Facebook takes another shot at settling privacy lawsuit

Earlier this year, U.S. District Judge Richard Seeborg rejected a proposed class action settlement over Facebook's 'Sponsored Stories' advertising feature. But at a hearing on Thursday in San Francisco federal court, Seeborg was much less critical of a revised proposal and promised a ruling "very shortly."

Five Facebook Inc members filed a lawsuit seeking class-action status against the social networking site, saying its Sponsored Stories feature violated California law by publicizing users' "likes" of certain advertisers without paying them or giving them a way to opt out. The case involved over 100 million potential class members.

As part of a proposed settlement reached earlier this year, Facebook agreed to allow members more control over how their personal information is used. Facebook also agreed to pay $10 million for legal fees and $10 million to charity, according to court documents.

However, Seeborg rejected the proposed deal in August, questioning why it did not award any money to members.

In a revised proposal, Facebook and plaintiff lawyers said users now could claim a cash payment of up to $10 each to be paid from a $20 million total settlement fund. Any money remaining would then go to charity.

The company also said it would engineer a new tool to enable users to view any content that might have been displayed in Sponsored Stories and then opt out if they desire, the court document says.

In court on Thursday, Facebook attorney Michael Rhodes said the settlement provided meaningful protections and that Seeborg's job was to ensure a fair settlement - not write national privacy policy.

"Trust me, I'm not proposing to set grand policy with privacy issues writ large," Seeborg said.

Two children's advocacy groups filed court papers opposing the deal, saying that an opt-in procedure with parental consent should be required before Facebook can use a minor's content in ads.

However, plaintiff attorney Robert Arns said the deal balances the public good with Facebook's ability to run a profitable social networking service.

"We believe we cracked the code so that it's fair," he said.

If Seeborg grants his preliminary approval, outside groups would be able to file further objections before a final hearing.

The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc, 11-cv-1726.

© Thomson Reuters 2012