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Facebook privacy settlement

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I'm quoted in a Reuters story on the settlement of the Facebook privacy suit, claiming legal problems with Facebook's use of "like"s to portray users as commercially endorsing products or services to their friends. I note that the cy pres provisions, at least as currently publicized, don't provide any protection to class members that the cy pres will not be misused. There's been no publicity about how much the lawyers will profit; the fee structure could be grounds for further objections if the lawyers profit at the expense of the class.

Brian Fitzpatrick is quoted in the story as defending the settlement because "The important thing is the defendant is forced to pay someone... That creates the deterrence to prevent a company from doing something like this in the first place." That seems to me to be missing the point.

Plaintiffs brought a suit claiming $750 statutory damages/class member. They're settling it for $0.10 per class member (over a period of time, no less), and the class members won't even get the money, undetermined third parties will.

If the underlying suit has even a 2% chance of success, that indicates that class members should be getting in the range of $15 each, with some discount to reflect certainty versus risk and the time value of money. If the claims are even more meritorious than that, then the ripoff to the class is even larger, and the attorneys are selling their clients out for a guaranteed fee.

But it could very well be that the parties have correctly valued the suit as having only a 0.01% chance of success. If a suit with a 1-in-7500 chance isn't a frivolous abuse of the civil justice system, what is? Perhaps just bringing a bad case isn't enough to merit sanctions under our current law. But how do attorneys get the right to collect a full fee for doing so? Why do we want to "deter" Facebook if there's a 7499-in-7500 chance they haven't done anything wrong?

The best counterargument is that implicit in Fitzpatrick's analysis, which centers on the difficulty of class certification: the claims aren't frivolous, and have some value, but it would be too hard to prosecute the case as a class action. But that doesn't imply settlement is appropriate; that implies that the appropriate course for ethical counsel is to dismiss the suit and preserve individual class members' claims. Class counsel would be breaching its fiduciary duty to the class in insisting on waiving the class's right to seek relief to justify its own fee.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.