Bloomberg News

Facebook Suit Over Subscriber Tracking Seeks $15 Billion

May 19, 2012

The 'Facebook' logo on sunglasses as she browses on a tablet. Photographer: Manjunath Kiran/AFP/Getty Images

The 'Facebook' logo on sunglasses as she browses on a tablet. Photographer: Manjunath Kiran/AFP/Getty Images

Facebook Inc. (FB:US), the social network operator whose shares began trading yesterday, was sued for $15 billion in an amended complaint by subscribers who claim the company invaded their privacy by tracking their Internet use.

In the complaint filed May 17 in federal court in San Jose, California, the plaintiffs say Facebook improperly tracked users even after they logged out. Twenty-one cases making similar claims have been consolidated before the court. The latest filing seeks to proceed on behalf of U.S. residents who subscribed to Facebook from May 2010 to September 2011.

Facebook, which sold stock in an initial public offering valuing the company at about $104 billion, has been scrutinized by regulators in the U.S. and Europe over how it protects users’ private information. Last year, a German data-protection agency said it may fine the Menlo Park, California-based company over facial-recognition software used for tagging photos.

“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, a partner at Stewarts Law, which represents some of the users, said in an e- mailed statement.

Andrew Noyes, a Facebook spokesman, said in an e-mailed statement that the claims are without merit and the company will contest them.

Non-U.S. Residents

Straite said his firm is evaluating ways to add non-U.S. residents to the group of plaintiffs.

The U.S. Wiretap Act “provides statutory damages of the greater of $100 per violation per day, up to $10,000, per Facebook user,” according to the complaint. Facebook’s more than 800 million members are entitled to about $15 billion in total, according to the plaintiffs.

Facebook sold 421.2 million shares at $38 each to raise $16 billion, it said in a statement. That values the company at $104.2 billion, or 107 times trailing 12-month earnings, more than every S&P 500 member except Amazon.com Inc. and Equity Residential. (EQR:US)

The shares (FB:US) rose 23 cents above the IPO price of $38 yesterday in Nasdaq Stock Market trading.

The case is In re: Facebook Internet Tracking Litigation, 5:12-md-02314-EJD, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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