Plaintiffs tussle with Facebook over proposed settlement of ad-related lawsuit

Opponents of Facebook's settlement of a lawsuit involving "Sponsored Stories" -- an ad feature that displays images of users of the social network -- spent Friday morning in a San Francisco court trying to convince a federal judge that the settlement's terms fail to protect the privacy of minors.

Facebook, of course, believes otherwise and if users who are objecting to the settlement don't agree, they should just leave the class-action lawsuit, according to Michael Rhodes, the attorney hired by the social network to handle the case.

"If it's such a terrible action, opt out," he said during a hearing in the U.S. District Court for the Northern District of California. If a plaintiff were to opt out of the class action, he or she could sue Facebook separately.

In December, U.S. District Judge Richard Seeborg gave preliminary approval for the $20 million settlement. But some of the case's plaintiffs weren't happy, including six parents who each have children aged 13 to 16.

Sponsored Stories are the ads that feature a user's name and photo when he or she "likes" a page belonging to an advertiser. The original five plaintiffs claimed that the social network violated users' right to privacy by publicizing their "likes" in advertisements without asking for permission or offering compensation. After hearing arguments from both sides, Seeborg can issue his decision at any time. There are no other hearings scheduled at this point, but if Seeborg ends up rejecting the settlement, the case, of course, will continue.

During the hearing, Seeborg asked the objectors' attorneys to explain why they think the settlement is not fair, emphasizing that he was not there to draft a new policy for Facebook: his role is to reject or accept the settlement.

"Why is this more harmful to the 13- to 17-year-old than it is to an adult?" he asked.

The objectors argued that teenagers need more protection because they don't fully understand the consequences and post information without thinking. Seeborg commented, "the premise of posting without thought is certainly not confined to minors."

Scott Michelman, an attorney with Public Citizen, the nonprofit that's representing the parents with teens, said the bottom line is that the court can't approve a settlement that breaks other laws. In this case, state laws require parents to give permission for the use of a minor's likeness. Under the settlement, minors can opt out of participating in the ad unit only if they say specifically that their parents didn't give them permission to use Facebook, or if the parents are on Facebook as well and are linked to the minor's account. In the second scenario, the parents would opt out for the minor.

"Minors' images will continue to be used under this settlement without parental consent," Michelman told Seeborg.

The objectors also argued that Facebook's recent plans to get rid of the "Sponsored Stories" label and integrate that type of ad unit into its other advertising products would give the company a loophole out of the settlement.

Rhodes responded, saying that the name may have changed but the ad unit's function has not and Facebook will recognize that.

"The name of that ad format is being phased out and Sponsored Stories will be a part of ad units going forward...We can't avoid injunctive relief by changing the name," he said.

Though the answer didn't appease Michelman, who said after the hearing that the settlement should be rewritten to clarify that point, Judge Seeborg said Facebook can't argue that the settlement won't apply just because the label "Sponsored Stories" is gone.

"Effectively, whatever Sponsored Stories is doing, whatever one may put as the name for it, it's covered," Seeborg said.