Meta’s $90 Million Tracking Deal Challenged Before Ninth Circuit

Objectors to Facebook’s $90 million settlement of a class action over its tracking of users on non-Facebook websites told a skeptical federal appeals court on Wednesday that deal should be tossed because the lower court failed to properly value the class’s statutory claims.

The plaintiffs in the consolidated litigation alleged that Facebook, now known as Meta Platforms Inc., tracked their online activities without their consent even when they were no longer logged into the social media service.

The settlement was reached after the Ninth Circuit held that the plaintiffs had adequately pleaded claims under the Federal Wiretap Act, the California Invasion of Privacy Act, and the California Computer Data Access and Fraud Act. Objectors Sarah Feldman and Hondo Jan appealed to the Ninth Circuit after Judge Edward J. Davila of the US District Court for the Northern District of California gave final approval to the deal in November 2022.

The total value of the statutory damages available to the 124 million class members was $1.24 trillion, meaning the settlement provided a recovery of just .0073% of the maximum statutory damages, an inadequate result under federal rules for approving class-action settlements, John J. Pentz of Wayland, Mass., who represented the objectors, said during oral argument before the US Court of Appeals for the Ninth Circuit.

David A. Straite, a partner with DiCello Levitt LLP, who represents the non-objecting class members, asked the court to affirm the judgment of the lower court. “We believe this to be an “historic settlement with overwhelmingly positive reaction from the class,” as shown by the 1.5 million submitted claims as against nine objectors.

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Perrin Davis, Brian Lentz and the other plaintiffs claimed in the 2011-filed lawsuit that Facebook tracked users’ internet activity on pages that displayed a Facebook “Like” button using “cookies,” or small text files the server creates and stores on the user’s computer.

The case consolidated similar complaints filed on behalf of U.S. residents in 10 states, including Alabama, California and Texas.

Ninth Circuit Judge Ryan D. Nelson said the size of the statutory damages under the objectors’ calculation, which would lead to bankruptcy even for a company the size of Meta, would create problems for the objectors’ argument under the Due Process clause of the Constitution.

“The district court said that that would violate Meta’s due process, if it were subject to that amount of damages,” the judge said.

The proposed settlement amount of $90 million was 10% of the class’s own estimate of its maximum damages, which Ninth Circuit case law has held to be reasonable, Nelson said.

Pentz agreed that a 10% recovery on the facts of the case may be a reasonable amount, but said “it has to be 10% of what the class would realistically recover after trial in front of a jury.”

Pentz added that settlement amount also needed to be large enough to serve the statutory purpose of deterring Facebook’s behavior.

“And you know, Facebook stopped doing it, that was part of the settlement,” said Nelson. “I’d say that was pretty good deterrence.”

Christopher Chorba, a partner with Gibson, Dunn & Crutcher LLP and who represents Meta, said that a district court isn’t required under Ninth Circuit precedent to consider every available form of relief in evaluating the adequacy of a settlement.

“For the purposes of settlement the class engaged a damages expert who calculated that $90 million was 10% of the available disgorgement,” he said. “This was on of their principal theories of damages—and it’s within class counsel’s discretion to consider what relief to seek because of the obvious due process problems.”

The district court was also well aware of those problems after extensive discussion at the hearing for final approval of the settlement, Chorba said.

Judges Danielle J. Forrest and Gabriel P. Sanchez were also on the panel.

Simmons Hanly Conroy and Grygiel Law LLC also represent the non-objectors. Kendrick M. Jan of San Diego, Cal., and Eric A. Isaacson of San Diego, Cal. also represent the objectors. Cooley LLP also represents Meta.

The case is Davis v. Meta Platforms Inc., 9th Cir., Nos. 22-16903, 22-16904, oral argument 2/7/24.