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Advertisers Suing Facebook For 'Overcharging' Denied Bid

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FACEBOOK ADVERTISERS LAWSUIT
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By Jonathan Stempel

(Reuters) - Facebook Inc, which runs the world's largest social networking website, won a court ruling on Friday rejecting a bid by thousands of advertisers to sue the company as a group for overcharging them.

U.S. District Judge Phyllis Hamilton in Oakland, California, denied the advertisers' request for class-action status, saying they failed to show they had enough in common to sue for breach of contract and violating California's unfair competition law.

"The court is persuaded by Facebook's argument that plaintiffs have not shown that they have a viable method for proving each class member's recovery," Hamilton wrote. "The need to determine both liability and damages on an individualized basis makes this case inappropriate for class treatment."

Jonathan Shub, a lawyer for the advertisers, declined to comment. Facebook spokesman Andrew Noyes said the company is reviewing the decision.

Class certification often leads to higher recoveries and allows plaintiffs to cut legal bills.

Facebook is expected this year to conduct perhaps the most anticipated U.S. initial public offering ever. The Menlo Park, California-based company is valued at $95.8 billion, according to SharesPost Inc, which tracks valuations of private companies.

In their 2009 lawsuit, the advertisers accused Facebook of overcharging them on their "cost-per-click" contracts, under which they paid fees each time users clicked their ads.

According to the advertisers, Facebook improperly imposed charges for nonexistent clicks, for clicked ads that never opened, for clicks caused by server problems, and for accidental multiple clicks by individual users, among other types of clicks.

But citing a 2011 U.S. Supreme Court decision involving Wal-Mart Stores Inc that limited class-action litigation, Hamilton said the advertisers showed neither a "systemic breach of contract" nor enough similarity among the claims raised.

"There is no way to conduct this type of highly specialized and individualized analysis for each of the thousands of advertisers in the proposed class," she said.

Hamilton scheduled a May 17 conference to discuss how best the case should proceed.

The case is In re: Facebook Inc PPC Advertising Litigation, U.S. District Court, Northern District of California, No. 09-3043.

(Reporting By Jonathan Stempel in New York; Editing by Andre Grenon, Gary Hill)

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