Facebook Stops Fighting Wiretap Act Litigation After More Than a Decade
Social Media Site Pays $90 Million, Emboldens Class Actions Involving Website Privacy
Meta Platforms, Inc. (formerly Facebook) has proposed a national class action settlement of its long-running Facebook Internet Tracking Litigation.1 According to papers filed by the parties, the settlement class would include more than 124 million Americans. While a settlement does not decide legal controversies, a resolution between one of the leading internet companies and more than a third of the nation will have an impact on how Facebook and other tracking technologies are viewed in court and by Congress.
The plaintiffs contend that between April 22, 2010, and Sept. 26, 2011, Facebook tracked user activity on non-Facebook sites for purposes of targeted advertising. Facebook did so by means of Facebook "Like" buttons that website operators throughout the internet integrated into their digital properties. On Sept. 27, 2011, Facebook publicly committed not to use data from Like buttons and other widgets to track users or target advertising to them and to delete or anonymize the data within 90 days.
According to plaintiffs, during the class period, Facebook violated federal and California Wiretap Act law. Plaintiffs allege that Facebook had used the Like buttons to intercept communications between its users and the non-Facebook websites that they visited. Facebook long contended that it was a party to all relevant communications, not a third party, thereby making it impossible for the company to have intercepted or recorded an electronic communication without the website visitor's knowledge.
In a 2020 decision, the U.S. Court of Appeals for the Ninth Circuit held that "Facebook is not exempt from liability as a matter of law under the Wiretap Act or CIPA [California Invasion of Privacy Act] as a party to the communication." In re Facebook, Inc. Internet Tracking Litig., 956 F. 3d 589, 608 (9th Cir. 2020). Further, the Ninth Circuit's ruling found a number of named plaintiffs had sufficiently alleged economic harm to survive dismissal. The U.S. Supreme Court denied certiorari. When the parties submitted the class action settlement for court approval, the settling parties noted that the Ninth Circuit's ruling has already been cited more than 50 times in reported cases just in the past 18 months.
As consideration for settlement, Meta will pay a non-reversionary amount of $90 million into a settlement fund. Settlement class members will have to submit a claim to receive money. The settling parties' papers estimate that 4 percent to 5 percent will make a claim, based on a Federal Trade Commission study of 100 class actions. This $90 million pie will shrink by the amount of attorney fees (not yet specified) and costs of notice and claims administration before it is divided among class members. The settling parties claim this will represent more than 100 percent disgorgement of net profits from the class period. However, the class period was just 17 months a decade ago (April 22, 2010 to Sept. 26, 2011). The $90 million figure is also a tiny fraction of Meta's current $565 billion market cap.
Meta will also "sequester and delete the data that Plaintiffs alleged was wrongfully collected during the Settlement Class Period," which again is deletion of decade-old internet browsing data. Nevertheless, getting any data deletion from a data company in a settlement class action is a significant new development in data class action law.
All in all, this settlement seems unlikely to significantly change current operations at Facebook. But the headline numbers will draw further legal scrutiny into how third-party trackers are integrated into websites and mobile apps. Given how little online service operators can influence policies at giants such as Facebook and Google, additional care must be taken with disclosures, the look and feel of websites and mobile apps, implementation of banners, and choice of settings and deployment.
1 In re: Facebook Internet Tracking Litigation, Case No. 5:12-md-02314, in the U.S. District Court for the Northern District of California.