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Ninth Circuit Upholds Settlement in Facebook ‘Beacon’ Case

Wednesday, February 27, 2013

On Tuesday, the U.S. Court of Appeals for the Ninth Circuit denied an en banc rehearing of the panel’s year-old decision to uphold Facebook Inc.'s $9.5 million settlement resolving privacy claims in Lane v. Facebook. Lane revolved around privacy issues concerning the now-defunct Facebook “Beacon” feature, which shared a Facebook user’s activity on external website with the user’s Facebook network as a means of facilitating target advertising. The settlement, approved in 2009, represents an instance of cy pres jurisprudence as more than $6 million dollars were allocated to a nascent organization protecting online privacy.

The controversy surrounding the Ninth Circuit’s refusal of an en banc rehearing stems from a conservative bloc of judges’ contention that the settlement sets a dangerous precedent for cy pres distributions. The six Republican appointees authoring and supporting the dissent opinion worry that the newly formed organization, the Digital Trust Foundation, receiving the settlement funds has not established itself as a functioning, proactive organization deserving of such a distribution. As Judge Milan Smith Jr. explained in his dissent, “"If fashioning an open-ended, one-sentence mission statement is all it takes to earn cy pres settlement approval in our court, we have completely eviscerated the meaning of our previously controlling case law.” His caustic evaluation may motivate the Supreme Court to review the decision, as en banc review denials widely function as a call for the Supreme Court to offer their critique of the decision.

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