Facial recognition company Clearview AI has agreed to resolve claims that it violated the privacy rights of millions of Americans, reaching an unusual class action settlement based on a theoretical stake in the company's future value.
The case, which accused Clearview of violating an Illinois biometric privacy law, stems from a January 2020 New York Times article describing use of the company's facial recognition tool by law enforcement agencies and private companies. The lawsuit alleged Clearview scraped billions of facial images from the web and sold information without consent. Clearview had denied misconduct.
The proposed settlement, which does not contain an admission of liability, requires approval by U.S. District Judge Sharon Johnson Coleman in Chicago.
"Clearview AI is pleased to have reached an agreement in this class action settlement," Jim Thompson, partner at Lynch Thompson, said in an emailed statement.
The lawyers behind Wednesday's proposed settlement acknowledged in their filing that the ACLU deal mooted some of their claims, and said Clearview ended up with "few assets" to compensate a huge class made up of "virtually anyone in the United States whose face appears on the internet."
They said they therefore devised a "unique structure" that bases the eventual settlement fund on multiple options.
If Clearview goes public through an IPO or is liquidated through a merger or sale, the fund would be based on a percentage of the company's value. The filing said Clearview's current enterprise value could be as high as $225 million, which would yield a $51.75 million settlement fund.
Alternatively, a court-appointed settlement master up until September 2027 could require Clearview to make a cash payment equal to 17% of its revenue since the settlement approval date. The master could also sell the settlement rights to a third party in order to maximize class recoveries.
The filing said the class lawyers could ask to be awarded as much as 39.1% of the settlement fund in attorney fees.
"This structure both provides meaningful relief to the class and flexibility in how to best realize value from its stake in Clearview," plaintiffs' lawyers from Loevy & Loevy said in the court filing.
Jon Loevy of Loevy & Loevy said in an emailed statement that Clearview "did not have anywhere near the cash to pay fair compensation to the class, so we needed to find a creative solution."
The class members "now get to participate in any profits that are ultimately generated, thereby recapturing to some extent the ownership of their biometrics," he said.
The case is Clearview AI, Inc., Consumer Privacy Litigation
For the plaintiffs: Jon Loevy, Michael Kanovitz and Thomas Hanson of Loevy & Loevy
For Clearview: James Thompson and Daniel Lynch of Lynch Thompson
