Online Powerhouses – Too Big to Sue?

Online Powerhouses – Too Big to Sue?

Online Powerhouses – Too Big to Sue?

Internet privacy is not just under siege from the NSA. Google is fighting two huge class action suits based upon privacy violations. Facebook recently settled two privacy-based class action lawsuits. These lawsuits are colossal because Google and Facebook are two mammoth companies with enormous numbers of customers. One class is comprised of everyone who has a Gmail account or sent a message to a GMail account over the last two years. How huge is that? The last time Google released the number of Gmail accounts was in June, 2012: 425 million worldwide. I’ve opened two myself since then.  But that’s only the number of Gmail accounts and doesn’t include everyone sending messages to Gmail accounts. Facebook boasts over 1 billion users. We mean huge.

Facebook-legal

(Image Source: Shutterstock)

The second Google case is In re Google Street View Electronic Communications Litigation. This class is every person in the US whose home WiFi Google tapped to perform its street view mapping. No one knows how many people that is, but it could be in the millions.

While lawyers typically look for moneyed defendants, the problem with lawsuits of this magnitude is that each privacy violation has a statutory penalty of up to $10,000 under the Wiretap Act. When the class of plaintiffs is so large, the penalties rapidly hit billions or even trillions of dollars – that is if every class member decides to participate.

So what does this really look like? Facebook lucked out on its class action, Fraley v. Facebook, when the judge approved a settlement in August to pay each class member $15. The potential class included 150 million users but only 615,000 filed claims. Facebook paid $20 million into a settlement fund with $9,225,000 going to class members; $5,000,000 to Internet privacy watch dog groups, called cy pres awards; and $3.5 million in attorneys’ fees. So Facebook is lucky because $20 million is far less than $2.25 billion (150 million members x $15). If each class member got $1,000, more would likely have signed up and well, you can do the math.

Facebook managed to settle its next class action on the Beacon program (Let’s broadcast details about our users’ personal lives!) with a $6 million cy pres award to a privacy group Facebook controls. Clearly Facebook thought it “cracked the code” on managing its privacy problems but the case is being appealed. And what’s more, settling class actions with cy pres awards in lieu of compensating individuals is now losing favor in the 9th Circuit where Google and Facebook live.

The Google cases have been progressing through the litigation process with the plaintiffs largely winning. Even with gross revenues of $50 billion in 2012, awarding significant damages to each class member would likely bankrupt Google, leaving the claimants without payments and hundreds of millions without services.

Some commentators are arguing that the suits are “Too Big to Settle”. In the class action world, once the class is certified by the court, settlements are very difficult. What usually happens is that prior to certification, the parties come up with their proposed settlement and present it to the court for approval. Once the class is certified, it’s up to the court to define the award. If the court won’t accept a cy pres award and applies statutory damages to each class member, we are looking at staggering judgments.

It’s reminiscent of the “Too Big to Fail” arguments of the big banks and auto companies. But do they warrant it? However you feel about class action suits, shouldn’t Google and Facebook be held accountable for privacy violations even though they are so large – or because they are so large? Would the impact of Google’s or Facebook’s demise be similar to bringing down the banking system or the auto industry? Or would the Internet ecosystem hiccup and move on?

The U.S. Supreme Court should announce if they will take the appeal of the Beacon Facebook class action and its cy pres award on Monday. Any bets?

By Cindy Wolf

Cindy is a Colorado lawyer with more than 25 years experience representing large and small domestic and multinational companies. Her expertise is in helping companies enter the cloud safely, either as providers or users. She also practices in the areas of corporate law and commercial contracting, with an emphasis on international issues. She can be reached at cindy@cindywolf.com. 

(Note: This publication is provided for informational purposes only. It does not constitute legal advice. There is no implicit guarantee that this information is correct, complete, or up to date. This publication is not intended to and does not create an attorney-client relationship between you and the author.)

About CloudTweaks

Established in 2009, CloudTweaks is recognized as one of the leading authorities in connected technology information and services.

We embrace and instill thought leadership insights, relevant and timely news related stories, unbiased benchmark reporting as well as offer green/cleantech learning and consultive services around the world.

