Facebook consumer suit settlement proposal approved

DIGITAL: Case spurred similar lawsuit from Blockbuster users

By Danny King -- Video Business, 10/26/2009

OCT. 26 | DIGITAL: The Facebook lawsuit that prompted a companion suit against Blockbuster could be getting a settlement.

Facebook's proposal last month to pay some of its members $9.5 million in a settlement involving a marketing program was upheld in a preliminary decision by a U.S. Federal Court judge in California.

The settlement, which was proposed by the social-networking site after more than a year of litigation and involves Facebook shutting down the Beacon program that plaintiffs say violated their privacy, is “appropriate,” Judge Richard Seeborg wrote in a decision. Facebook was sued in the class-action claim in August 2008.

The decision by Facebook and the court is an acknowledgement that, by using the Beacon program, which was intended as a marketing tool by publicizing users' consumption habits on their “friends'” Facebook pages, might have violated privacy laws because users weren't given a clear opportunity to be excluded from the program.

Earlier this month, Facebook was sued by three Dallas residents for what they said was Facebook's role in the illegal disclosure of which DVD titles Facebook users are renting on Blockbuster's Web site.

Facebook violated the Video Privacy Protection Act by pulling customer-rental information off of Blockbuster's Web site before giving Facebook users the chance to opt-out of the option, according to the class-action claim filed by Cathryn Elaine Harris, Mario Herrera and Maryam Hosseiny. Through Facebook and Beacon, Blockbuster promoted certain films to Facebook users by telling them which DVDs their friends are ordering on Blockbuster Online, according to the case.

Earlier this month, Facebook said in a statement that the Texas class-action claim was “without merit.” Blockbuster declined to comment, saying it wasn't a party to that particular claim.

In November 2007, Facebook said 44 Web sites, including Blockbuster.com, would work with the social-networking site and its Beacon partnership in its effort to socially distribute information, including consumer preferences, across the site.

Five months later, the plaintiffs in the Texas class-action lawsuit filed a claim against Blockbuster. The court handling that case was switched in January. Court records show no documents filed on the claim since then, but Blockbuster in July requested that the parties take their claims to arbitration, according to the class-action suit.