ITIEL WAINER—On March 20, 2025, a federal judge in the Northern District of Illinois approved an unconventional class action settlement that grants class members a 23% equity stake in Clearview AI, a facial recognition start-up the class sued over privacy harms, even though the company’s sucess hinges on those harms. Despite objections from a bipartisan group of state attorneys general, the court ruled that the settlement was fair, reasonable, and adequate under Rule 23.
The New York Times first reported Clearview’s existence to the public in January 2020, when it published an investigative report titled The Secretive Company That Might End Privacy as We Know It. The report detailed the tech start-up’s practice of scraping billions of photographs from public websites and social media platforms. Clearview then used these images to power a facial recognition application. It licensed the application to about 2,200 entities, including law enforcement agencies, private companies, and individuals. The application allowed Clearview’s customers to identify a person by uploading a picture of the person to the platform. Clearview’s application would identify the individual using biometric data from its scraped image database.
Following this revelation, plaintiffs filed a slew of class action lawsuits, and in January 2021, the cases were consolidated into a multidistrict litigation in the Northern District of Illinois. The consolidated class was structured into four subclasses—representing claimants from Illinois, Virginia, California, and New York—on top of a nationwide class. The subclasses brought fourteen counts based on an array of state laws, while the nationwide class brought two counts: one seeking damages under a theory of unjust enrichment and another seeking a nationwide injunction preventing Clearview from continuing to profit off people’s biometric data.
In June 2024, Clearview and the class’s lawyers reached a settlement agreement. The agreement establishes a settlement fund, which Clearview will pay in the future through a 23% equity stake in the company, valued at roughly $51.75 million as of January 2024. The fund will be triggered and paid upon one of four events—an IPO, a liquidation event, a revenue-based payment, or the class’s election to sell its stake—allowing class members to pick the option most beneficial to them as Clearview’s future unfolds.
The lead class counsel’s unopposed motion for approval justified the unusual settlement structure by explaining that Clearview’s position as a young start-up with limited assets meant a substantial immediate recovery for a class that includes “virtually any individual whose face had been posted on the internet” was unlikely. The motion also noted that litigation costs could bankrupt Clearview before the case reached trial, leaving nothing for class members.
Nevertheless, a bipartisan group of state attorneys general from twenty-two states and the District of Columbia jointly filed an amicus brief in opposition to the settlement agreement. The amicus brief argued that the settlement agreement does not satisfy Rule 23(e)’s requirement that a class settlement agreement be “fair, reasonable, and adequate.” The main arguments against approval of the agreement were twofold: (1) that the settlement failed to provide meaningful injunctive relief and (2) that the monetary relief was unusual and speculative.
On March 20, 2025, the district court granted the plaintiffs’ motion for final settlement approval. Most of the court’s thirty-six-page order focused on Rule 23(e)’s fairness inquiry. The court first rejected the argument that the lack of injunctive relief is unfair to claimants. The court did so on two bases. First, it found weak support for injunctive relief under the counts alleged by plaintiffs, as the only counts that directly related to data privacy and biometrics were exclusive to the Illinois subclass. Second, the court pointed to the settlement in a collateral case, an ACLU lawsuit against Clearview, as minimizing the need for injunctive relief in the class action. In the ACLU settlement, Clearview agreed to a permanent nationwide injunction barring it from granting paid or free access to its application to any private entity or individual. The court concluded that the existence of the ACLU settlement meant that the lack of injunctive relief did not undermine the settlement’s fairness.
Furthermore, the court rejected objections regarding the certainty (or lack thereof) of monetary relief under the 23% equity stake settlement structure. Its analysis considered the risks, costs, and duration of continued litigation, noting the difficulty of litigating the technical nature of the claims weighed in favor of settlement. The court concluded that the 23% equity stake, while unconventional, provides meaningful relief in light of Clearview’s financial constraints. Ultimately, the court deemed the settlement fair, reasonable, and adequate under Rule 23(e).
The court’s order, while legally sound, warrants consideration from a practical lens. Although the court deemed the lack of injunctive relief immaterial, mainly because a separate ACLU settlement addressed Clearview’s most controversial practices, the equity-based resolution raises significant questions. By tying class recovery to a 23% stake in Clearview, class members’ ability to recover monetary relief is predicated on Clearview’s ability to profit off the very privacy harms that spurred the class action.
While the court found that this equity arrangement offers “meaningful relief,” its actual value depends on external factors such as market conditions, regulatory outcomes, and the viability of any future IPO or liquidation event. The triggers for monetizing the stake—an IPO, a sale, revenue-based payments, or an election to sell—may not all transpire advantageously, leaving class members with a potentially uncertain payout.
Ultimately, the Clearview AI settlement illustrates the uneasy balance between achieving a practical recovery and confronting alleged violations. Linking class members’ compensation to the company’s future success ties the remedy to the practices under scrutiny. Time will tell whether this unusual and creative equity-based settlement model can stand as a workable innovation.
