Facebook IPO Overshadowed By Multi-billion Dollar Lawsuit
May 19, 2012

Facebook IPO Overshadowed By Multi-billion Dollar Lawsuit

On what should have been Facebook´s biggest and brightest day, the company´s initial public offering on Friday was overshadowed by an unprecedented $15 billion class action lawsuit filed against the social network for violating its members´ privacy by tracking Internet usage.

The action, filed in federal court in San Jose, California, combines 21 cases filed across the US and alleges Facebook violated privacy rights of its some 800 million subscribers by tracking them even after they logged out of their accounts. All the lawsuits were consolidated by a California judicial panel that decided the cases should be heard in Facebook's home state, according to Mashable's Alex Fitzpatrick.

The filing seeks to proceed on behalf of all US residents who subscribed to Facebook between May 2010 and September 2011.

“This is not just a damages action, but a groundbreaking digital-privacy rights case that could have wide and significant legal and business implications,” David Straite of Stewarts Law US LLP, one of the firms leading up the suit, told Bloomberg reporters Kit Chellel and Jeremy Hodges.

Plaintiffs in the case claim that the social network is violating the US Wiretap Act, which prohibits the “interception and disclosure of wire, oral or electronic communications.” According to the complaint, the Wiretap Act “provides statutory damages of the greater of $100 per violation per day, up to $10,000, per Facebook user,” which amounts to roughly $15 billion. According to the plaintiffs, Facebook´s more than 800 million members are entitled to that money.

Straite added that the firm is currently trying to find ways to add international claims to the lawsuit, as Facebook´s privacy practices came under fire in Europe as well.

“We believe this complaint is without merit and we will fight it vigorously,” Andrew Noyes, manager of public policy communications at Facebook, told PCWorld in a statement.

This lawsuit follows a similar class action lawsuit filed against the world´s #1 social network that was settled last year after a privacy agreement was reached with the US Federal Trade Commission (FTC). In that case, the agency accused Facebook of engaging in deceptive privacy policies that caused users to share more information than intended.

Under that agreement, Facebook is subject to fines of $16,000 per violation per day for violating the settlement terms.