• by Wendy Davis  @wendyndavis, September 20, 2012

A divided federal appeals court ruled on Thursday that Facebook can create a new privacy foundation in order to settle a class-action lawsuit stemming from its defunct Beacon ad program.

A panel of the 9th Circuit Court of Appeals voted 2-1 to uphold the settlement, approved in 2010 by U.S. District Court Judge Richard Seeborg. "We affirm the district court’s holding that the settlement was fundamentally fair," the majority wrote. The court specifically rejected arguments by opponents, who contend that Facebook will exert too much control over the new organization, called the Digital Trust Foundation.

The majority decision paves the way for Facebook to move forward with the new foundation, which is part of a $9.5 million settlement package. The deal calls for Facebook to pay $6.5 million to fund the Digital Trust Foundation, which will be directed by a three-person board that includes Facebook's Director of Public Policy, Tim Sparapani. The social networking giant also will pay the 19 consumers who filed suit amounts varying from $1,000 to $15,000, while around $3 million will go toward court costs and to the lawyers who brought the case.

Senior Circuit Judge Andrew Kleinfeld dissented from the decision. "This settlement perverts the class action into a device for depriving victims of remedies for wrongs, while enriching both the wrongdoers and the lawyers purporting to represent the class," he wrote.

 "Facebook deprived its users of their privacy. And now they are deprived of a remedy."