Facebook $550 Million Settlement On Decline

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Trails entail their drawbacks of excessive time consumption, constant outflows of money, and public nature of proceedings. For corporations, the absence of confidentiality in trials is the biggest concern since disclosure of internal matters of the company and its prosecution over accusations of criminal behavior is bound to negatively impact the company, its operations, and profitability. Such negative impacts mainly include loss of public confidence, media trials and disparaging campaigns, loss of customers, and declining profits for the corporation. For this reason, none of the companies, be it giants or start-ups, may willingly opt for a lawsuit while avoiding settling out of court. 

Facebook, too, has always been in favor of settlement rather than pursuing active litigations in the courts. In breach of privacy, under the Illinois biometric privacy law, Facebook would settle the case out of court for a lump sum amount of $550 million to be paid to everyone who had their face-scan data recorded under the app’s tag suggestion utility, an operation violating online privacy. The Illinois law allows aggrieved persons to sue for privacy violations for damages amounting to $1000. In contrast, the sum offered to be paid by Facebook would only result in $150 being paid to each user on the aggregate subject of such a privacy breach.

The lawsuit is now being made subject to active litigation against Facebook has been kept dragging for five years. Through these five years, the matter is now being taken up robustly by the Californian US District Judge James Donato. The judge has labeled the offered amount to be woefully inadequate and insufficient for the claim that has been made at hand.

The $550 million amount proposed against settlement should be known as the largest ever to be paid for settling a class-action lawsuit. The lawsuit was brought under the Illinois biometric privacy law, which stands as the most significant reason Facebook is inclined to offer an unprecedented, hefty amount for settlement. Facebook can be seen in a weak position in this instant case, heavily owing to several factors. The first reason is the Illinois privacy law regime’s extraordinarily stringent nature since it is viewed as the most reliable instrument currently applicable within the US for some cogent reasons. Another reason for Facebook’s reluctance from indulging in a lawsuit is the judge’s robust attitude against the alleged offense committed. Judge Donato’s repeated emphasis on whether the offered amounts amount to an adequate pay-out remedy and his unwillingness to let Facebook get off the hook is a primary concern. Even despite the offer of an unprecedented fortune for settlement, the judge’s reluctance to allow settlement would preclude the case from proceeding in the desired direction for Facebook. A further reason could be the making out of a strong case by the plaintiffs. The plaintiffs’ counsel had the opportunity to quote Facebook’s previous litigations in the instant case and highlight the repeated violation of its previous accords with the tribunal that earlier adjudicated against Facebook.

The violation pertains to Facebook’s tag suggestion utility. Extracting data from users’ pictures applies to photographs uploaded by their friends to link such photographs with such identified users’ accounts. In the past, Facebook has gotten into legal controversies arising out of the same utility, whereby Facebook was required to give users “better notice” about its face-scanning utility. In addition to this compliance, Facebook was imposed with a notorious fine of $5 billion by the Federal Trade Commission, regulating the US’s consumer protection space. This said compliance was raised by the plaintiffs’ counsel and duly noted by the judge, who remarked that Facebook’s failure could be seen as “an intentional or reckless violation. To make matters worse for Facebook, the Illinois law provides intentional or reckless violations to be penalized with penalties amounting to $5,000 for each claimant.

This settlement will likely end up being rejected since the plaintiff side has strong arguments to compel Facebook to increase its pay-out offer.

On a clear sight, the settlement rests in the Plaintiffs’ favor. Facebook is currently having a total valuation of $680 billion. Taking support from its market valuation, the plaintiffs’ counsel has strong reasons to suggest that Facebook’s offer for settlement could go substantially higher to over $47 billion. Notwithstanding this, the amount would still not be explicitly demanded because such a hefty amount would likely be struck down by the court upon an appeal from Facebook. Settlement issues are sensitive matters attracting any factors material to the parties. Decisive driving factors determine whether a dispute is to take the settlement route or not. 

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