Controversial Facebook Privacy Lawsuit Settlement Rejected by Judge

As has had been expected, a judge has rejected the settlement in the class-action lawsuit brought against Facebook over "sponsored stories," i.e. ads which relied on user interactions.

The judge had reservations when the two sides put forward the settlement, he wanted more info on how the sums involved were determined and why the lawyers got so much while the actual users got nothing.

Now, he's come out and denied the settlement proposal, over those concerns, and asked the two sides to come up with a much better explanation of why the lawyers that brought forward the lawsuit get $10 million, €8.16 million.

Another $10 million will go to various privacy groups and organizations, but users won't be seeing anything.

However, the settlement figured that Facebook was "losing" over $100 million by not being able to use sponsored stories as much as it wanted.

It still got to use the ad type though, the settlement only enabled minors to completely opt out of the feature, the rest of the users would only have been able to "limit" the scope of the ads.

Sponsored stories are the type of ads that feature the actions of your friends. That is, if one of your friends liked Sony's Facebook page, then an ad for Sony could highlight that action, perhaps implying some sort of endorsement.

It's not a clear-cut violation of privacy, since "linking" a page is a public action or is at least visible to friends so an ad wouldn't reveal anything that wasn't already available.

Another controversial issue with the settlement was that, apart from lawyers getting $10 million, several groups got the same amount, spread out, in what is called a "cy pres" payment. This is used when it's impossible to evaluate the actual damages for individual users or the sum is too small to warrant the effort. In these cases, some money is directed at groups that act in the user's interest.

However, this system is ripe for abuse, as groups that are slated to get some money will agree to the settlement, no questions asked.

Facebook and the plaintiff lawyers will now have to go back to the drawing board. The judge is asking for more details on how the damages were calculated, so a new settlement deal will be proposed soon enough.