Facebook’s terms of service doomed Canadian class-action lawsuit

The law firm representing Canadian members of Facebook in a class-action lawsuit decided settlement was the best option after a Quebec judge determined the case had to be litigated in Santa Clara, Calif.

Merchant Law Group LLP issued a notice yesterday that Facebook will pay the lawyers who handled the suit $75,000 and class representative Patrice St. Arnaud $1,000 to settle the case. The suit includes all Canadians who were members of Facebook between December 2009 and January 2010, except for those who opt out of the suit.

Despite awaiting a hearing in a Manitoba court, the law firm decided not to pursue the case further after a Quebec judge made a ruling on April that obliged St. Arnaud to fight his case in Santa Clara – an agreement he had made when signing up for Facebook, in the terms of service agreement.

“We disagree with the Quebec judge’s decision,” says Owen Falquero, attorney with the Merchant Law Group. “But it is one of the things we had to consider.”

A similar lawsuit against Facebook representing U.S. members was approved by a Santa Clara court for settlement May 10. The law offices of David Lake settled with Facebook for the promise of an updated privacy policy within 120 days, $300,000 to be paid for counsel’s fees and expenses, and $1,000 each for the main plaintiffs involved in the suit.

“The fact that the case lawyers had figured a settlement was a better way to go was a suggestion to us that might be the best possibility,” Falquero says. Even if the amount of payment received doesn’t even cover the firm’s fees.

“The number of hours we have on the file far, far exceed the amount that we have proposed,” the lawyer says. “It certainly would not be called a windfall. If you do the math, it ends up being a fairly modest wage.”

The law firm launched litigation against Canada’s most widely-used social networking site charging that Facebook’s users were deceived by Facebook’s misrepresentation of its updated privacy settings at the time. Users were prompted to review their privacy settings by Facebook at the time, but anything left unchanged from the default setting allowed Facebook to share information with third parties, according to the firm, which was not the default before the settings change.

Facebook agrees in the Canadian settlement that it will not substantially change its current privacy policy for at least three years. Facebook has recently updated its privacy control settings to make it more clear for users how their information is being exposed and when, Falquero says.

Merchant Law Group had filed an appeal against the Quebec judge’s decision that St. Arnaud must litigate in Santa Clara county. It had argued in court it was a consumer contract, but the judge disagreed because there was no money being paid by the user to Facebook and deemed it a contract between private individuals. That meant Facebook’s terms of service agreement was upheld.

“I don’t think that most people spend an hour and a half reading the terms and conditions,” Falquero says.

The settlement will be brought to a Montreal court room Feb. 9, 2012 to be approved by a judge. Any member of the class defined in the suit has 45 days from the time of publication of the Notice of Settlement, to opt out and seek other legal options. Otherwise, they are bound by the settlement.

Merchant’s class-action suit against Facebook may be the largest in Canadian history in terms of the number of claimants involved. In addition to the class action litigation, Facebook is under an ongoing investigation by the Privacy Commissioner of Canada due to a complaint lodged in January 2010.

Merchant is known for representing high profile class-action suits in Canada, including acting as representation for the native residential school students, and taking action against HSBC Mutual Funds and Winners/Homesense.

Facebook declined to comment for ITBusiness.ca.

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