What’s $100 million worth to a $700 billion company like Facebook?
Well, consider this: Last month, a San Francisco federal judge wasn’t particularly impressed by the eye-popping $550 million proposed to settle a class action against Facebook. He rejected it. Now weeks later, the parties are headed back to the judge with a new number — $650 million. That’s right. Facebook just added $100 million in an attempt to make one of its problems on the privacy front go away.
The lawsuit alleges Facebook violated the Illinois Biometric Information Privacy Act by collecting facial data and then using recognition technology in its “tag suggestions” service. Facebook was unsuccessful in an attempt to dismiss the suit. Last August, the Ninth Circuit Court of Appeals upheld the decision allowing the case to move forward.
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Then, Jay Edelson, the plaintiffs’ attorney, announced a landmark settlement worth $550 million.
“That’s a lot of money,” said U.S. District Court Judge James Donato at a subsequent hearing on June 4.
“You know the old sob about the portions — the food was bad and the portions were small,” the judge said in his next breath. “Is it really a lot? The individual payments are going to end up being $150… possibly topping out at 300, depending on how things go with the claim rate. That is a significant reduction from the thousand dollars that the Illinois legislature set as the baseline. So I’d like to hear more about why that is a reasonable settlement amount.”
With this alternative perspective — namely, Facebook could be looking at a damages award three to five times the settlement figure and possibly more (“I’d also like to understand why there was no discussion whatsoever on why this is not a case where the enhanced damages of $5,000 per person are on the table,” said the judge at the June 4 hearing) — the parties went back into mediation and came to a revised agreement. On Wednesday, it was presented to the judge for approval.
Now, the settlement is worth $650 million. A bigger buffet table for the bad food.
And that’s not all.
To win over the skeptical judge, Facebook also agreed to another big change in the settlement.
At the June 4 hearing, the judge had said, “The other thing I’m concerned about is the scope of the released parties. It includes all of — I think the language is ‘Facebook’s sister and affiliated companies.’ I mean, you know, that’s Instagram. That’s Oculus. That’s WhatsApp…I am not willing to let those companies off the hook in this case, where they weren’t defendants, claims against them were not articulated, and the amount that the aggrieved people are going to get is $150. That just doesn’t seem right to me.”
The revised agreement releases Facebook and associated companies and executives. But that release excludes “any entities in which Facebook or Face.com had or has a controlling interest or are affiliated with that did not use the Tag Suggestions feature such as Instagram, Inc., WhatsApp Inc., and Oculus VR Inc.”
In other words, an opening for further legal action.
