Facebook proposes revised settlement in Sponsored Stories lawsuit

The company has now agreed to pay up to $10 to each member of the class

By , IDG News Service |  Legal

Facebook has proposed a revised settlement in a lawsuit in which it was alleged to have used the names and likeness of the plaintiffs without their prior consent in "Sponsored Stories" advertisements shown to their online friends on the social networking website.

The company has agreed in a court filing on Saturday to pay Facebook users in the U.S. who appeared in Sponsored Stories up to $10 each to be paid from a $20 million settlement fund, amending its earlier proposed settlement which aimed to pay $10 million to activist organizations and charities as cy pres fee as direct payment to all members of the class was not feasible. Another about $10 million was earmarked for attorneys' fees and expenses.

Facebook has also promised greater user control including a tool that will enable users to view going forward the subset of their interactions and other content on Facebook that may have been displayed in Sponsored Stories, and the ability to prevent further displays of these Sponsored Stories.

The motion for preliminary approval of the earlier proposed settlement was rejected in August by the U.S. District Court for the Northern District of California, San Francisco division with the Judge Richard Seeborg ruling that there were sufficient questions regarding the proposed settlement. The question will remain as to whether $10 million in cy pres recovery is fair, adequate, and reasonable, the Judge wrote in his order.

"Although it is not a precise science, plaintiffs must show that the cy pres payment represents a reasonable settlement of past damages claims, and that it was not merely plucked from thin air, or wholly inconsequential to them, given their focus on prospective injunctive relief," Judge Seeborg added.

The settlement relates to a class action lawsuit filed in U.S. District Court in California in 2011 by Angel Fraley and others in which they alleged that Sponsored Stories constitute "a new form of advertising which drafted millions of (Facebook members) as unpaid and unknowing spokepersons for various products," for which they were entitled to compensation under California law.

The new proposed settlement, which also needs Seeborg's approval, covers nearly 125 million users in the class, which could see each member getting a few cents on a pro-rata basis if all file claims.

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