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Judge rejects Facebook’s “Sponsored Stories” settlement

Judge Richard Seeborg noted that the deal did not award any damages to Facebook users

Not so fast, Facebook. On Friday, a judge rejected a proposed settlement in a case involving the tech company’s alleged misuse of users’ names and likenesses in one of its advertising features.

Five Facebook members sought class-action status for the suit, arguing that Facebook violated California law by publicizing users’ “likes” of advertiser pages in its “Sponsored Stories” section without offering them compensation or the choice to opt-out.

Under the terms of the proposed settlement, the social networking site would have paid $10 million to charity and another $10 million in legal fees. Facebook, and the plaintiffs, had argued that the class size was too large to allow for individual statutory damages. But U.S. District Judge Richard Seeborg wrote in his opinion that “merely pointing to the infeasibility of dividing up the agreed-to $10 million recovery, or the relatively small per-use revenue Facebook derived, is insufficient, standing alone, to justify resort to purely cy près payments.”

Seeborg also questioned the specific amount of the charitable payment and the legal costs, but noted that the two parties could modify the agreement to remedy these issues. In a statement, a Facebook spokesperson called the settlement “fair, reasonable and adequate” and said that the company “[looks] forward to addressing the questions raised in the order.”

Read more about the judge’s rejection at Thomson Reuters.

For more InsideCounsel coverage of Facebook, see:

Judge recuses herself in Facebook privacy suit

Facebook will pay $10 million to charity to settle suit

Facebook Fraud?

Investor sues Nasdaq over Facebook IPO

Facebook users sue company for $15 billion

Alanna Byrne

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