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No en banc in Lane v. Facebook

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In Lane v. Facebook, Facebook settled its claim for $0 for the class and $3.2 million to the attorneys—and less than $6.3 million in illusory cy pres money to a charity established by Facebook. This plainly violated multiple Ninth Circuit precedents, but the district court approved the settlement, and a Ninth Circuit panel affirmed in a 2-1 decision, creating an intra-circuit split. Now the Ninth Circuit has refused to review the decision, leaving contradictory guidance for lower courts. Six judges dissented from the denial of rehearing en banc noting this "muddle"; as Public Citizen's Scott Nelson notes, all six were Republican-appointed judges, making one wonder whether the question of consumer protection in class-action settlements has become a partisan question—and one where liberal judges are on the side of the powerful against the weak. More: Fisher; Reuters; Trial Insider.

The objectors, I think, erred in failing to more explicitly ask the Ninth Circuit to consider the settlement under the Bluetooth framework. When Facebook pays the $6.5 million cy pres to itself to promote its own interests, it means that the real economic settlement is "$0 for class and $3 million for attorneys"; as Dennis v. Kellogg noted, cy pres payments that overlap with existing charitable donations are really just a shift in accounting entries rather than a class benefit. That's plain evidence of self-dealing. For this reason, I think Lane is distinguishable from the cy pres objections the Center for Class Action Fairness brings, because the Lane court did not consider the Bluetooth factors.

The question will arise again in the pending Fraley v. Facebook case in the Northern District of California. That settlement has been modified to provide payments to the class, unless there are too many claimants, in which case the whole amount goes to cy pres charities favorable to Facebook. The attorney-fee request is disproportionate, too, and the claims process oddly excludes many class members from recovery.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.