Appeals court blocks Clearview AI privacy deal
A U.S. appeals court blocks Clearview AI’s privacy settlement, citing improper representation for class members in the case.
The U.S. Court of Appeals for the Seventh Circuit returned Clearview AI’s proposed class-action settlement to the district court, determining that members of the nationwide class lacked proper representation during negotiations.
The court vacated the approval on July 13, 2026, in In re Clearview AI, Inc. Consumer Privacy Litigation, sending the case back to the Northern District of Illinois. The ruling focused on the absence of independent representation for plaintiffs who were part of only the nationwide class, rather than any state-specific subclasses that received larger portions of the settlement.
Equity stake, not cash, at the heart of the dispute
The settlement included no direct payment. Instead, the class would receive a payment equivalent to a 23% equity stake in Clearview AI if the company completed an initial public offering, merger, consolidation or sale. Settlement master Sidney Schenkier could instead sell the interest or demand 17% of qualifying revenue by 30 September 2027.
Payouts varied by state residency. Members of the Illinois subclass were allocated ten shares, those in the California, New York and Virginia subclasses five shares, and members belonging only to the nationwide class one share. Two nationwide class members, Robert Weissman and Rick Claypool, appealed after District Judge Sharon Johnson Coleman approved the agreement on 20 March 2025.
Representation gap violates procedural rules
Judge Hamilton, writing for a panel with Judges Maldonado and Taibleson, held that the process lacked the structural protections required by Federal Rule of Civil Procedure 23. Every class representative who approved the settlement belonged to a favoured state subclass, and no representative of only the nationwide class endorsed the allocation. Representatives receiving greater benefits could not also represent the nationwide class when their interests conflicted over monetary relief.
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The Seventh Circuit did not find an inherent problem with either the absence of further injunctive relief or an equity-based payment. It accepted that differences between state laws might justify different recoveries. The defect was procedural: the nationwide class lacked independent representation when the allocation was agreed.
The panel also directed the district court to consider the replacement of all eight original class representatives if another settlement is proposed. None accepted the agreement, and they were replaced with four representatives from favoured state-specific subclasses. The court said the change could indicate that class members’ interests had not been protected adequately.
The litigation concerns Clearview AI’s collection of photographs from publicly accessible websites and use of artificial intelligence to create searchable facial vectors. Claims include alleged breaches of the Illinois Biometric Information Privacy Act, alongside state privacy, publicity and unjust-enrichment claims. A separate settlement with the American Civil Liberties Union restricts access to Clearview AI’s database and provides an opt-out process for Illinois residents.
The decision underlines the need to identify conflicts between claimant groups before settlement allocations are agreed. In equity or revenue-based settlements, counsel must also examine the proposed valuation and ensure that groups with materially conflicting interests are represented separately.
The district court will now review the settlement—or any revised proposal—with the Seventh Circuit’s guidance. For now, the nationwide class has no recovery plan, and Clearview AI’s legal challenges persist.
