By Gerald L. Maatman, Jr., Hayley Ryan, and Tyler Zmick
Duane Morris Takeaways: On July 13, 2026, in the case captioned as In Re Clearview AI, Inc. Consumer Privacy Litigation, No. 25-1673, 2026 U.S. App. LEXIS 20406 (7th Cir. July 13, 2026), the U.S. Court of Appeals for the Seventh Circuit vacated a district court’s approval of a novel class action settlement between Clearview and individuals alleging that Clearview violated privacy laws by “scraping” their public photos from the internet to improve the company’s facial recognition technology. The Seventh Circuit held that the absence of separate class representatives for the nationwide class and the state-specific subclasses was a “key procedural problem” requiring vacatur of the settlement.
This decision is an important reminder that courts evaluating class settlements will closely scrutinize whether all classes and subclasses have adequate structural protections, including separate class representatives with separate counsel in cases where class members may have divergent interests.
Background
Clearview operates “a search engine for faces,” whereby the company scrapes photographs of individuals from public websites and analyzes them using artificial intelligence to generate “facial vectors” reflecting the geometry of a person’s facial features. Id. at *3. A search of Clearview’s database using a photograph of a person returns other photographs of that same person, together with links to the websites where the photographs were located.
The case arose from 11 putative class actions filed in federal district courts against Clearview and related defendants, which were ultimately transferred to the Northern District of Illinois for coordinated pretrial proceedings.
After the appointment of interim lead class counsel, Plaintiffs filed a consolidated complaint asserting claims for declaratory judgment and unjust enrichment on behalf of a Nationwide Class comprised of all individuals in the United States whose biometric data was or is contained in Clearview’s database. Plaintiffs also asserted claims under the Illinois Biometric Information Privacy Act (“BIPA”) on behalf of an Illinois Subclass; claims under various California laws on behalf of a California Subclass; claims under New York’s civil rights code on behalf of a New York Subclass; and claims under the Virginia Computer Crimes Act and for statutory commercial misappropriation of identity on behalf of a Virginia Sub-class.
The parties first engaged in settlement discussions in 2022, which failed because Clearview lacked the financial ability to make the substantial immediate payments sought by Plaintiffs. But after mediating the case in 2023, the parties agreed to a settlement structure under which class members would acquire equity stake in Clearview. Specifically, the settlement provided that upon an initial public offering or a merger, consolidation, or sale of Clearview, the Class would receive a payment equivalent to a 23% equity stake in Clearview as of September 6, 2023. Alternatively, in lieu of that payment, the court-appointed settlement master could either (i) sell the settlement stake to a third party for a “commercially reasonable price” or (ii) make a cash demand equal to 17% of Clearview’s revenue from the date of final approval of the settlement until the date of such demand. Id. at *7.
The settlement stake itself would be divided unevenly among Class members based on the specific forms of relief available under the relevant state laws: ten shares to each member of the Illinois Subclass; five shares to each member of the California, New York, and Virginia Subclasses; and just one share to each member of the Nationwide Class. Notably, none of the eight original class representatives agreed to the settlement, so lead class counsel replaced them with four new representatives, each of whom belonged to one of the “favored” state-specific sub-classes.
After the District Court granted final approval, Objectors Robert Weissman and Rick Claypool, both members of the Nationwide Class, appealed. They argued that the settlement was not “fair, reasonable, and adequate” because (i) it did not provide injunctive relief, (ii) the future equity-stake and cash-demand fallback made the settlement’s value too uncertain, and (iii) the Nationwide Class lacked separate representation during the settlement negotiations.
The Seventh Circuit’s Decision
The Seventh Circuit vacated the District Court’s approval of the settlement and remanded the case for further proceedings.
The Seventh Circuit rejected the Objectors’ two substantive challenges to the settlement, concluding that a fair settlement did not necessarily require injunctive relief and that the uncertainty associated with the equity-based structure was not disqualifying because “uncertainty is inherent” in such settlements. Id. at *11, 16.
The Seventh Circuit, however, agreed with the Objectors’ third argument regarding the settlement being deficient due to the absence of a separate Nationwide class representative with separate counsel. The Seventh Circuit explained that class action litigation relies on “structural assurance of fair and adequate representation for the diverse groups and individuals affected.” Id. at *23 (quoting Amchem Products, Inc. v. Windsor, 521 U.S. 591, 627 (1997)). One such “important structural feature” is the requirement that class representatives, who owe a fiduciary duty to absent class members, approve any proposed settlement. Id.
The Seventh Circuit emphasized that “[n]ot just any representative will do” and that the critical question is whether “the court can be confident that absent class members have been represented fairly.” Id. at *24-25. The Seventh Circuit concluded that the Nationwide Class lacked adequate representation because “none of the named class representatives was in a position to represent solely the interests of the Nationwide Class in allocating the settlement.” Id. at *29; see id. at *31 (“Appointment of separately counseled class representatives for identifiable, significantly different groups of claimants with fundamentally conflicting interests is Rule 23’s primary mechanism for such protection.”).
On this basis, the Seventh Circuit vacated the District Court’s approval of the settlement and remanded the case.
Implications For Companies
The Seventh Circuit’s decision in In Re Clearview AI, Inc. Consumer Privacy Litigation is a cautionary tale for companies structuring, or defending, class action settlements involving multiple classes or subclasses with potentially divergent interests. Where claimants fall into distinct groups with conflicting stakes in how settlement proceeds are allocated, courts will expect each group to have its own class representative with its own counsel at the negotiating table. A settlement that may be fair and reasonable on its face can be vacated if it lacks these structural safeguards, as without such protections a reviewing court cannot confirm that each class’s interests was independently considered during negotiations. Companies should keep this principle in mind at the outset of class settlement negotiations to avoid the possibility of a proposed class settlement failing on appeal due to the lack of necessary structural safeguards.