DailyTech - Judge Rejects Facebook "Sponsored Stories" Settlement Offer As Stock Price Plummets

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Internet Judge Rejects Facebook "Sponsored Stories" Settlement Offer As Stock Price Plummets
Shane McGlaun (Blog) - August 20, 2012 10:15 AM

9 comment(s) - last by overlandpark4m.. on Aug 21 at 1:54 AM

Facebook has definitely seen better days

Facebook has been fighting a lawsuit over its "Sponsored Stories" advertising feature. The company previously offered to settle the suit for $10 million, which would be given to charity. However, U.S. District Judge Richard Seeborg has listed concerns with the proposed settlement and issued a request for more information on why the agreement doesn't award money to social network members.

Judge Seeborg stated that Facebook and attorneys for the plaintiffs could modify the proposed settlement to address his concerns.

"We continue to believe the settlement is fair, reasonable, and adequate," a Facebook spokesman said in a statement. "We appreciate the court's guidance and look forward to addressing the questions raised in the order."

The class-action suit was originally filed by five different Facebook members who claim that the Sponsored Stories feature violated California law by publicizing the "likes" of users without paying the user or giving them away to opt out. The case covers 100 million potential class members.

Part of the Facebook proposed settlement included ways for users to have more control over how their information is used. In addition to the $2 million to be paid to charity, Facebook also agreed to pay $10 million for legal fees.

While Facebook reconsiders its settlement offer, the company stock is plummeting after its IPO brought such high hopes for investors. The company stock recently fell to half its IPO price. As of this morning, Facebook stock is trading below $18 per share, half the IPO market value in May.

Sources: Reuters, Huffington Post

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Cause of the problem

By Shadowself on 8/20/2012 10:45:34 AM , Rating: 5

$2 M for charity, $10 M for lawyers (that is lawyers for the opposing side, to say nothing of what Facebook's own lawyers will haul in) and NOTHING for the plaintiffs.

Does anyone think the problem is not the lawyers?

It's not just the patent/copyright/trademark system that is broken. The whole legal system is set up to just support itself -- to hell with whatever is right or wrong.

RE: Cause of the problem

By RufusM on 8/20/2012 11:06:03 AM , Rating: 3

I agree with you, but to be fair the settlement was offered by Facebook and was a business decision. They want this to go away as quickly as possible and are willing to buy off the lawyers, which is probably the quickest/cheapest way. The gift to charity was probably a way to make the lawyers seem like wankers if they didn't accept the offer.

Like virtually all class-action suits the lawyers walk away with most of the money and a pittance is given to consumers. Most consumers don't even bother to collect it since the amounts are so small and the money goes back to the lawyers.

Class action lawsuits have become a huge money maker for big law firms well versed in them.

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RE: Cause of the problem

By Argon18 on 8/20/2012 12:15:57 PM , Rating: 2

In your typical class action, the lawyers get paid a few millions, the lead plaintiff (or plaintiffs) get around $50k, and then everyone else gets a near-worthless amount, and usually not even in monetary form.

For example, most class actions against cellular phone carriers result in the participants being awarded a certain amount of free airtime, instead of a check in the mail. The lead plaintiff still gets a handsome sum, and the lawyers make out like bandits of course.

We don't have a Justice system; we have a Legal system. And yes it does seem to exist purely for its own sake these days, sadly enough.

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RE: Cause of the problem

By RufusM on 8/20/2012 1:42:21 PM , Rating: 2

Here is the original judgement:
http://www.scribd.com/doc/97428106/Facebook#fullsc...

If Facebook took this case all the way and lost they could be on the hook for up to $750/person defined in the class action, which equates to a possible maximum liability of $75B. That's why they settled; risk mitigation.

The charity was not defined but had to be some type of mutually agreed upon advocacy group whose business related to the charges being brought.

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