Our vision is to create awareness and to help find innovative ways to connect our planet in a positive eco-friendly manner.

In the meantime, you may connect with CloudTweaks by following and sharing our resources.

View All Articles

Sorry, comments are closed for this post.

How Your Startup Can Benefit From Cloud Computing And Growth Hacking

How Your Startup Can Benefit From Cloud Computing And Growth Hacking

Ambitious Startups An oft-quoted statistic, 50% of new businesses fail within five years. And the culling of startups is even more dramatic, with an estimated nine out of ten folding. But to quote Steve Jobs, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.” So while…

Disaster Recovery – A Thing Of The Past!

Disaster Recovery – A Thing Of The Past!

Disaster Recovery  Ok, ok – I understand most of you are saying disaster recovery (DR) is still a critical aspect of running any type of operations. After all – we need to secure our future operations in case of disaster. Sure – that is still the case but things are changing – fast. There are…

Cloud Computing Checklist For Startups

Cloud Computing Checklist For Startups

Checklist For Startups  There are many people who aspire to do great things in this world and see new technologies such as Cloud computing and Internet of Things as a tremendous offering to help bridge and showcase their ideas. The Time Is Now This is a perfect time for highly ambitious startups to make some…

Why Cloud Compliance Doesn’t Need To Be So Overly Complicated

Why Cloud Compliance Doesn’t Need To Be So Overly Complicated

Cloud Compliance  Regulatory compliance is an issue that has not only weighed heavily on the minds of executives, security and audit teams, but also today, even end users. Public cloud adds more complexity when varying degrees of infrastructure (depending on the cloud model) and data fall out of the hands of the company and into…

How Data Science And Machine Learning Is Enabling Cloud Threat Protection

How Data Science And Machine Learning Is Enabling Cloud Threat Protection

Data Science and Machine Learning Security breaches have been consistently rising in the past few years. Just In 2015, companies detected 38 percent more security breaches than in the previous year, according to PwC’s Global State of Information Security Survey 2016. Those breaches are a major expense — an average of $3.79 million per company,…

Cloud Infographic – Interesting Big Data Facts

Cloud Infographic – Interesting Big Data Facts

Big Data Facts You Didn’t Know The term Big Data has been buzzing around tech circles for a few years now. Forrester has defined big data as “Technologies and techniques that make capturing value from data at an extreme scale economical.” The key word here is economical. If the costs of extracting, processing, and making use…

Cloud Infographic: The Explosive Growth Of The Cloud

Cloud Infographic: The Explosive Growth Of The Cloud

The Explosive Growth Of The Cloud We’ve been covering cloud computing extensively over the past number of years on CloudTweaks and have truly enjoyed watching the adoption and growth of it. Many novices are still trying to wrap their mind around what the cloud it is and what it does, while others such as thought…

5 Essential Cloud Skills That Could Make Or Break Your IT Career

5 Essential Cloud Skills That Could Make Or Break Your IT Career

5 Essential Cloud Skills Cloud technology has completely changed the infrastructure and internal landscape of both small businesses and large corporations alike. No professionals in any industry understand this better than IT pros. In a cutthroat field like IT, candidates have to be multi-faceted and well-versed in the cloud universe. Employers want to know that…

Cost of the Cloud: Is It Really Worth It?

Cost of the Cloud: Is It Really Worth It?

Cost of the Cloud Cloud computing is more than just another storage tier. Imagine if you’re able to scale up 10x just to handle seasonal volumes or rely on a true disaster-recovery solution without upfront capital. Although the pay-as-you-go pricing model of cloud computing makes it a noticeable expense, it’s the only solution for many…

6 Tech Predictions To Have A Major Impact In 2016

6 Tech Predictions To Have A Major Impact In 2016

6 Tech Predictions To Have A Major Impact The technology industry moves at a relentless pace, making it both exhilarating and unforgiving. For those at the forefront of innovation it is an incredibly exciting place to be, but what trends are we likely to see coming to the fore in 2016? Below are six predictions…