Background
Clearview AI operates a facial recognition search engine that scrapes biometric data from public sources. Following an exposé, multiple class-action suits were consolidated in the Northern District of Illinois. The parties reached a settlement providing an equity stake in Clearview and a cash demand option, with benefits allocated differently based on state residency. The district court approved the settlement, but objectors from the nationwide class appealed, arguing the allocation was unfair and the representation inadequate.
The court’s reasoning
The court reviewed the settlement for an abuse of discretion, focusing on whether the class representatives adequately protected the interests of all class members. While the court found no inherent substantive problems with the lack of injunctive relief or the nature of the equity stake, it identified a critical procedural flaw. The settlement allocated far greater monetary benefits to members of favored state-specific subclasses compared to the nationwide class. Because all class representatives who approved the settlement were members of the favored subclasses, they could not fairly represent the nationwide class regarding the allocation of monetary relief. The court held that class-action settlements require structural assurances of fair and adequate representation, which were lacking here.
Class-action settlement requires structural assurances of fair and adequate representation, and those were lacking here.
Opinion at 2
What it means going forward
The approval of the settlement is vacated, and the case is remanded to the district court for further proceedings. The district court must ensure that the nationwide class has separate representation to address the conflict of interest regarding the allocation of settlement benefits.