Facebook massive class-action privacy suit moves to discovery

U.S. District Judge Vince Chhabria moved to discovery a class-action damages suit against Facebook by users claiming their privacy was mined through “friends.”

Facebook’s 2019 Annual Stockholder Meeting was supposed to be a victory lap for cofounder and CEO Mark Zuckerberg after the world’s top social media company beat Wall Street estimates for revenue, operating earnings, monthly active users, average user revenue, and ‘Stories’ feature use on all its platforms.

But as shareholders arrived in Menlo Park on May 30, Silicon Beat reported that “Fire Zuckerberg” was projected on a nearby wall of the Hotel Nia and a plane overhead was pulling a banner demanding: “Break up Facebook, Save Silicon Valley.”

Once inside, shareholders were offered proxies with eight dissident shareholder proposals seeking to punish Facebook after numerous scandals by seeking to force the appointment of an independent chairman, or prevent the renomination of Zuckerberg and Chief Operating Officer Sheryl Sandberg.

With Zuckerberg holding about 60 percent of the Facebook’s voting shares, he has nothing to fear from grumpy minority shareholders. But Judge Chhabria’s decision the prior day that the allegations in dozens of lawsuits claiming fraud and misrepresentation regarding control over their personal information have sufficient merit under federal law to consolidate claims and begin moving the trial forward to discovery.

Facebook states that it is an on-line auction house for advertisers to access its social media opt-in users that drives up bid prices through a secretive algorithm that matches user needs to customer offerings. But media revelations have reported that Facebook also sells its user data to businesses interested in influencing social and political attitudes.    

The basis for filing federal privacy lawsuits arose from media revelations regarding how the UK’s Cambridge Analytica procured data without their knowledge on up to 87 million American Facebook users to aid the Trump campaign in the 2016 election cycle.

The federal lawsuits consolidated in a San Francisco court contends that Facebook signed a privacy settlement agreement with the U.S. Federal trade Commission (FTC) in 2011 that effectively barred the company from surveilling or data mining its social media users without their knowledge or consent.

But Facebook interpreted the settlement to mean that if a user adjusted their Facebook privacy settings to share information with “Friends Only,” the company had the right to collect data on the user and on their friends.

The complaint alleges that despite Facebook’s FTC settlement, the company deliberately ignored privacy settings so that app developers and 150 business partners, such as Apple, could mine so-called rich data from user viewing histories, photos, videos, and social media comments.

Cambridge Analytica is alleged to have used Facebook rich data to engage in “psychographic marketing” to target users’ values, concerns, and fears.

Among various claims for damages, plaintiffs allege: “The Content and Information About Its Users That Facebook Has Shared With Third Parties Has Allowed Advertisers and Political Operatives to Harass and Discriminate Against Them.”

Facebook was able to get privacy lawsuits dismissed in the past by arguing that users can’t claim damages because they already consented to the use of their information when they joined the platform. Even if the plaintiffs did not give proper “consent,” Facebook argued that plaintiffs cannot meet a 2016 U.S. Supreme Court ruling requiring proof of “concrete injury,” such as identity theft economic losses, to collect damages.

According to the Claims Journal, Judge Chhabria stated that Facebook has mistakenly been treating user privacy expectations as a “binary” scheme. The Judge recognized that sharing on Facebook with others diminishes privacy, “but it doesn’t eliminate it” so Facebook can “disseminate it to a thousand different corporations.”

Facebook’s stock was not impacted when the company announced it expects the FTC to issue fines of up to $5 billion and get the company to agree to enhanced compliance for violating the 2011 settlement over its privacy practices.

But allowing plaintiff discovery that unveils how Facebook’s top-secret algorithm trolls user data and the extent that the company mines and monetizes its ecosphere, may significantly diminish Facebook’s reputational value and curb its future earnings growth.

Chriss Street is an economist and geopolitical consultant