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Law360 Guest Article: Fraley V. Facebook: Impact On Class Action Litigation
Timothy Newman

It is not uncommon in class actions for parties to reach a settlement that provides nonmonetary relief to the plaintiffs and a payment of attorneys’ fees to class counsel. In August, however, a California federal court denied preliminary approval of such a settlement. The court questioned the propriety and reasonableness of a proposed cy pres award — one in which funds would be awarded to a third party because distributing funds to the class would not be feasible — and, more importantly, questioned the amount of plaintiff attorneys’ fees agreed to by the parties — an amount the parties had to justify in part based on the perceived value of injunctive relief.

This recent holding will likely impact both the motivation of plaintiffs’ attorneys to bring class actions seeking only injunctive relief and the way in which class action litigators craft settlements. In the context of privacy and data breach law, where small or noncash settlements accompanied by sizeable attorneys’ fees awards are common, this holding could be of particular importance.

The plaintiffs in Fraley v. Facebook sued in 2011 alleging that Facebook’s "sponsored stories" advertising service violated their privacy rights under California law. The sponsored stories program operates as follows: Facebook users “like” a particular product or company online by clicking the iconic “thumbs up” symbol, their profile image appears as an endorsement on Facebook pages, and the company benefiting from the endorsement pays Facebook a small fee.

Excerpted from Law360, September 17, 2012. To view full article, click here (subscription required).