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Facebook Hit with $15 Billion Privacy Class Action Suit
Facebook Hit with $15 Billion Privacy Class Action Suit

By Jennifer LeClaire
May 18, 2012 11:45AM

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"Privacy issues will continue to be a challenge for Facebook as it pushes to generate more revenue in a post-IPO environment," said analyst and former attorney Greg Sterling. Facebook's model is based on making as much information as possible about Facebook users visible and available to advertisers, Sterling said.

Facebook is now a publicly traded company -- and it's also under legal fire. Beyond Yahoo's patent litigation against the social media giant, Facebook is the subject of a class action suit over privacy concerns.

Facebook users on Friday filed an amended consolidated class action complaint in federal court in San Jose, Calif. The privacy suit involves alleged Facebook Internet tracking violations and seeks a minimum of $15 billion in damages.

"This is not just a damages action, but a groundbreaking digital-privacy rights case that could have wide and significant legal and business implications," said David Straite, a Stewarts Law partner. Stewarts Law, a London firm that set up U.S. offices in April, is representing the class action.

Tapping the Wiretap Act

The lawsuit argues federal statutory and California state causes of action related to the revelation in September 2011 that Facebook was improperly tracking the Internet use of its members even after they logged out of their accounts. The class action consolidates 21 related cases filed in more than a dozen states in 2011 and early 2012.

The plaintiffs' argument is based on the federal Wiretap Act, which provides statutory damages per user of $100 per day per violation, up to a maximum per user of $10,000. Even if Facebook's alleged actions constitute a single violation of the Wiretap Act per class member, that implies more than $15 billion in damages across the class. The complaint also asserts claims under the Computer Fraud and Abuse Act, the Stored Communications Act, various California statutes and California common law.

The amended suit comes on the day Facebook went public. Facebook hit its financial targets, raising $16 billion in its IPO. The stock climbed $4 a share to about $42 a share, a 10 percent boost, in the first few minutes of trading on Wall Street Friday morning. Facebook CEO Mark Zuckerberg rang the Nasdaq opening bell from Facebook's Menlo Park, Calif. corporate headquarters.

Facebook's Public-Private Future

We asked Greg Sterling, principal analyst at Sterling Market Intelligence and a former practicing attorney, what he makes of the Facebook privacy class action suit. He told us he can't comment on the merits or outlook for this particular case, but he did offer insight on the future of Facebook and privacy.

"Privacy issues will continue to be a challenge for Facebook as it pushes to generate more revenue in a post-IPO environment. Its model is based on making as much information as possible about people visible and available to advertisers," Sterling said.

"In general, people don't want to be tracked and targeted by ad networks and marketers online. They will, in situations of a clear value exchange, give up personal information, but don't want to do it as a matter of routine."

Tell Us What You Think



Posted: 2012-05-20 @ 6:25am PT
Another instance of Big Bro. What's gonna happen when everyone is made to get a computer chip implanted into them? They will literally be tracked wherever they go. Not much unlike the chips they put in pets to locate them when they get lost.

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