Ending years of litigation, the U.S. Supreme Court denied certiorari to a class member objecting to the $9.5 million deal in a suit alleging Facebook violated users' privacy rights with its Beacon program.
Launched in 2007, Beacon tracked the activity of Facebook users and then shared the information with their friends, from an online purchase at Amazon to a movie rental at Netflix. Users were automatically enrolled in the program and had to affirmatively opt out to avoid having their data broadcast. After one month – and a public outcry – the site changed the settings to require users to affirmatively opt in to Beacon. The program was eventually terminated in 2009.
Facebook users also filed a class action suit in California federal court, which alleged the social media site violated both federal and state privacy laws. Settlement negotiations resulted in a deal totaling $9.5 million. Of that, $6.5 million would be spent to create and fund a foundation to promote online privacy and security, the Digital Trust Foundation, with a representative from Facebook as one of three members of the Foundation's board.
More than $2.3 million was set aside for class counsel. The plaintiffs also agreed to expand the class to include not just those whose information was shared during the initial one-month period when all users were automatically included in Beacon, but also those who were involved with the program after Facebook changed the default setting to opt in.
Some class members objected to the settlement, but a federal court judge granted approval and a panel of the Ninth U.S. Circuit Court of Appeals affirmed that the deal was "fair, adequate, and reasonable." Class member Megan Marek then took her challenge to the U.S. Supreme Court.
She focused on several features of the new foundation as the most troubling aspect of the settlement, specifically, that a senior Facebook employee would serve on its board, which would enjoy broad discretion in choosing recipients to fund. Marek also noted that the foundation lacked any kind of track record of supporting the causes at issue. The total settlement amount was also too low, she said.
The justices denied certiorari.
In an atypical twist, Chief Justice John Roberts added a statement. The Chief Justice said he agreed with the decision to deny the petition for review because Marek's challenge was focused on the particular features of the specific cy pres settlement at issue.
"Granting review of this case might not have afforded the Court an opportunity to address more fundamental concerns surrounding the use of such remedies in class action litigation, including when, if ever, such relief should be considered; how to assess its fairness as a general matter; whether new entities may be established as part of such relief; if not, how existing entities should be selected; what the respective roles of the judge and parties are in shaping a cy pres remedy; how closely the goals of any enlisted organization must correspond to the interests of the class; and so on," Chief Justice Roberts explained.
Cy pres remedies "are a growing feature of class action settlements," he added, and the Court has not previously addressed the issues presented by such deals.
"In a suitable case, this Court may need to clarify the limits on the use of such remedies," the Chief Justice wrote.
To read the Chief Justice's statement, click here.
Why it matters: The denial of certiorari allows for the new privacy foundation to begin its work and for Facebook to finally close the door on the Beacon litigation. For other parties involved in class action litigation featuring a cy pres remedy, however, the Chief Justice’s accompanying statement serves as a warning shot. He provided objecting class members a road map of potential concerns for members of the Court to consider in a future case, such as when cy pres relief is appropriate and how, as a general matter, to consider its fairness.