Social media can be a game-changer for class actions.

I was recently reminded of this when reading news coverage of a proposed class settlement of claims involving chicken that a fast food restaurant allegedly had improperly described as halal. A Michigan lawyer, who wasn’t involved in the case, had taken to Facebook to complain that the settlement would distribute the $700,000 class fund to plaintiff’s counsel and two charities rather than to class members. (We’ve previously blogged about the emerging backlash against settlements with large cy pres components.)

Plaintiff’s counsel, apparently fearing that the Facebook posting would stir up objectors, persuaded the judge to require the Michigan lawyer to remove his post, replace it with the official class notice, and refrain from commenting further on the settlement. I wonder if that plaintiff’s counsel now appreciates the irony of suing over a web posting; the court filings and media coverage have drawn way more attention to the issue than the original Facebook posting ever would have. In any event, Public Citizen intervened and persuaded the judge to lift the gag order as a violation of the First Amendment.

I can understand the plaintiff’s counsel’s motive for seeking a gag order. A random stranger’s venting on Facebook, Twitter, or Youtube can go viral, multiplying the number of objections to a proposed class settlement. Such a development can be disappointing to both plaintiffs’ lawyers and defendants: Plaintiffs’ counsel don’t get paid for their work on a class action until a settlement is approved, and defendants are denied (at least for the time being) the peace and finality they sought when they agreed to settle rather than litigate.

Businesses should be monitoring social media for other class-action threats. Plaintiffs’ counsel are using social media to recruit potential named plaintiffs or class members. Moreover, the business’s own use of social media can be a source of liability risk. Privacy, employment discrimination, and false-advertising class actions with a social-media component abound. In-house counsel also should familiarize themselves with the FTC’s guidance concerning social media advertising. See Guides Concerning the Use of Endorsements and Testimonials in Advertising (pdf), 74 Fed. Reg. 198 (Oct. 15, 2009). And industries subject to special advertising regulations, such as pharmaceuticals, financial firms, and insurance companies, face additional oversight by the FDA and FINRA. A failure to comply with these regulations may trigger not only agency attention but also private class actions.

In sum, marketing departments are not the only ones that should have a social media strategy. So should legal departments. The modern Perry Mason is fluent in Facebook.

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