Facebook agreed to pay $20 million to settle a class action lawsuit filed against the company for its unauthorized use of the names/likeness of its users in sponsored stories. Under the settlement agreement, each claimant would received $10 each.
The legal notice sent by Facebook Inc (NASDAQ:FB) to users regarding a class action settlement, which indicated that they will receive a payment of $10 each for the unauthorized inclusion of their names and likeness without their permission is real.
Angel Fraley along with other Facebook users filed a class action complaint against the social network giant on March 18, 2011 alleging that Facebook Inc (NASDAQ:FB) took advantage of a certain type of user behavior (such as “liking” a company) and turned it into a paid advertisements through its sponsored story system which included their name or picture.
Fraley claimed in her first amendment complaint that the social networking giant violated California’s right of publicity statute, which protects against the misappropriation of a person’s identity for monetary gain, the sponsored stories being unlawful, fraudulent, and unfair, violated California’s unfair competition law; and Facebook’s actions constituted unjust enrichment.
Facebook Inc (NASDAQ:FB) argued that the allegations of the complainant lack merit and requested the court to dismiss the case. According to the social networking giant, the complainant’s names/likeness lacked commercial value; thus they cannot prove any actual monetary/commercial injury. Facebook also explained that the Sponsored stories are mere editorial functions, and its actions fell within the right of publicity law’s exception for newsworthy content, the unfair competition claims failed because the company does not charge its users, and California does not recognize unjust enrichment claim.
On December 16, 2011, Judge Lucy Koh ruled in favor of the complainants with the exception of dismissing the unjust enrichment claim. Both parties submitted different motions on certain issues such as the approval of a settlement. On December 2012, Facebook eventually agreed to pay $20 million to a settlement fund. Authorized claimants are entitled to receive a one-time pay of $10 each, the remainder will be distributed to cy press recipients Center for Democracy and Technology, Electronic Frontier Foundation, MacArthur Foundation, Joan Ganz Cooney Center, Berkman Center for Internet Society, Campaign for Commercial-Free Childhood, and other non-profit organizations.
Based on court filings, 125 million American users received Facebook’s legal notice. If all of the recipients filed for a claim, each of them would get a payment of only $0.16 each. Most likely, the $20 million settlement would be divided among the non-profit organizations, if the settlement per individual will be lower than $5.
Facebook Inc (NASDAQ:FB) sent an e-mail to its users over the weekend with the subject: LEGAL NOTICE OF SETTLEMENT OF CLASS ACTION. Users who did not delete the e-mail have until May 2nd to file for a claim. The final approval on the settlement is scheduled on June 28.