Lane v. Facebook, Inc.

Facebook, Inc. (defendant), an online social-networking platform, created a program that shared users’ private information with other companies. A group of Facebook users (class representatives) (plaintiffs) filed a class action, alleging that Facebook violated state and federal privacy statutes. The class representatives reached a settlement agreement with Facebook that provided for an indirect remedy to class members, called a cy pres remedy, in lieu of a direct monetary payout to class members. Facebook agreed to pay $9.5 million, of which $6.5 million in cy pres funds were to go towards creating a new charity run by a three-member board of directors to promote online privacy and security. As part of the arm’s length settlement negotiations, Facebook wanted one of its employees to be on the charity board to ensure that the money would not be used to harm Facebook, and the class representatives agreed. The remaining $3 million of the settlement was to pay the class representatives’ attorney’s fees and litigation expenses. Other members of the class (objectors) opposed the proposed settlement, arguing that having a Facebook employee run the charity created a conflict of interest and that the settlement amount was too low. Following a hearing, the district court certified the settlement agreement. The objectors appealed.