lawyers, lead plaintiffs and administrative costs.

The panel’s majority also said there was no conflict in a Facebook director sitting on the board of the charitable organization set up to distribute the remaining $6.5 million.

“A $9.5 million class recovery would be substantial under most circumstances, and we see nothing about this particular settlement that undermines the district court’s conclusion that it was substantial in this case,” U.S. Circuit Judge Procter Hug Jr. said, writing for the majority.

Facebook Chief Executive Officer Mark Zuckerberg in 2007 apologized after users complained that the social-networking site’s Beacon advertising program violated their privacy. The feature tracked what users buy online and shares the information with their friends.

“We appreciate the Court of Appeals’ careful consideration of this case, and are pleased that the panel affirmed the district court’s ruling that the Beacon settlement is fair, reasonable, and adequate,” Facebook Deputy General Counsel Colin Stretch said in an e-mailed statement.

‘Settlement Perverts’

Senior U.S. Circuit Judge Andrew Kleinfeld wrote today in his dissent that the lawyers obtained millions of dollars in fees and that Facebook obtained a judgment “that bars claims by millions of people victimized by its conduct.”

“This settlement perverts the class action into a device for depriving victims of remedies for wrongs, while enriching both the wrongdoers and the lawyers purporting to represent the class,” the judge said.

Steven Helfand, a lawyer for class members who objected to the settlement, said in a phone interview that the attorneys were still studying the opinion and were inclined to seek further review.

“Obviously we agree very much with the dissenting opinion,” Helfand said.

The case is Lane v. Facebook, 10-16380, U.S. Court of Appeals, Ninth Circuit (San Francisco).

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

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

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