Remember the Facebook "Beacon" scandal, in which the world's leading social network suddenly began broadcasting purchases made through through other sites, like Amazon, to users' friends?
"Why no, honey, I did not buy a dvd box set of the entire run of CHiPs to watch during your business trip, nor did I purchase $300 worth of virtual animals to populate my Farmville account. As for the rotary-glide nostril hair trimmers, that must have been someone else with the same name, who's also on your friends list."
It was a serious gaffe on Facebook's part, betraying just how little regard the company has for its users privacy, and the extent to which Facebook is just a marketing machine as intrusive and stupid as any government bureaucracy. Threats of lawsuits abounded, as did threats to abandon the service in favor of luddite technologies of the past, like email and blogs.
Fortunately, Facebook survived, promising to turn over a new leaf, that in the future users' privacy would be respected. Although a class action was filed, that case has now settled. And just as fortunately for Facebook, the Court hearing the class action over the Beacon program has concluded that no one suffered any embarrassment at all.
How else to justify a settlement in which no one, absolutely no one, allegedly harmed by Facebook gets any compensation whatsoever?
Facebook is paying a total of $9.5 million to resolve the case. Against the agony and expense of a trial, with the attendant embarrassment of testimony from people who really didn't want their friends to know about that Mein Kampf purchase, that's a pretty sweet deal for Facebook. It's also a pretty sweet deal for the attorneys allegedly representing the plaintiff class, Scott Kamber and David Stampley of KamberLaw, LLC, and Joseph Malley. Up to $3 million has been set aside for their fees, in an order to be issued later by the court.
As for the allegedly injured parties, the three named plaintiffs will divide $20,000 among themselves. The remaining $6.5 million will be divided among the thousands of injured Facebook users, compensating them for their humiliation and shame.
Nah, just kidding. It will actually be spent to establish a "foundation for the study of internet privacy," on which Facebook will have a board seat. The actual people allegedly harmed by Facebook will receive … nothing.
This sort of settlement, known as cy-pres, in which a big pocket defendant makes a (by its standards) small contribution to a charity which may or may not have anything to do with compensating those actually harmed by the defendant, while the attorneys representing the plaintiffs receive a (by their standards) huge windfall, is becoming increasingly common in class action litigation. Federal judges, who are supposed to act as gatekeepers looking out for the interests of the class, and protecting the sanctity of the court system by refusing to certify class actions which lack actual merit, increasingly turn a blind eye to their duties, certifying any class, no matter how ridiculous, and signing off on any settlement, no matter how little it does for the people it's allegedly intended to benefit, as long as it gets the damned case off of their desks.
Class actions, as originally conceived, were intended to allow large numbers of people with similar claims, none of whom could afford an attorney on their own, to mass their claims together and receive just compensation. It's the compensation part that's been forgotten. Today, as with the Lane v. Facebook case, a class action is all too often just a shakedown, in which attorneys receive a windfall at the expense of a defendant which is only too happy to buy its peace on the cheap, while the alleged clients get little or nothing.
Think of all the notices you've received in which you're told you could get up to $1.25, six months from now, if you fill out a ten page form and mail it, at your own expense, to a PO Box in Washington State. The cy-pres settlement just cuts out the middleman: you. You're not going to fill out that form for a buck and change. But the attorneys who say they represent you are surely going to pocket their share, for hundreds of thousands or millions.
But if we're going to cut out the first middleman, the injured party, and turn class actions into vehicles for pure charity, why not cut out the second middleman: the attorneys? For all the good that this foundation will do for people harmed by Facebook's alleged wrongdoing (I'd venture none whatsoever), what good did the attorneys representing the class do for their clients?
The federal rules on class actions need to be amended. Attorneys representing classes should be forced to do their jobs, to put real money in the hand of their clients. Judges should be required to exercise real oversight of settlements, to ensure that they're not signing off on a shakedown which will only benefit attorneys and "foundations" and other charities which did not suffer an injury, and judges should be required, in cases where the actual injury alleged is as ridiculous as this one, to rule on class certification before considering any settlement.