A federal appeals court has vacated approval of a nationwide biometric privacy settlement involving Clearview AI, finding that part of the class lacked adequate representation when the deal’s monetary benefits were divided.
The U.S. Court of Appeals for the Seventh Circuit sent the case back to the Northern District of Illinois for further proceedings. The ruling reverses the district court’s final approval of the settlement, which resolved claims arising from Clearview’s collection and use of face images taken from public websites.
The proposed deal did not require Clearview to make an immediate cash payment. Instead, it gave class members a right to a payment equivalent to a 23 percent equity stake if the company completed an initial public offering, merger, sale or other qualifying transaction. A court-appointed settlement master could alternatively sell the stake or demand 17 percent of qualifying revenue accumulated after final approval, subject to a September 2027 deadline.
The allocation differed by location. Members of the Illinois subclass would receive ten shares, members of the California, New York and Virginia subclasses would receive five shares, and people belonging only to the nationwide class would receive one share.
That structure created the central procedural problem. Every named representative who accepted the settlement belonged to one of the state subclasses receiving the larger allocation. The nationwide-only group had no separate representative or counsel endorsing its smaller share, even though the groups had conflicting interests over how the same recovery would be divided.
The appellate court said differences among state privacy laws could justify different benefits, but that possibility did not eliminate the need for structural safeguards under federal class-action rules. It therefore vacated approval without deciding that the allocation itself was necessarily unfair.
The panel also rejected broader objections to the deal. It found no inherent defect in using an uncertain equity-based recovery, given evidence about Clearview’s limited ability to fund a large judgment, and held that a settlement did not have to add new restrictions on the company’s business. Clearview’s commercial access is already constrained by a separate Illinois agreement, while its government work has continued, including a $9.2 million facial recognition contract with U.S. Immigration and Customs Enforcement.
The remand leaves the parties and district court to address representation before any revised settlement can receive approval.
Sources: U.S. Court of Appeals for the Seventh Circuit
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By the ID Tech Editorial Team
