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U.S. justices decline to review Facebook 'Beacon' settlement

A man is silhouetted against a video screen with an Facebook logo as he poses with an Dell laptop in this photo illustration taken in the ce
A man is silhouetted against a video screen with an Facebook logo as he poses with an Dell laptop in this photo illustration taken in the ce

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Monday let stand Facebook Inc's $9.5 million class action settlement over allegations the social networking company's defunct "Beacon" service violated its members' privacy rights.

Although the court declined to hear the case, Chief Justice John Roberts issued a statement raising concerns about the particular type of settlement in the case and said the Supreme Court might take up another case in the future to clarify the law.

The court's decision not to hear the case means the settlement is final.

Four users who were part of the class action lawsuit objected to the settlement, which set up a not-for-profit group that addresses online privacy rights. They claimed it gave nothing of value to the approximately 3.5 million plaintiffs.

One of them, Megan Marek, sought Supreme Court review after the 9th U.S. Circuit Court of Appeals in San Francisco ruled in September 2012 that the settlement could go ahead.

One member of the three-judge panel dissented, saying the settlement unfairly benefited Facebook and plaintiff attorneys.

In 2007 Facebook launched Beacon, which would notify a user's friends of transactions the user made on such third-party websites as Overstock.com Inc, a discount retailer. Facebook did not ask users to agree to participate in the program, prompting complaints about how private data was being transmitted without their permission. Facebook eventually discontinued the service.

A group of 19 plaintiffs filed a proposed class action in federal court against Facebook and other businesses that participated in Beacon. Facebook soon agreed to settle the case for $9.5 million.

Roughly $3 million was set aside for attorney fees, with the rest going to establish the charitable group focused on online privacy rights. The board members of the group would be selected by Facebook and the lawyers representing the users.

In his statement on Monday, Roberts noted that settlements similar to those in the Facebook case, in which the majority of plaintiffs get no damages, with the money put to another use, have become increasingly common in the class action context.

"In a suitable case, this court may need to clarify the limits on the use of such remedies," he wrote.

The case is Marek v. Lane, U.S. Supreme Court, No. 13-136.

(Reporting by Lawrence Hurley; Editing by Howard Goller and Jeffrey Benkoe)

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