The Law Office of Lynnette Ariathurai A Professional Corporation

Class action status rejected in Facebook contract dispute

In a case that may be of interest to readers, a federal court in California has rejected class action status for a lawsuit brought against Facebook. The business contract dispute, involving thousands of advertisers who claim that Facebook wrongfully charged them, was originally brought in 2009. However, even as the presiding judge rejected the class action status, the judge nonetheless scheduled a conference to be held in mid-May to discuss how the litigants may be able to proceed further.

The lawsuit has to do with a particular type of advertisement on Facebook called "cost-per-click" advertising. Under this model, an advertiser is only charged when a user actually clicks on the ad. However the advertisers allege that Facebook charged them for mistaken clicks, clicks caused by server problems and even for nonexistent clicks. They subsequently sued for breach of contract and for the violation of an unfair competition law in California.

In launching the lawsuit, though, the advertisers also sought class action status. However, a 2011 case involving Wal-Mart led the U.S. Supreme Court to narrow the type of litigants that can file for class action status. In order to qualify, the litigants need to have a substantial commonality of issues, which includes the amount of recovery sought.

Here, the problem was with damages. That is, the court agreed with Facebook that the litigants would have to prove their damages on an individualized basis and had no method of proving the recovery for each member of the class. As a result, the class action status in the business contract dispute was ruled to be inappropriate.

Source: Chicago Tribune, "Facebook advertisers lose bid for class status," Jonathan Stempel, April 13, 2012

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