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Monday, February 24, 2020

'This should keep you up at night': $550M Facebook settlement could spark yet more IL biometrics class actions

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By Jonathan Bilyk | Feb 5, 2020

Facebook

For Facebook, it didn’t seem to amount to much.

Even after years of litigation, the social media giant only gave it the briefest of mentions, a seeming throwaway line in its quarterly earnings report.

But Facebook’s quiet announcement of a settlement to end its years-long court fight quickly gained headlines across the country, in no small part because, to most Americans, $550 million is a relatively large sum of money.


Molly Arranz | SmithAmundsen

And that dollar figure – and the attention it drew – is likely to fuel the interest of many other lawyers seeking to use Illinois’ privacy law, known as the Biometric Information Privacy Act, to draw out paydays of their own, say attorneys who have themselves spent years trying to help companies defend against such lawsuits.

 “I don’t know that I would expect a groundswell, necessarily,” said Molly Arranz, an attorney with the firm of SmithAmundsen, in Chicago, who serves as chair of SmithAmundsen’s Data Privacy, Security and Litigation Practice Group . “But I would anticipate an uptick.

“Facebook is a very high profile defendant, so this will certainly raise the profile of BIPA even more.”

THE SETTLEMENT

Since 2015, Facebook had battled in court to defeat a class action lawsuit launched under the Illinois biometric privacy law.

First filed in Cook County Circuit Court by attorneys from the Chicago firm of Edelson P.C., the action accused Facebook of violating the Illinois BIPA law in its so-called photo tagging system. According to the lawsuit, Facebook improperly failed to obtain consent from Facebook users before scanning photographs containing their likenesses that were uploaded to Facebook’s social media platform, and then creating a so-called “face print” template to be used by Facebook’s algorithms to automatically recognize and identify those people in subsequent photo uploads, either by the users themselves or by others.

The class action asserted Facebook should be forced to pay damages of $1,000-$5,000 per facial recognition scan of every Illinois resident whose likenesses were “tagged” on Facebook.

With millions of users in Illinois, Facebook and the plaintiffs’ lawyers both conceded the potential damages, should the case go to trial, could amount to tens of billions of dollars.

The lawsuit was one of the first of its kind filed under the Illinois BIPA law, and Facebook contested the action nearly every step of the way. However, the company lost at every turn.

Facebook asserted the class actions were improper because no one was actually harmed by the photo tags. No identities were stolen, and no one suffered any financial loss or other injuries under the law.

Further, Facebook argued the Illinois law shouldn’t apply to Facebook, simply because some users happen to live in Illinois.

And the company argued the differences among potential users was so great, a class action could not hold together in court, as the claims would result in a series of time-consuming mini-trials.

However, U.S. District Judge James Donato, and later the U.S. Ninth Circuit Court of Appeals, rejected all those arguments.

The Ninth Circuit particularly relied on a decision from the Illinois Supreme Court which in early 2019 had ruled plaintiffs don’t need to prove they were ever really harmed by technical violations of the BIPA law before being allowed to press lawsuits that could be worth billions of dollars.

Facebook then attempted to appeal to the U.S. Supreme Court. But the high court opted not to hear the case.

Days later, Facebook Chief Financial Officer David Wehner noted in the company’s fourth quarter 2019 earnings call that Facebook had agreed to settle the litigation for $550 million.

That news was quickly confirmed in a joint statement from Edelson and the firms of Labaton Sucharow, of New York, and Robbins Geller, of San Francisco, who had jointly pressed the class action against Facebook for nearly 5 years. The settlement news was further confirmed in a status report to Judge Donato, filed on Feb. 3.

In their statement, the firms noted the settlement marked the largest ever such cash-only settlement from a data privacy case, far outdistancing the $380 million paid by Equifax to end its data breach litigation.

The plaintiffs’ lawyers said the settlement could result in checks of $200 each for eligible Illinois Facebook users. Details of the settlement have yet to be revealed, however, including how much the plaintiffs’ lawyers may receive from the settlement. The settlement must still be approved by Judge Donato.

However, typically, plaintiffs’ lawyers claim around a quarter to a third of the settlement funds in attorney fees.

SURGE COMING?

Even before those numbers are finalized, however, the sheer amount of the settlement likely will lead to a greater acceleration of the growth of such lawsuits that now target businesses and employers of all sizes and types in Cook County and other Illinois courts.

“I suspect you’re going to see a number of plaintiffs’ attorneys, who may have been focused before on things like wage-and-hour claims, now pivot to press BIPA class actions,” said Arranz. “The bar is now pretty low for these kinds of cases.”

Since the Illinois Supreme Court’s decision in the case docketed as Rosenbach v Six Flags, in which the justices held proof of harm is not required to bring sweeping class actions under BIPA, the number of such cases have surged in courts in Cook County and elsewhere in Illinois, with as many as 3-10 new cases being filed each week throughout much of 2019. The trend has continued so far this year.

