A Chicago federal judge has given a preliminary nod to a $92 million settlement of a group of class action lawsuits, accusing TikTok of breaking privacy laws. The decision overrode objections the payout falls short and still does not fully protect TikTok users.
Judge John Lee, of U.S. District Court for the Northern District of Illinois, signed off Sept. 30 on the tentative deal.
The TikTok online video app was launched in 2018 by the China-based company ByteDance. A number of federal class actions were soon filed around the United States, which were consolidated in Chicago federal court. The 21 suits alleged TikTok breached American privacy laws by surreptitiously amassing users' private information, through such means as facial recognition technology.
Katrina Carroll
| Carlson Lynch
In August 2020, then-President Donald Trump said TikTok's alleged privacy violations constituted a "national emergency," ordering TikTok to sell its U.S. operations to a U.S. company or else TikTok would be banned in America. By this point, TikTok was already in settlement negotiations. The White House ultimatum motivated TikTok to decrease its liabilities and increase its value in preparation for sale, Judge Lee said.
The sale of TikTok has not taken place, as the Biden Administration has not backed up Trump's threat.
The agreement that Lee has preliminarily approved, estimated there are 89 million class members countrywide, of which 1.4 million are Illinois residents. Each member will receive one share of the settlement fund, with Illinois citizens collecting six shares. The 35 plaintiffs who spearheaded the class action, 28 of whom are minors, will each receive an additional $2,500.
TikTok consented to refrain from using its app to grab and utilize data considered private, unless such use is in compliance with law. TikTok will also require privacy training for employees and will hire a third-party firm to review its training for three years.
The deal further calls for plaintiffs' attorneys to pick up more than $30 million in fees, plus expenses.
A pair of class members, Dennis Litteken and a person identified as "Mark S.," objected to the settlement, contending plaintiffs' case is stronger than $92 million would suggest, and instead should be around $200 million. However, Lee concluded, "The settlement agreement is well within the range of fairness, reasonableness, and adequacy."
Lee pointed out TikTok has plausible defenses it could pursue at trial.
TikTok has argued that users purportedly agreed to terms of service when utilizing TikTok, including agreeing to use arbitration to settle disputes, waiving participation in class actions.
"Given the prohibitive time and expense of undertaking millions of individual arbitrations, Plaintiffs would likely receive nothing if Defendants succeeded on this front," Lee predicted.
In addition, TikTok could be shielded at trial by the argument that any disclosures of user data to third parties, fall under the 'incident to the ordinary course of business' exemption of the U.S. Code, Lee said. Further, users consented to disclosures when they agreed to TikTok's terms of service.
Lee said plaintiffs may also struggle to prove actual, rather than just potential damages.
"It is not uncommon for consumer class action settlements based on such claims [of non-economic damages] to yield no monetary relief at all. The Court also finds it noteworthy that, out of an estimated 89 million members of the Settlement Class, only two (Mark S. and Dennis Litteken) have objected to the fairness, reasonableness, and adequacy of this widely published settlement so far," Lee noted.
Lee added that continued litigation would likely be "complex, lengthy, and expensive."
The judge further pointed out the mediator in the settlement talks reported there were "significant obstacles" in the plaintiffs' path if trial took place.
The two objectors also complained class members who are minors should collect more in the settlement, because, as minors, they can repudiate the arbitration agreements and class action waivers found in TikTok's terms of service. Lee dismissed this objection by noting that for minors to disaffirm arbitration and waiver terms, they would have to stop using TikTok.
Brian Behnken and Joshua Dugan, along with 957 other class members, want to opt out collectively and press a separate class action, but Lee ruled they must opt out individually, as has been long established in class actions.
Plaintiffs have been represented by Katrina Carroll, of Carlson Lynch, of Chicago; Elizabeth Fegan, of Fegan Scott, of Chicago; and Ekwhan Rhow, of Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, of Los Angeles.
TikTok has been defended by Tony Weibell, of Wilson Sonsini Goodrich & Rosati, of Palo Alto, Calif.
Scott Drury and Mike Kanovitz, of Chicago's Loevy & Loevy, have represented objector Mark S.
Jay Edelson, Ryan D. Andrews and J. Eli Wade Scott, of the Chicago firm of Edelson P.C., have represented objector Dennis Litteken.
Objectors Brian Behnken and Joshua Dugan have been represented by Michael D. Smith, of the Law Office of Michael D. Smith, of Chicago; and Jonathan Gardner, Melissa Nafash and Jonathan Waisnor, of Labaton Sucharow, of New York City.