Court Rejects Privacy Class Action Deal, Holds that Settlement Distribution Should be Related to Nature of Lawsuit

A federal appeals court rejected a proposed settlement that would terminate a class action lawsuit brought by AOL users. The Court held that the proposed deal was inconsistent with the "cy pres" doctrine, a legal principle that allows courts to allocate funds to groups that protect the class' interests. The Court ruled that cy pres distributions should be based on the nature of the lawsuit, the objectives of the relevant law, and the interests of the class members including their geographic diversity. AOL users sued the company for inserting footers containing promotional messages into users' email messages. The lawsuit alleged violations of several laws, including the Electronic Communications Privacy Act. The parties settled the suit, agreeing to distribute $110,000 to several charities, none of which work to protect internet users' privacy. EPIC previously highlighted the dangers of improper cy pres distributions in Lane v. Facebook and In re: Google Buzz.

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