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Guess who'll grab Facebook Sponsored Stories payout? (Hint: Not the victims)

It's not like you'll ALL come calling for measly $10... bitch

The smart choice: opportunity from uncertainty

Comment Because of a quirk of the US legal system, the bulk of the $20m from Facebook's class action privacy settlement meant for people affected by its Sponsored Stories privacy gaffe* will likely go to "citizens' groups" - and concerns have been raised over the relationship between the beneficiaries and powerful corporations they purport to monitor.

The proposed settlement in the Facebook "Sponsored Stories" class action (Fraley v Facebook, Inc) offers $10 to every claimant. But once lawyers' fees have been settled - and once individual class members have claimed their $10 - the remainder of the payout will go to a range of "privacy activists". These include non-profits and law schools which frequently lobby on policy positions that are aligned with those of Facebook and other Silicon Valley companies, and which have benefited from their funding in the past. This has raised concerns that the powerful media firm is feeding the hand that is supposed to bite it.

What is cy-près?

The legal oddity is called the cy-près** doctrine, and it allows litigants in a class action to distribute payout money to charities rather than to the individuals affected, if the individual payout is very small. The use of cy-près has already raised ethical concerns. Google used it in 2011 to settle the privacy class action suit over Google Buzz.

The recipients of the cy-près awards are decided by the counsels for both sides after perusing all the applications.

The problem? Many of the recipients - in the Buzz case, around half of them, according to an objection filed by privacy group EPIC - were organisations that benefited from Google donations, and lobbied on behalf of Silicon Valley companies such as, er, Google. The Buzz settlement rewarded “organizations that are currently paid by [Defendant] to lobby for or to consult for the company”, EPIC alleged after it was excluded from the windfall.

Buzzkill

Corporates in the US have long used academia to promote their causes, and the explosion of tech company-backed "cyberlaw" institutions at US universities in the last decade is merely the latest manifestation. For example, Google paid $2m to Stanford's law school towards its "Center for Internet and Society", while the secretive Berkman Center at Harvard refuses to disclose its corporate tech donations. A clutch of cyberlaw schools benefit from the Facebook offer. However with "citizens groups", or non-profits, it ought to be different. These organisations purport to do battle on behalf of the citizen against corporate interests. When they are the beneficiaries of large payouts, it is legitimate to question whom they serve - for their incentive becomes one to raise class actions often and settle easily, ensuring the benefit to the non-profit is maximised.

In the Buzz settlement, two non-profits, the ACLU and the EFF, benefited handsomely, bagging $1m each. Both the ACLU and the EFF were already beneficiaries of Google donations, and have taken policy positions on causes close to Google's interests that are entirely in line with Google's. The EFF raised more from the Buzz payout alone than it raised in membership fees and individual donations combined.

Who gets paid?

In the payout for the Facebook suit, cy-près awards beneficiaries include the EFF (again), the Center for Democracy and Technology and gold-plated law schools, including the Berkman Center at Harvard Law School and cyberlaw faculties at NYU, Berkeley and Santa Clara universities.

Two groups sponsored by Silicon Valley corporations also benefit: ConnectSafely.org, which is already funded by Facebook, MySpace, Google and others and WiredSafety.org (whose founder serves on Facebook's Cybersafety Advisory Board) and which is notably muted in its criticism of internet companies. Another NPO on the list is the Silicon Valley-sponsored Joan Ganz Cooney Center, a lab originally responsible for Sesame Street that now focuses on getting children to use computers even more than they do already.

These organisations are not the only winners. The attorneys in the class action suit are requesting a mind-boggling $7.8m for their "attorneys’ fees". You can find out more about the slush fund here (PDF). ®

* Class members in the case are Facebook users in the United States whose name and profile picture - or whose child's name and profile picture - were used in a Sponsored Story.

** From cy-près comme possible, or "as near as possible"

Bootnote

In an annoying loophole, even if all the class-action litigants claim their 10 bucks they still might not stop the payout to the cy-près beneficiaries... If TOO MANY people submit a claim form, and the "number of claims made renders it economically infeasible to pay money to persons who make a timely and valid claim"... then "payment will be made to the not-for-profit organizations identified in Section 7 of this Notice".

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