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Facebook 'sponsored stories' settlement rejected by judge

updated 12:55 pm EDT, Sun August 19, 2012

Judge requests more information on why no payout to the class

In an order on Friday, US District Judge Richard Seeborg rejected Facebook's proposed settlement that the company violated its' members rights and California law through its "sponsored stories" feature. The judge listed several problems with the negotiated settlement, including a request for a better answer to his previous question on why the settlement didn't award any cash to the class members.

"We continue to believe the settlement is fair, reasonable, and adequate," said Facebook in a briefstatement. "We appreciate the court's guidance and look forward to addressing the questions raised in the order." Facebook was slated to pay $20 million to lawyers and charities as part of the settlement. In an effort to convince the judge that the package was a good value for the plaintiffs, Facebook attorneys claimed that the settlement payout plus changes to privacy settings represented $123 million in value to the suing class and Facebook users.

Facebook's "Sponsored Stories" were advertisements that appeared on a user's Facebook page when a friend "likes" an advertiser, including the friend's name and photograph. The suit claims that the paid post uses user's images and names to advertise products without compensation for advertising purposes in violation of California law.

The settlement forced Facebook to revise its terms of service to allow members to control what information can be used in "Sponsored Stories," or letting the user opt out completely. Additionally, $10 million would have been paid to 15 different consumer privacy advocating charities.

Attorney Michael Rhodes representing Facebook said at a previous hearing that the parties couldn't come up with an acceptable algorithm to determine the value of a user's involuntary endorsement. Rhodes said the required disclosures and ability for parents to exclude their children from the feature as a result of the settlement are "unprecedented" for a social media website, and told the judge that he believes that it "has a significant benefit to the class."

The settlement terms have already caused one judge to recuse herself from the case, due to her involvement with charities slated to receive payment.

by MacNN Staff



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