While the claims against Facebook and other big tech companies, like Google, Amazon, Apple and Shutterfly, have claimed headlines, a majority of the hundreds of BIPA class actions filed locally have targeted employers. Typically, these lawsuits – often boilerplate versions of each other – take aim at employers for using so-called biometric time clocks, which require employees to scan fingerprints when punching in and out of work shifts, or for requiring biometric scans to prove a worker’s identity before accessing secured or sensitive areas within a workplace, like a rail yard or drug supply closet at a hospital.

While some lawsuits have been filed against large employers like Walmart, many others have targeted employers across the spectrum of industries and economic sectors.

Nearly all of them allege the employers violated BIPA by requiring employees to scan fingerprints when punching the clock without having first obtained written authorization from workers to scan their prints or providing notice to employees concerning the purpose of the scans; how their fingerprint scans will be stored and shared; and how the fingerprints will be ultimately destroyed.

For instance, from Jan. 21 to Feb. 3 alone, 11 new BIPA-related class action lawsuits were filed in Cook County Circuit Court against a range of employers, including:

  • Senior housing management company Atria;
  • Hartgrove Hospital in Chicago;
  • T-Mobile store operator Wireless Vision;
  • Water management solutions manufacturer Prinsco;
  • Menasha Packaging Company;
  • Foodservice provider Compass Group USA;
  • Salad kit packer and distributor Fresh Express;
  • Norfolk Southern Railway; and
  • Pharmaceutical packaging company Nosco.
Employers throughout Illinois should take note of the trend, and expect the lawsuits to continue piling in, said Arranz and attorney Gerald Maatman and others with the firm of Seyfarth Shaw in Chicago.

Arranz warned any Illinois employers who at any time have used biometric time clocks to track employee work hours to be prepared for lawsuits, even if they no longer use such systems in their workplaces.

“You’re going to have a lot of companies that aren’t using the biometric clocks any more, but it may be a former employee sees a chance now to gain a quick couple thousand bucks off this,” said Arranz.

She said she is aware of a number of employers who have told her the prospect of such litigation and potentially business-crippling judgments “keeps them up at night.”

'SEEK CHANGES'

Maatman, a partner at Seyfarth whose practice centers on defending employers against such actions, and his Seyfarth colleagues cautioned the Facebook settlement may not necessarily produce the bonanza some employers and other businesses may fear.

Maatman, particularly, noted a belief the settlement may have a “minimal impact” on BIPA litigation, overall, for “multiple reasons.”

He noted California’s courts operate under different rules than in Illinois, so cases there may produce “outcomes that are not analogous to Illinois.”

Maatman also noted the defendant in that case was “one of the largest social media companies on Earth,” allowing them to take a different view to what would be to smaller companies a staggering sum.

Further, he said, the facts at play in the Facebook BIPA case are not “’apples to apple’ with what typical BIPA class actions in Illinois are all about.”

However, in a blog post discussing the Facebook settlement fallout, Seyfarth attorneys agreed the sheer size of the settlement could boost the reach and number of privacy lawsuits filed in Illinois under BIPA and across the country under other privacy laws.

“… Despite the unique posture of the Facebook lawsuit, this significant settlement amount may exacerbate an already growing trend in privacy lawsuits being filed across the nation, with Illinois serving as a hotbed for such litigation under the BIPA,” the Seyfarth lawyers wrote in their blog.

Arranz agreed the circumstances in the Facebook case differed from the typical BIPA case against an employer over punch clock fingerprint scans.

However, she said, the Facebook settlement will likely encourage even more businesses to push for a quick settlement.

“I think companies were already looking at settlements,” said Arranz. “There are not many defenses that have been successful so far, so I expect this (Facebook settlement) will only embolden that position.”

Both Arranz and her Seyfarth counterparts urged employers to begin complying with BIPA immediately, and discuss their potential situations with their attorneys.

However, once compliant with the law, Arranz said Illinois business owners and employers may best invest their time and energy in contacting their state representatives and state senators, and any other elected official who would listen, to lobby for changes to the law to make it less perilous for Illinois employers.

She said Illinois employers should look for no relief on these lawsuits from the courts, given the trend thus far in rulings in courts in Chicago, Springfield, San Francisco and Washington, D.C.

“This is something that should be keeping you up at night, to seek changes,” said Arranz. “And the appropriate avenue for that is to raise the issue with the lawmakers, and to petition your governing bodies to do something about it.”

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Organizations in this Story

Edelson, PCIllinois Supreme CourtSeyfarth Shaw, LLPCircuit Court of Cook CountySmithAmundsenFACEBOOK, INC.

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