It’s back to the drawing board for those clever plaintiffs’ attorneys who brought a class action against Facebook for its “Sponsored Stories” program. We previously blogged about the proposed settlement here, wherein the attorneys were slated to earn $10 million for their efforts, public interest groups–many of whom opted not to take a stance on the settlement (and did we mention may possibly be “friendly” with Facebook?)–were to receive another $10 million in cy pres damages, and plaintiffs could expect to receive a weakly worded promise “not to do that again.”
Following a trend of recent rulings rejecting proposed class action settlements (see here and here), Judge Richard Seaborg expressed several concerns over the proposal. The judge noted that the class members would receive no monetary compensation, and asked for clarity regarding what would actually be required of Facebook when revising their privacy policy. He further expressed skepticism towards both parties’ agreement over the cy pres award (cy pres damages are conferred to public interest groups in lieu of plaintiffs where distribution to each class member is unfeasible.) Judge Seaborg opined, “plaintiffs must show that the cy pres payment…was not merely plucked from thin air, or wholly inconsequential to [the plaintiffs’ lawyers.]” One wonders if Judge Seaborg did not hit the nail exactly on the head. This is precisely one of the problems with cy pres awards: they create a situation in which the plaintiffs’ lawyers are now only tangentially working towards the benefit of their clients, and thus decrease the attorney’s incentive to achieve the best result.
In this case Judge Seaborg indicated it would be appropriate to increase the cy pres award. And, whatever one’s opinion of cy pres awards in general, he fairly raised the point that if they are to act as a substitute for plaintiff compensation, the substitute must be necessary and adequate.
Finally, Judge Seaborg not so subtly noted the circumspect equation the plaintiffs’ lawyers used to determine their fee, remarking, “Plaintiffs have presented no reason in logic or law that supports calculating the value of the injunctive relief in such a manner.” Hopefully, various courts’ willingness to more carefully assess proposed settlements will serve as a warning for the lawyers in round two, and the inevitable future cases to come.