Ninth Circuit Will Not Revisit Beacon Facebook Settlement

The Ninth Circuit has declined to revisit the 2012 decision of a three-judge panel affirming the $9.5 million class action settlement involving Facebook’s controversial “Beacon” advertising system. See Lane v. Facebook, __ F.3d __, 2013 WL 765140 (9th Cir. 2013). In an order issued on February 26, 2013, the court denied defendants’ petitions for rehearing and rehearing en banc. Barring review by the U.S. Supreme Court, this brings to a close a multi-year saga for the Beacon settlement, which the parties first agreed to in 2009.

In the complaint, class members alleged that the now-discontinued Beacon program illegally monitored and shared Facebook users’ online shopping and search activity, compiling purchasing patterns and entertainment preferences and selling that information. The parties negotiated a settlement that would devote the entire net proceeds to the creation of the “Digital Trust Foundation,” with the objective of educating Internet users and merchants alike on issues related to privacy, prevention of identity theft, and the improper use of personal information. The settlement, approved in 2010 by U.S. District Judge Richard Seeborg, also required Facebook to discontinue the much-criticized Beacon program, and has successfully withstood criticism that the all-injunctive-relief settlement provisions were inadequate.

The ruling comes amid somewhat greater scrutiny being applied to similar cy pres settlements, where settlement proceeds only indirectly address the at-issue conduct in the underlying lawsuits. Last year, Judge Seeborg rejected a settlement in which Facebook proposed to resolve claims that it had misappropriated users’ names and likenesses with a $10 million charitable contribution. And the battle around the Beacon settlement might not yet be over, as the U.S. Supreme Court’s recent receptiveness to hearing cases where class action jurisprudence is at issue suggests that this relatively aggressive use of the cy pres doctrine might be vulnerable to Supreme Court review.